Banking sector trying to put in a low, though not C-ing that each bank makes a come-BAC

The banking sector continues to exhibit a chart pattern consistent with trying to put in a major low. After having smoothly downtrended to a significant Fibonacci level we were looking for, it's become quite choppy which indicates waves of short covering, and possible early speculative trading or buying alternating with sell-offs that still wedge lower but in a deceleration of trend. The weekly banking index (BKX) chart below shows that, despite the nice big bounce after reaching our Fibonacci projection, this sector seems to be coiling into a type of triangle and closed on Friday slightly under our Fibonacci level. It needs to rise clear of that level, and move above the indicated downtrend lines marked on this BKX chart, to get positive. I've also included below a daily chart of the exchange-traded fund, KBE, showing this wedge or consolidation pattern of the recent couple of weeks:


KBE is still in downtrend mode, but with the deceleration it's moving more sideways, trying to gather strength to move upward. We've still got to be careful, because if and when this pattern gives way to an upward move, it could be a very nice bounce for either a swing trade or a position for a few months. But it would still have to prove that any rally would turn into a long-lasting trend reversal for the banks to become positive again. So if any rally is to become more than just another bear market rally, it will have to be accompanied by the types of patterns and great buying volumes that provide that proof. We'll be looking for those indications.

Meanwhile, I remain concerned about some individual companies, and Citigroup (C) is one of them. I see that Bill Luby of VIX and More made a comment about Citi in November 2008, in an article quoted at ISE Revamps Implied Volatility Charts, saying: "If Citigroup crumbles, it will dwarf the chaos created by AIG and Lehman Brothers." Despite the attempts by the banking sector (the index BKX, which the KBE exchange-traded fund attempts to replicate) to put in a low, if Citi and/or another major banking concern like Bank of America (BAC) go under, the wheels could come off the market's bandwagon in a way we still haven't seen yet.

On January 20, I showed this chart of Citi, and had a bit of fun adding cartoon images illustrating my view, which is also marked on the chart in my annotations, that even though there was a hint of positive RSI divergence, Citi's chart overall is saying that this company may not make it through. I wouldn't want to make such a harsh judgment call based only on looking at a chart, except that this chart is truly ugly and the fundamentals indeed ARE very bad. Below is my chart of Citi from January 20, followed by how the daily chart looks now:


The indicators are showing that Citi still hasn't shaken off its downtrend. Here's a look at Bank of America too ... it's quite evident that, despite a lot of volume off the lowest point that just happened recently, the indicators here are also still poor. So Bank of America is also still trying to work on either a reverse head & shoulders bullish pattern, or some other form of rally that would see higher highs with lower lows:

*Update - those interested in the banking sector might also want to see what Kosta is saying, in Oh Canada at K's Analytical Musings.