The enclosed comparison chart supports my sense that the banks in general, and Bank of America (BAC) in particular, are sensitive to the recent shift in the shape of the yield curve. In a loose sort of way, the patterns between the ProShares UltraShort 20+ Year Treasury (TBT) and BAC exhibit some pattern similarity. Certainly, the April-August downtrends paralleled closely, which represented a relentless decline in longer-term interest rates (TBT) concurrent with the declining price of BAC.

Since mid-August, the TBT has carved out a 3-month bottom pattern that appears to be breaking out to the upside, reflecting a climb in longer-term interest rates. For the past three weeks, BAC has rallied sharply, perhaps in reaction to better business propects for BAC implied by a steepening yield curve.

To really get some upside traction, BAC needs to hurdle and sustain above 13.00/05.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.