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Wednesday, August 5, 2009

The Banking Index

The rally top may almost be in for the Banking Index. The daily RSI went to 77.68! I mean the US Government is blowing the biggest public debt bubble ever and people are bullish on banks! Incredible. But predictable.

I stated a few weeks back that the financials will likely have one more run up. Rally laggards.

Notice how the banking bulls kept charging up this last rally and kept going in order to finally make a new high after the early May high? The move up did achieve a "golden cross" 50/200 DMA crossover. Of course it took a 77.68 daily RSI to achieve that right into the heart of resistance!

For my long term Primary count to work, the MAX retrace can go no higher than 46.51. Why?Because wave 4 cannot retrace into wave 1 price territory. We still have a bit of room for that mark to be safe. The 50/200 crossover is doomed for ultimate failure by my long term daily BKX chart. And it would be the one sector that can be expected to "fail" this bullish technical achievement. For now that it has crossed over, it now has to rally above eventually to follow through with the technical move.

At any rate the banking index is the leading bear market sector and will remain so throughout this Cycle C wave down to wherever it ends.

As far as my short term chart, it has the look of an extended 5th wave rather than some kind of C wave or even a wave 3 of some kind. I could be wrong and it eventually gets one more squeaker high and the daily shows negative RSI divergence at a new high if we get a pullback for a bit. And it could get that new high and stay beneath my 46.51 max retrace count.

An extended 5th means its top is in period. We shall see! This is getting interesting.

Lemme ask you this: Would you buy banks after that runup with the daily sitting at 77.68 RSI and deflation happening?

I'll sit that long trade out from here thanks! Let Timmy save the banks. But who'll save Timmy?

One last point: I don't presume a Primary wave [5] down will prove to be the final count or "bottom". It could just be that a 5th Primary wave down absolutely crushes the banking index so much that long term wave counts are of no consequence if it is at less than 10 and/or hardly or never recovers. Basically it becomes like all stocks that go from lofty heights down into penny stock land. They fade into Fibonacci-infinity like a black hole collapsing into itself. Hehe.

At any rate, the count fits best right now.
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