Some investors were excited last week with a nice market move on oversold conditions.
Is it real, or is it part of a market attempt to find a bottom?
Think about it ... who or what got us into this whole trouble? The answer is the Banks.
So, it makes imminent sense that the banks are going to have to show that they are out of trouble and trending up before the stock market can find its way to a new Bull Market. This is important, because over 13% of the S&P 500 is made up of Financial stocks.
Therefore, let us look at Banking Index today (symbol: $BKX).
This daily chart goes back to 1993, 17 years ago.
On Friday, the Banking Index closed at 25.59. That was a level just above the 1993 and 1994 support levels. As you can see on today's chart, the drop after the Banking Index's 2007 peak has been precipitous.
In fact, the down movement in the past two and a half years erased 14.5 years of up movement. The fall in the Banking Index depicts the seriousness of the the financial troubles this country is in.
So, what is the Banking Index telling us now?
The daily chart looks pretty depressing. But, take a look at the close-up insert in the upper left hand corner. That is a picture of the Index's movement since January of this year.
First, note the fan lines. We have had rising fan lines which is a sign that the Banking Index is trying to stabilize.
Sounds good? Not quite yet ... note the arrows I drew in the close-up. They still show lower/highs and lower/lows ... a classic definition of a down trend. Until that changes, the Banking Index will remain in a technical down trend.
So, what we are seeing is a mixture of two conditions ... one negative and one positive. This could be a basing attempt which would translate into the Banking Index trying to establish a hold-able bottom. While that would be good news, it hasn't happened yet. Such an event is a process, not an instantaneous happening.
So, be patient. The Banking Index is showing some progress ... it now has to show a trend reversal and that will take some work.
