Comments about the banks, and more on oil and euro,

Thinking of being bullish not just oil (maybe gold), but banks too? Here's a banking index chart to keep an eye on (below), and some information on the commercial traders' positions in oil and the euro. The COTS Timer blogspot which I like to check in on, has posted this week saying their setups look bullish for the banks, and for oil (although going into cash for equities for this week - which from a swing trade basis may make a lot of sense because it's probably going to be day traders and very, very short-term swing trade (the kind that last into the next day or maybe 3 days) who continue to do best in this market. I can agree that oil looks like it has more upside work to do, because if it were going to reverse off the Fibonacci and symmetry it already met last week then I would not expect to see the futures as green for oil as they are right now. But check out the COT charts below (from ) - they show the commercial traders recently increased sharply their short positions in oil, as well as the euro - while speculators went a bit more long on both over the past few weeks. That doesn't look bullish to me, but I must defer to COTsTimer blog as they've put a lot of work into their setups and their methods also have a time factor. So perhaps being bullish on these now is based on movements that occurred in prior weeks. For that matter, in the face of the ChartsEdge gold forecast for the upcoming week, one has to wonder if the dollar does weaken more (that drop on Friday does call into question the symmetry target there, so maybe the dollar reaches for one of the lower support levels I've described in my posts on the dollar (use "US Dollar" label to find those).

As for the banking index - I know, with the current awful news about this sector including the FDIC reserves getting very thin, one might have to hold one's nose to plunge into a long position there - maybe there's a bullish case, even if it's only a temporary one for either a "B" wave up or another rally leg. On my BKX daily chart below, I marked some channel lines to watch for support. The indicators are where they can flick up, and there may be a real effort to test that 200-day moving average. If that effort fails, then it's more likely to be only a "B" wave that rolls over to a "C" wave lower. I read the Elliott Wave count for this as a possible leading diagonal, because of the subwaves looking like 5-3-5-3-5. If that turns out to be correct, then a correction could be quite deep (but doesn't always have to be, especially if it's an "A" wave rather than a wave 1). Another place to look for support is the 50-day moving average.

Another alternative for the BKX chart would be that it needs another high to complete the 5th wave of a major "C" to finish a primary "B" wave (at least, using Tony Caldaro's Elliott Wave parlance, if I have it right). The point being, that it can finish another bear rally movement of its own that can result in something more bearish later on.

One potential target for the BKX on a move up may be $46. That would be an important test of swing lows back in mid- and late 2008. There also are other Fibonacci retrace targets (including one at about $50) but I would tend to look for a projection to $46 first, if it gets above that 200-day moving average.

Note that I'm not really saying I agree with the bullish case for banks - I'm just saying that I can see a chart basis for the banks moving higher, but I think it is limited. I don't know if this is related, but I have pointed out that the chart of GS is moving into resistance. It can push higher, to about $147-148, and perhaps that would be consistent with equities and the banks edging higher. But there are reasons to think all this doesn't happen in a straight line - can be choppy. There seem to be some real cross-currents going on in the markets right now. Good money management and use of TMAR (take money and run) combined with honoring stops if setups go awry, look to be as important as ever right now. (There are times when sidestepping a loss is more important than trying to catch every wave on the hourly charts.)

As for the euro - about which I posted in depth this weekend (use "Euro" label to locate) - yes, the commercials' short position increased, and yes it may reverse. Perhaps a bullish case would be that if the euro (and oil and gold, where the commercials are also distinctly net short) do push higher and the commercials unwind their shorts, that could provide a short-covering push propelling these asset classes higher. Are these "green shoots" or just a weaker dollar? For traders, it doesn't really matter. Raymond Merriman made remarks in his weekly comments about the possibility for several of these markets to move sharply and not necessarily based on fundamentals but on emotions. We cannot necessarily predict where unexpected emotions will take these markets - or we might not agree - but we can remain alert and flexible.