Let the banks run but don't rule out a run on the banks

The banking index broke above the resistance level I showed here and so it's not surprising we got a nice follow-through day today. As I mentioned, it looks rather obvious for the 200-day moving average to be a new target. If that's attained it will be a nice increase even from here, even if it's just a C-wave movement up. There's no point trying to stand in its way, so long as there's no trigger day down, the StochRSI remains above .08, and the volatility index (along with CPCE) is confirming the type of economic confidence that the Armstrong model has targeted for this time frame. But don't rule out the possibility of bad news that may be waiting around the corner once we get there. The fundamentals remain very poor, according to the noted banking analyst Meredith Whitney (see Banks Are Not Reaching Bottom - Meredith Whitney, SeekingAlpha Quick Read, Apr 12, 2009). Questions remain about the bailouts and toxic assets situation that the "great earninings," TARP payback and new equity issuance proposals may not be able to wave away (see Warren Interview: Wall Street’s “system has collapsed”, Option ARMageddon, 4/12/09). Now, the bear-market rally and confidence wave may last somewhat longer - just don't get swept away by it.

For those who enjoy Elliott Wave analysis, you may remember I tried to point out the bear-market rally alternative with one more new low still possible for this index. So, check out this post - The Banking Index - at http://danericselliottwaves.blogspot.com/. They've done a very nice job counting out the Elliott Wave for the banking index. I'm not familiar with their blogspot and work (except that the name daneric does sound familiar to me). I will tell you that the Elliott Wave count they show for the banking index is exactly what I was trying to point out here recently. So check it out; it's a possible, and very sobering, bearish outcome for the banks. Even if you're not into Elliott Wave counting, another way to think of it is that the 200-day moving average may prove stiff resistance, along with the swing low level just under $47 in mid-October.

I've used the Elliott Wave label for this post, which by default refers to Tony Caldaro's Objective Elliott Wave. It will be a good idea to cross-check at Tony's site, Elliott Wave Lives On, where he includes his charts link, to see what he's counting for the banking index as well.