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Here’s a novel way of looking at the Philadelphia Banking Index (BKX).
Turn it upside down!
Credit: Yes and Not Yes
And voila! the parabolic move is suddenly so much more recognizable. Keep in mind the parabolic move is obvious even when the chart is logarithmically scaled. Of course, when any market trends with more and more intensity, it approaches an eventual exhaustion point. We’ve seen this in every single bubble formation - no matter what the underlying security being traded: gold, bonds, stocks, tulips, etc.
The last time I mentioned this type of technical formation was last year when we looked at the price of crude oil. The price chart of oil had the unmistakable characteristic of a bubble, taking less and less time to increase more and more. It took one more month for the oil bubble to be pricked.
The chart above would suggest that the exhaustion point for the beleaguered US financial sector is near. No one knows if what we’re seeing is yet another short lived counter rally or if it is really the blow off. What is clear, however, is that the trend has very little time left to breathe (if it hasn’t given up its last gasp as of yet).
Here’s an interesting video which covers the question on everyone’s mind: is this rally the real deal? or another run-of-the-mill bear market rally? It also uses Fibonacci levels to provide some levels to watch for next week.
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