The case for further rate highs in 2016 is in serious doubt if the 1.78% level on the US 10 year Treasury Note is breeched, according to Walter Zimmermann, Senior Technical Analyst at United-ICAP.
A head-and-shoulders bottom had looked like it was forming on the 10 year T-Note , giving a target of 4.67% (should the neckline be broken and the pattern confirmed). Now, however, Zimmermann thinks two scenarios are possible:
- The 10 year interest rate falls below the 1.78% level and jeopardises the higher rates scenario OR
- The stock market recovers and rates recover with it, bringing the head-and-shoulders pattern back into play.