Thursday 3 December 2009

Home Run

BOTTOM LINE: Not long to wait now for risk and related assets to start falling. Equities will fall, USD, government bonds and volatility will rise.

This is an hourly chart of the KBW Banking Index (BKX), shown with this very count on Tuesday 1 December. I see Bank of America (BAC) up about 3% following their announcement that they will repay $45bn. This would be enough to take the BKX higher by about 2%, given BAC is the largest constituent at 9%... and it would then come to the perfect zone of between 44.50 and 45.50 where the whole correction from 3 November 2009 should end. This will likely mark the end of wave II or B, which in either case would result in a move lower of at least the same magnitude as the October sell-off, which was 12.5%.

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