Friday, October 15, 2010 2:56:10 PM
BAC in bearish trend
When the US markets topped out in October 2007, most of the US banks had already tipped into bearish trends. As the $SPX topped out in October that year, many US banks either double topped or put in secondary highs before rolling over. Well, judging from what I’ve seen this week, we may be seeing this repeat again. The US banks look as if they have started another bearish trend. The primary stock I follow is BAC and I’ve attached two charts for your review.
The markets have put in 80 week cycle lows either early July or early Sept. However, BAC has cut to new lows here today and that confirms a likely bearish trend for the US financial sector IMO. An important Hurst 80 week, as well as 4.5 and 9 year lows is due in 2012. I do not expect the US banks to perform well into that timeframe.
If you look closely at the 2007 October timeframe, BAC, as well as, all the US banks rolled over immediately after the Oct. 11th top. When they cut to new lows in the following month (Nov. 2007), price took out what should have been a bullish 18 month cycle low. Once price had taken out this major cycle low, it was a warning that the larger market was in longer term trouble. See the first chart for illustration.
Looking specifically at the significance of this week’s new lows for BAC, the stock is bound by the FLDs (Hurst speak for future line of demarcation). As long as the stock price cannot penetrate above these FLDs (which is basically price offset by a given number of calendar days), the stock will trend downward and cannot generate a new buy signal or any upside target. See second chart.
From a Hurst cycles point of view, a bullish market holds its major lows and then rallies for months or years, never visiting that low price again. A bearish market develops when important cycle lows are breached to the downside.
So looking at the latest price action for BAC, it is flashing a major warning IMO (as will the other US banks) for the US markets. BAC took out its price low from early Sept. which should have been a major cycle low. It also confirmed that the stock is once again in a major bearish trend that will likely not end before 2012, where major lows are due at the next 18 month cycle low.
I know that the US mortgage and housing market is a mess and so fundamentally this will be a continuing problem in the US. But I think the US Financials are key to supporting a bullish market. I also recognize that the US market can delay the onset of any decline due to FED shenanigans, but at some point, the weak financial sector will have its consequences.
cheers,
john
When the US markets topped out in October 2007, most of the US banks had already tipped into bearish trends. As the $SPX topped out in October that year, many US banks either double topped or put in secondary highs before rolling over. Well, judging from what I’ve seen this week, we may be seeing this repeat again. The US banks look as if they have started another bearish trend. The primary stock I follow is BAC and I’ve attached two charts for your review.
The markets have put in 80 week cycle lows either early July or early Sept. However, BAC has cut to new lows here today and that confirms a likely bearish trend for the US financial sector IMO. An important Hurst 80 week, as well as 4.5 and 9 year lows is due in 2012. I do not expect the US banks to perform well into that timeframe.
If you look closely at the 2007 October timeframe, BAC, as well as, all the US banks rolled over immediately after the Oct. 11th top. When they cut to new lows in the following month (Nov. 2007), price took out what should have been a bullish 18 month cycle low. Once price had taken out this major cycle low, it was a warning that the larger market was in longer term trouble. See the first chart for illustration.
Looking specifically at the significance of this week’s new lows for BAC, the stock is bound by the FLDs (Hurst speak for future line of demarcation). As long as the stock price cannot penetrate above these FLDs (which is basically price offset by a given number of calendar days), the stock will trend downward and cannot generate a new buy signal or any upside target. See second chart.
From a Hurst cycles point of view, a bullish market holds its major lows and then rallies for months or years, never visiting that low price again. A bearish market develops when important cycle lows are breached to the downside.
So looking at the latest price action for BAC, it is flashing a major warning IMO (as will the other US banks) for the US markets. BAC took out its price low from early Sept. which should have been a major cycle low. It also confirmed that the stock is once again in a major bearish trend that will likely not end before 2012, where major lows are due at the next 18 month cycle low.
I know that the US mortgage and housing market is a mess and so fundamentally this will be a continuing problem in the US. But I think the US Financials are key to supporting a bullish market. I also recognize that the US market can delay the onset of any decline due to FED shenanigans, but at some point, the weak financial sector will have its consequences.
cheers,
john
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