[BKX] update

My first post on the financial services index ticker:BKX (AKA $BKX.X) was entitled "Banking index [BKX] suggests shorts be cautious near term."/

I provided a few possible models there but none with any real conviction.  My bottom line was "The two short term bullish counts upper right get the nod if BKX goes up just $1 from current levels."  BKX did go up that dollar and so the bullish count should have gotten the nod to anyone reading these posts.  Now it's time to look at this again.  The chart is below and it is still potentially vague but my primary count is now bearish (the blue path).

The blue path uses the blue numbers and it basically says that BKX peaked back in late December with an expanding wedge and that the subsequent January lows were wave 1 down.  Thus the mid Feb peak was a deep vee wave 2.  If this count is correct there is still some chance for a slightly higher move to perhaps $73.50 but it should then quickly reverse and fall through the lower red rail of the rising wedge.  That is the clear signal to sell the banks.  Patience will be your friend here.


The green path says that we are still working on a 4th wave HT whose D wave just finished.  In this case, the coming pullback will not be the start of a new bear market but rather just the E wave. 

In either of these cases, the banking sector is expected to be under pressure for the next 2-3 weeks.   If this is an E wave, I would expect a throw under and then a break back into the channel.

If this is instead blue 3 then the wave should blow the lower rail away.  Another possibility is that blue 3 turns out to be an extended wave and in this case we could see wave 1 of 3 kiss the bottom rail from above, bounce a little into wave 2 of 3 and then smash down the lower rail in wave 3 of 3.

The battle ground is at the red oblong and what is at stake is not just the financial services but virtually all of the US stock market indices.  Again, I don't know what the final outcome will be and neither does anyone else but the odds greatly support one of these two outcomes and the trigger levels to determine which it will end up being should be easy to observe.