Back in early December last year when I penned the article "Is Banking Tanking?", the banking sector was chugging northwards like all other sectors, and the only hint of trouble was that it had gone from a leading sector to a laggard sector since the June 2006 low point.

In that article I predicted a top for the sector near the end of January 2007. It actually came in on February 20, 2007 - so I was out by about three weeks. And I guess folk who had read the article had dismissed it by then, or - more likely - completely forgotten it.

But fast-forward to today and banking really is tanking!

In fact, BIX has recently gone into a near-vertical plummet southwards.

By my calculations BIX could ultimately bottom out near 290 - that's another 20% below the recent close of 361. Now BIX could just persist with its near-vertical descent all the way to 290, but I don't think it will.

In my view a traditional A-B-C decline in a double zigzag form is likely to unfold, and the progress of the slide to-date supports this view.

We should be very near concluding the slide to point A of the zigzag. A bounce should unfold next to point B (likely to be near 390), followed by the next slide south to under 300.

We're approaching 355, which has been support or resistance on 10 occasions since early 2004. I expect BIX to form a bottom within the next week in the 345 - 355 range, then bounce strongly in a zig-zag to near 390.

This impending rally could last to anywhere from mid-October to the years end.

Expect to see more fireworks after the bounce ends, including a spreading of the near-vertical drop characteristics to the major US indexes.

But that may be next year. Right now we are about to enter what may be the last good buying opportunity in US markets for a long time to come. In the immediate term BIX should not drop below 345 in any persistent way. If it does, even I will be frightened as the only suitable explanation that comes to mind is that dreaded five-letter word: CRASH! I don't think we're heading there - at least not yet. But I may be wrong. This is certainly no time for complacency.

Volatility is back! Yes, I predicted that as well - in my November 2006 article: "Outlook For 2007 And Beyond".

View the full version of this article, including a chart of BIX and links to the other articles mentioned, at www.TrendSensor.com/MarketBrief/ DISCLOSURE: Murray Nickel holds no position in BIX.