Tuesday, December 7, 2010

Citigroup Supports Bull & Bear Case

Citigroup is working on a very nice textbook elliott wave triangle. The most likely scenario is a move down in wave E beginning about now and ending in January followed by a 6 month advance in wave (C) up. However, the triangle could break to the downside which would mean wave (C) would be delayed for a few months. The primary takeaway is first that there will be a wave (C) up. It will likely top well before the rest of the stock market and so could be a leading indicator. Second, Citigroup will retest its 2009 low which supports the case for a resumption of the bear market once the current cyclical bull market comes to a conclusion.

JPM is tracing out a much smaller B wave triangle that also suggests more upside after a 2+/- month decline. I am not suggesting that either of these would be good investments or trading vehicles, but rather they point to the likelihood that the cyclical bull market has further to run. Less risky alternatives to C and JPM would be the XLF or the KBE if one is so inclined.

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