More fun with charts

I've been throwing a lot of charts up on the blog lately, each designed to shed some insight into where bond prices and yields might go. It's all educated guesswork, of course ... If I KNEW where prices and yields were headed, I wouldn't be blogging. I'd be ensconced somewhere on my own personal, private island. But since we all have some time in advance of tomorrow's CPI report, what do we have to lose?

Anyway, this chart shows 10-year Treasury Note yields going back about five years. You don't have to be a top-of-the-line technical trader to see that yields have made a series of higher highs and higher lows. And each time we broke out to a new high, we kept on running for several percentage points thereafter.

The percentage figures on the chart measure the yield extension -- how much of a percentage change we got in the 10-year yield -- AFTER the breakout. The average change over the past three breakouts was just over 7%. If the pattern holds this time, and we do break out here, 10-year yields could head to 5.5% -- or slightly higher -- in a hurry. As always, time will tell ...