My own Elliott Wave taken on the BKX is that it's in a "C" wave up, most likely, with the alternative being a wave 3 up. The big picture Elliott Wave is rather interesting in the sense that I don't see this as having completed a 4th wave and now going up in wave 5. I view it as having completed a 5th wave up in 2007. So - either this is part of a new wave 1 up (so, wave 3 of 1 perhaps), or this is wave C up to complete a "B" wave up, consistent with the overall broad equity market indices. In which case, there's frankly a level higher yet, above $57 (could reach to $58) in the BKX.
I'm thinking the most reasonable approach is to give it leeway and/or continue riding it with the thought that $50 or $51 can be the right level for now, and then see how it does from there. Obviously if $47 turns it back then we'll know, but I'm guessing that Fibonacci level at $50.47 is more like a magnet right now. BUT - to be more specific, the chart resistance is at $46.52 and $46.68. If the BKX cannot push above those levels, then there's a more serious Elliott Wave situation (a 5th wave down needing to complete still) - not my preferred "count" at this point given the looks of the movement, but theoretically possible.
How it acts from around those levels will start telling us whether the bigger picture is to consider this a "B" wave in the banking sector. (There is still another option that this is a B wave up in a flat 2nd wave after it already formed its first wave up, to be followed by a C wave down to complete the second wave. But let's not get overly complicated unless and until we need to!)
We should also ponder how this fits in with the equities rally having lasted 5 months from the March lows. (Longer for the Nasdaq and some other sectors/indices, that bottomed in November 2008 and not in March.) As Raymond Merriman pointed out in his weekly public comments, posted also at this site in Equities moving closer to 4-year cycle crest; while dollar, and Federal Reserve, hang in the balance: Weekly comments by Raymond Merriman (7/31/09), a rally from the March lows if that can be deemed the 4-year cycle low, could begin to crest in five (5) months. He said in those comments: "All we have to do next week is to make yet another new high for this year and we will qualify our minimum time objective for a 4-year cycle crest. As stated in this year’s Forecast for 2009 book, written in November 2008, “…a 4- and 6-year cycle low may be completed anytime before May 2009… Once that low is in, look for a very healthy 5-16 month rally for the crest of the new 4- and 6-year cycle.”"
[Some think that the 4-year cycle bottomed in January 2008, others including Merriman think it bottomed in 2006. If in 2006, then it can have bottomed again in March 2009 as Merriman tends to think. However - I've got to point out, that if the rally does not continue past 20 or 22 weeks from the March lows (past the 5-month minimum), that may undercut the idea of the March lows as being it.*] Obviously, doesn't mean that the 4-year cycle must be cresting right now, but the point is that it can. At any time from here, that crest can be forming. Another reason to attach some importance to the SPX level at 1014 and the banking index if and when it may get to $50.47 (also please don't read my words as a guarantee that the BKX gets past $47 - there's chart resistance between $46 and $47).
* Yes, that does make it challenging to think that if the market tops out here, then it could be the 4-year cycle crest with the 5-month minimum rally, or it could mean that the 4-year cycle didn't bottom in 2006 but instead in 2008. I suppose the difference is when to project it bottoming the next time - frankly, I'm guessing that either way could point to 2012. I'll let the cycles experts debate that out, however, and stick more with Elliott Wave, Fibonacci and indicators, while sharing what the cycles folks are saying.
UPDATE NOTES: Let us suppose that all we get is a pullback, and that it does a pullback to 963 - testing the prior Fibonacci that was significant back in June but then the SPX broke above. If a retest there gets support, then another 90-point move up from there would be to 1053. Resonating about that number would get to 1060 which is a very important number to me personally. Also - if you believe in a possible "rogue T Theory" twist that works off the November 2008 lows (as in Nasdaq, GS, and some other indices), that would point to, perhaps December ... maybe even the very early part of 2010 (hmm, think also low in January 2008, high in January 2010??). // Do I like these ideas in this update note? Well, not my favorite, but gotta see all sides and count the potential including the alternatives. With the strength showing in indicators we've got to consider those that are more bullish. Still - taking it one day/week at a time, there are plenty of reasons to look for a breather or pullback here or very soon. Going to 963 would make sense for a lot of reasons. (A lower test could make sense also - around that 900/910 area even if it's a "prior 4th wave" idea.) (Note, 963 could also be a revisit to a smaller-level prior 4th wave too.)
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