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Can The Stock Market Rally Without Bank Stocks Joining?

The overall stock market won't have to, because Bank Stocks look ready to rally. Financial look okay, and should join, possibly even lead, the next rally, which should start fairly soon. That would be wave e-up on the chart below.


The BKX Daily Full Stochastics are on a new buy signal, coming from an oversold level, which is bullish. The price pattern is similar to the major averages, an Ascending Broadening Wedge pattern, but is occurring over a longer period of time, from August 2010, whereas the same pattern in the Industrials and S&P 500 started in March 2011. Wave d-down gave the impression that Financials were diverging against the major averages, which led many commentators to ask, "How can the major averages rally without the Financials?" That impression was because the wave d-down in major averages started in May 2011, whereas wave d-down started in February 2011 in the BKX. However, waves d-down in the BKX and in the major averages now look complete.


The next chart of the BKX shows it has completed a five wave Descending Bullish Wedge pattern for d-down, and its end is punctuated with a Hammer Candlestick pattern formed by last week's price behavior. Hammer Candlestick patterns are typically bottom signals.

It also looks as if the Weekly MACD is just starting to curl up from its widest divergence point, as last week's histogram was a smaller negative reading than the week before. This is typical of bottoming action.

Also, the Weekly Full Stochastics are deeply oversold, in a position to support a lengthy rally.

So we are expecting Financials to start a rally soon, one that could be fairly strong.



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