TNX 10-Year Treasury Note Yield Weekly Chart Inverted H&S

The big story for the last two weeks is the big up in yields after Chairman Bernanke said QE will taper off this year and likely end by mid next year. That is a rocket of a move from 1.60% to over 2.60%, 100 bips, in less than nine weeks, over 10 bips per week. The indicators continue to show long and strong strength ever since the mid-2012 bottom but the stochatics are overbot forecasting the first pull back for yield. The inverted Head and Shoulders (H&S) pattern shows head at 1.40% and neck line at 2.30% which targets 3.20% which is important horizontal resistance as well. An alternate inverted H&S is neck line at 2.40%, the 2.39%-ish level is important from 2011 and 2012, so this targets 3.40%.

The inverted H&S is a long-term and important pattern in play so yield would want to come back for a back test to show it respect so a move back to 2.30%-2.40% is on the table. At this juncture, yield would either bounce or die. The indicators have more juice so a bit more up would be anticipated. The 2.80% level is important resistance from mid-2011. Even though the inverted H&S points to 3.20%-3.40%, the indicators hint at perhaps 2.80% over the next month then lots of sideways action through 2.30%-2.80% moving forward for the months ahead. The banks need about 3% and higher to take advantage of the 2-10 spread on the yield curve. Until then, the rise in rates are not particularly helping the banks. Placing the positive yield trade thought aside, banks will be challenged on the housing side with the higher rates. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.