In One Chart: German bonds may offer the clearest warning that the stock market’s bull run is sputtering

German bunds are trying to deliver a message to stock-market investors: Achtung!

According to market technician Tom McClellan, a narrowing yield spread between German 10-year bonds, known as bunds TMBMKDE-10Y, +3.58% and their U.S. counterpart TMUBMUSD10Y, +1.44% has historically been a bad omen for equity markets.

The yield differential between bunds, which were carrying a negative yield about a year ago and reached a record spread—2.38 percentage points—on Dec. 28 with U.S. 10-year paper, has been on a tightening trend lately, illustrated by one McClellan chart (see below):

Source: McClellan Financial Publications

How is a narrowing spread in German bond yields a problem for U.S.

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