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-and-shoulders pattern in yields was in play. What happened just after that posting? Interest rates experience their largest 18-month yield rally in 30 years, beating the next biggest rally by 50%! (See rate aberration.)
Could an even larger bullish inverse head-and-shoulders pattern in yields be taking shape? 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? The 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 and heavy resistance at the neckline of this potential bullish yield pattern.
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 (ARCA:TLT), watch Utilities (NYSE:XLU) and Real Estate (ARCA:IYR) to see if these interest-rate sensitive sectors reflect concerns about rising rates.