Home | Finance | Investments
When I wrote the article "Is Banking Tanking?" in early December last year, the banking sector was doing just fine. The only cloud on the horizon was that it had gone from a leading sector to a laggard sector since the June 2006 low. It was February 20, 2007 when the Banking Sector (symbol = BIX, S&P Banking Sector Index) finally topped out. My guess is that most folk who had read my article had completely forgotten about it by then. But fast-forward to today and banking is down almost 14% from that February high. In fact, BIX has recently gone into a near-vertical plummet southwards. By my calculations BIX could ultimately bottom out near 290 - that's another 20% below the recent close of 361. Now BIX could just persist with its near-vertical descent all the way to 290, but I don't think it will. I think we should see a traditional A-B-C decline in a double zigzag form unfold. BIX should be very near finished the zig-zag plunge to point A of the larger zig-zag pattern. A zig-zag rally should unfold next to point B (likely to be near 390). This should be followed by the next zig-zag plummet south to the final point C of the larger zig-zag pattern, at near 290. BIX is approaching a strong region of support, and I expect it to form a trough within the next week in the 345 - 355 range, then rally strongly in a zig-zag to near 390. This impending rally could last to anywhere from mid-October to the years end. After that bounce another dramatic plummet south should unfold. Only this time I expect the major US indexes to join the plunge south in earnest. Something like eight or more consecutive down days for the DJI, including a few dramatic ones, is what I have in mind (more on that in an upcoming article: "Seven Years Bad Luck"). But that may be 2008. Right now I'm anticipating what may be the last good rally in US markets for a long while. But what if the near-vertical plunge in BIX continues down past 345 without hesitation? That's certainly a possibility - and a frightening one at that: the word "crash" comes to mind. I don't believe the bullish fervor will dissipate quite that fast, but I may be wrong. The market environment is unique, so it's dangerous to assume the "usual patterns" will continue. Catch-phrase: keep on your toes! Volatility is back! - just like I said it would be in my November 2006 "Outlook For 2007 And Beyond" preview. View the full version of this article, including a chart of BIX and links to the other articles mentioned, at www.TrendSensor.com/MarketBrief/ DISCLOSURE: Murray Nickel holds no position in BIX.
Article Source: http://www.itempad.com
Murray Nickel is a mathematician, statistician, and professional trend trader. He offers a free trial of trading signals for market indexes and index ETFs, spot Forex, and spot Gold. He also mentors trend traders aiming to succeed at trading global markets. Don't reprint the same version as everyone else. Get your own unique content stock markets article here.
