I thought I'd put this note out again to promulgate my view in no uncertain terms vis-à-vis the U.S. stock market through the eyes of the Nasdaq Banking Index ($BANK).
Unlike the Transports ($DJT) and some of the most closely-watched indices like the S&P 500 ($SPX) and the Dow Jones Industrial Avg. ($DJIA), $BANK isn't only back near its January 2018 high, but it has actually exceeded it on both an intraday basis and a daily closing basis. Clearly, like the Nasdaq Composite Index ($COMPQ) and the Philly Semiconductor Index ($SOX), $BANK also seems to be taking care of some unfinished business. Referring to the technical chart below, the [4456-4570] range would be the zone to watch closely from where a reversal would become highly probable. I don't believe the 1.618 XA (4,867) is in the picture for this particular phase of the bull market. Definitely not. Hence, I continue to believe $BANK, like many of the other indices, is on its final breath.
The yellow channel established by the Andrews Pitchfork tool will intersect with the 4456 level roughly in August. Is this too long to wait? Let me remind you that back in 2011, the tensions began to build in February/March (tsunami, nuclear meltdown, Greece, etc), and divergences (technical, intermarket) began to stealthily manifest themselves. Those divergences were never noticed or discussed publicly in the media, both traditional and social. For example, even though $SOX topped in early 2011, and $BANK as early as April 2010, many indices continued to forge ahead towards new highs during the following months until the string finally snapped in August. So, as far as $BANK's chart goes, notice what happened during the first half of 2011 while the S&P and Nasdaq indices, among others, were registering one new recover high after another. This is marked by the red box at the bottom of the chart. By October 2011, yellow "wave 2" was mostly on the books, and yellow "wave 3" had already gotten underway and remains in force to this day, albeit it's nearing the end of its journey.
The red box in the upper right marks the price and time zones of the anticipated yellow "wave 4". Using the channel as a guide, the upper trend line runs into the [4456-4570] range as early as August (similar to 2011 and 2015). Should yellow "wave 4" get underway sometime this summer, it probably wouldn't end until March-May 2019 upon finding support at ~3456; that's where green point X, purple "wave 4" and the bottom of the yellow channel happen to all coincide.
Peter Ghostine (@peterghostine)
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