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Prophetic Words From Dec 4, 2006: Is Banking Tanking? |
By:
Murray Nickel |
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Prophetic Words From Dec 4, 2006: Is Banking Tanking?
by Murray Nickel
When I wrote the article "Is Banking Tanking?" in early December last year, the banking sector was rallying like every other sector. Well, almost. The only cloud on the horizon: it had gone from a leading sector to a laggard sector since the June 2006 low.
In that article I predicted a top for the sector near the end of January 2007. It actually came in on February 20, 2007 - so I was out by about three weeks. And I guess folk who had read the article had dismissed it by then, or - more likely - completely forgotten it.
But take a look at an updated chart of the S&P Banking Sector Index (BIX): Banking Really Is Tanking!
In fact, BIX has recently gone into a near-vertical plummet southwards.
I've analyzed the BIX chart and data, and believe it could slide another 20% yet, and ultimately bottom out around 290. That would be 30% below the February high of 414.84. The current near-vertical plunge could take BIX all the way to 290 in a few crazy days of panic. It COULD, but I doubt it will.
I think we should see a traditional A-B-C decline in a double zigzag form unfold.
We should be very near concluding the slide to point A of the zigzag. A bounce should unfold next to point B (likely to be near 390), followed by the next slide south to under 300.
I think BIX should bottom soon in the 345 to 355 range as there is a strong band of support in this region. We should then see it bounce strongly in a zigzag to somewhere 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!
Expect the unexpected: yes volatility is back - just like I said it would be back in my November 2006 "Outlook For 2007 And Beyond" article.
Get the complete 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.
Murray Nickel is a mathematician, statistician, and professional trend trader. He offers a free trial of trading signals for global market indexes and index ETFs, spot Forex, and spot Gold. He also mentors trend traders aiming to build consistent success at trading global markets. This article is available as a unique content article with free reprint rights.
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Article Source: http://www.statssheet.com/articles/article54466.html |
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