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Is Banking Tanking?: Prophetic Words From Dec 4, 2006

By: Murray Nickel

Back in early December last year when I penned the article "Is Banking Tanking?", the banking sector was chugging northwards like all other sectors, and the only hint of trouble was that it had gone from a leading sector to a laggard sector since the June 2006 low point.

Two and a half months after my article, on February 20, 2007, the Banking Sector (S&P Banking Sector Index, BIX) finally topped out. I guess most of the readers of that original article had forgotten it by then.

But fast-forward to today and banking is down almost 14% from that February high.

When I wrote that original article there was no sign of banking tanking. That was then, but now? Yes banking really is tanking. In fact, about 10 trading days ago it began a near-vertical slide south.

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.

What's much more likely is a traditional A-B-C decline in a double zigzag form.

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.

During the slide south that follows the rally I expect to see the near-vertical plunge nature emerge as a characteristic of 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.

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.

The full version of this article, including a chart of BIX and links to the other articles mentioned, is available at www.TrendSensor.com/MarketBrief/ DISCLOSURE: Murray Nickel holds no position in BIX.

Article Source: http://www.articlemanual.com

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 and other unique content stock markets articles are available with free reprint rights.



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