Courtesy of Doug Short.
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The Power of the Pattern suggested that interest rates were about to blast off in May of 2013, because it looked like a bullish inverse head & shoulders pattern in yields was in play (see post here). What happened right after that posting? Interest rates experience the largest 18-month rally in yields in the past 30-years, beating the next biggest rally by 50%! (See rate aberration here.)
Could an even larger bullish inverse head & shoulders pattern in yields be taking shape? The Power of the Pattern suggests it could be possible … if a few other developments take place.
It appears that a larger inverse H&S pattern in the 10-year yield could be forming. What needs to happen to make this huge rate rally possible? First step is to break above the falling resistance in yields that formed as rates have fallen this year. If a break of that resistance takes place, the next huge step is to see if rates can break above very stiff & heavy resistance at the neckline of this potential bullish yield pattern.
Joe Friday: “If it does push above the neckline, the ‘measure move projection in rates’ suggests that the yield on the 10-year note could reach almost 7%.”
Besides bonds (TLT), watch Utilities (XLU) and Real Estate (IYR) to see if these interest-rate sensitive sectors reflect concerns about rising rates.
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