Sunday, June 29, 2008
The BKX Is Near A Low
The BKX Bank Index has completed 5 waves down from the May high or nearly so. While the broader indexes may need 1 to 2 more weeks before a substantial rally, the financials may begin to rally now. This should not be interpreted as strength, although it may fool a lot of people, but rather this is due to the fact that the financials have led the way down and have become oversold sooner than the rest of the market. While it is possible that the financials have further to go on this downleg, the risk is now for a sharp bounce. I will be exiting the SKF on Monday and look to re-enter on a pullback.
In my last post I said that stocks are not oversold. To clarify, the indexes are a bit oversold and due for a bounce, which fits with this holiday week, but the stocks making up the indexes have significant room to the downside, so expect a resumption of the downtrend after a brief bounce possibly lasting until July 7 or 8.
Posted by R. Craig Pritchard at 8:17 PM