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Sunday, April 12, 2009

The Banking Index

The banking index is something that has been very, very interesting as far as waveform structures. If one uses the other indexes such as $DJUSFN or XLF or others, the waves are not as "true" as the banking index. I could point out 10 spots where the other indexes are wobbly over the past 2 years as compared to the banking index. So when it comes to targeting financials as a whole I prefer the banking index. It just works better.
I have the banking index in either an intermediate wave (4) or a Primary wave 4, I am not sure. What does this mean? Why wouldn't this be in the same "count" as the SPX or the markets as a whole? I have pondered this much lately. One of my ponderings is that Intermediate (or primary) wave (5) of the banking index will occur at the same time as the SPX Primary wave 3. And one of my ponderings is that the banking index will be crushed beyond waveform count recognition.
The banking index peaked at 121 in 2007. It bottomed at 17.76 recently. A tremendous loss. If an SPX Primary wave 3 is to occur, then surely the banks will get crushed and the banking index will be obliterated way under 17.76. Kind of like what happens to a stock that becomes a penny stock. In other words, the waves will matter in the micro but so crushed in the macro that it just won't be comparable anymore. How can you compare a 121 high with *perhaps* a 3-4 low? So it suggests that the banks will get crushed and become insignificant as far as the market is concerned. And that would make sense.
Regardless that is speculation. For now the banking index waves ARE largely trackable and very countable. The patterns are clear at several key spots which I have identified:
1. 121 peak in May 2007.
2. Clear triangle (a likely wave 4 of some degree) in early 2008 with a long thrust out of that triangle.
3. A 50% corrective for wave (2) peak in September 2008.
4. An extended wave (3) channel and a perfect extended wave (3) that follows EW rules
5. A break above that wave (3) channel in the current rally
6. An ascending triangle in the current rally.
The other financial indexes don't follow or track these patterns exactly which is again why I prefer the banking index because the banking index has been true.
I have many notes on my 3 charts and these charts I will keep on my public chart lists. Link on the left side of the page. The fate of the banking index will determine the fate of the markets as a whole. Its a key index.


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