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 take a look at an updated chart of the S&P Banking Sector Index (BIX): Banking Really Is Tanking!
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.
The decline to point A of the zigzag should be very nearly complete. A bounce should follow next to point B (likely to be near 390), then the next plunge to point C of the zigzag, at under 300.
We're approaching 355, which has been support or resistance on 10 occasions since early 2004. I expect BIX to form a bottom within the next week in the 345 - 355 range, then bounce strongly in a zig-zag to near 390.
This coming bounce could last a few months, or even stretch out to the end of the year.
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's a way off yet. Right now I'm on the lookout for what may be the last good buying opportunity in US markets for a long while. And what if the near-vertical slide in BIX continues down past 345? That's certainly a distinct possibility - and a scary one at that: the word "crash" springs to mind. Personally, I don't believe the bullish fervor will dissipate quite that fast, but I may be wrong. The current US and global situation is unique, so it's dangerous to assume the "usual patterns" will unfold. Catch-phrase: cast off your complacency and 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.
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.
