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Back On Dec 4, 2006 The Banking Sector Was Doing Fine.

By: Murray Nickel

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 really is tanking!

There was no sign of banking tanking when I published the original article. That was then, but now? Yes banking really is tanking. In fact, it has recently gone into near-vertical free-fall.

My analysis suggests BIX should bottom out under 300 - near 290: still a long way below the recent 361 close (about 20% below, in fact). Now BIX could continue its near-vertical drop to that level without interruption, but I doubt it will.

In my view a traditional A-B-C decline in a double zigzag form is likely to unfold, and the progress of the slide to-date supports this view.

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.

That bounce should take us through to roughly mid-October, although it could stagger on after an initial spurt, and extend through to the years end.

Expect to see more fireworks after the bounce ends, including a spreading of the near-vertical drop characteristics to the major US indexes.

But that may be next year. Right now we are about to enter what may be the last good buying opportunity in US markets for a long time to come. In the immediate term BIX should not drop below 345 in any persistent way. If it does, even I will be frightened as the only suitable explanation that comes to mind is that dreaded five-letter word: CRASH! I don't think we're heading there - at least not yet. But I may be wrong. This is certainly no time for complacency.

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://ezine-articles-planet.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.
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