An Oldie But Goodie

Rates are on the move higher again today with the 10-Year Note back over 4.6% as I write this. Without question the many folks who boldly proclaimed rates had topped for the year earlier this month will need to at least pause and reflect on that view, as we noted yesterday that the TNX (Index for Rates on the 10-Year) weekly chart has been sporting a bull flag now uncoiling higher. 

Put another way, I still firmly believe rates are headed back above 5% sooner rather than later. 

On that note, quite a few of the sectors which are rate-sensitive are leading to the downside today, be it REITs in the IYR, homebuilders in the XHB, small caps in IWM, even large banks in XLF. 

However, it is the regional banks in the KRE ETF, below on the daily chart, illustrating an old-school but intriguingly bearish pattern. Specifically, the "throw-over trap," where price breaks above a well-defined resistance trend (light blue line downsloping), only to fail and head back down precipitously below the prior resistance trend. 

These patterns have a history of leading to incredibly sharply future declines as buyers had made their big play on the obvious breakout only to see it all come crashing down. A

And in a market where not much has made sense for a while now, this does make sense--Many regionals are in serious trouble, still, and likely cannot afford another spike in rates given their positioning and prior moves.