Have You Been Watching?
A few months ago or in that time frame as I recall I posted a response to comments that the bulls could take this market substantially higher. My comment was to watch one thing and only one thing to determine the health of this market. Forget about oscillators, sentiment, advancing issues or anything else. It was the Philly Banking Index. Prior I had posted that the BKX was likely topping based on my work and outlined three peaks and a domed house pattern recognition taken from George Lindsay's excellent work. There is a remote chance the BKX could hit approximately 116 but beyond that point, I would be highly surprised. Ultimately, picking the exact day of a top is fun but meaningless and nearly impossible so guesstimates may or may not be proven accurate. Let's look again at that prior post graphic of the BKX again.
Today, the banking index has made zero and I do mean zero progress with this "rally". The banking index is again down today. Finance is far and away the largest and most important component of market capitalization in the US. If anyone tells you that the market can go higher without Citigroup, Bank of America, JP Morgan Chase, Wells Fargo and twenty more of the largest banking institutions in the US, they are absolutely wrong. (JPM is relatively undervalued but then their dividend is paltry as well. Likely the reason why it is valued so cheaply versus traditional banking measures.)
We've had three bottoms in this move. June for utilities, July for the S&P and Nasdaq and August for retailers and transports. As fast money and fools cycle through these indices with rapid moves to the upside, the BKX has not participated at all. Of course, the good news is the BKX has also not collapsed either. This is not a technology rally as many would have one believe. It is a rotational oil=>semiconductor rally I talked about in the pairs trading post before oil started cratering. Unless you are a trader capable of extremely fast moves in pinpointed stocks, this rally is pathetic. As the Dow approaches its earlier highs, one should be less concerned about what the thirty stocks in the Dow are doing than what the overall market is doing. Remember, those same thirty stocks are the same weighted stocks which disproportionately affect the S&P. There are about six thousand stocks traded on the Nasdaq and NYSE and more on the pink sheets, Amex, etc.
Today, the banking index has made zero and I do mean zero progress with this "rally". The banking index is again down today. Finance is far and away the largest and most important component of market capitalization in the US. If anyone tells you that the market can go higher without Citigroup, Bank of America, JP Morgan Chase, Wells Fargo and twenty more of the largest banking institutions in the US, they are absolutely wrong. (JPM is relatively undervalued but then their dividend is paltry as well. Likely the reason why it is valued so cheaply versus traditional banking measures.)
We've had three bottoms in this move. June for utilities, July for the S&P and Nasdaq and August for retailers and transports. As fast money and fools cycle through these indices with rapid moves to the upside, the BKX has not participated at all. Of course, the good news is the BKX has also not collapsed either. This is not a technology rally as many would have one believe. It is a rotational oil=>semiconductor rally I talked about in the pairs trading post before oil started cratering. Unless you are a trader capable of extremely fast moves in pinpointed stocks, this rally is pathetic. As the Dow approaches its earlier highs, one should be less concerned about what the thirty stocks in the Dow are doing than what the overall market is doing. Remember, those same thirty stocks are the same weighted stocks which disproportionately affect the S&P. There are about six thousand stocks traded on the Nasdaq and NYSE and more on the pink sheets, Amex, etc.
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