How goes GS, so goes the BKX?

'Old timers' used to have a saying: "How goes GE, so goes the market". Prior to the down turn last year, one would be wise to keep an eye on the behavior of the largest market cap stocks.

After noticing the the SOX and Goldman Sachs were the only two (non-inverse) security on my watch lists that were red on Friday, i decided to so see what influence, if any, does GS have on the banking index.

When GS has declined for two consecutive days for more than -1%, and the BKX closes up on the 2nd day by more than +1%, the results appear to be rather bullish. In 8 out of the last 9 occurrences, the BKX was trading higher within the next 3 days. Though not statistically significant, it is noteworthy.

(Note: Column '3Day+' indicates the number of days it took the BKX to close higher than the trigger date. A value of '0' indicates that the BKX did not close higher within the next 3 days.)

Ticker			Date/Time			Close			3Day+			PctChg N1			PctChg N2			PctChg N3
^BKX			3/31/2000			79.54			1.00			5.75			2.25			1.12
^BKX			4/12/2000			82.70			0.00			-2.10			-9.04			-7.44
^BKX			4/20/2000			78.29			1.00			1.41			4.74			2.36
^BKX			10/24/2000			81.93			3.00			-0.66			-2.36			0.61
^BKX			6/28/2001			90.99			1.00			0.01			1.37			0.88
^BKX			11/8/2007			93.12			1.00			0.53			1.71			6.62
^BKX			8/1/2008			67.22			2.00			-1.44			3.96			3.41
^BKX			12/2/2008			42.63			1.00			5.40			4.01			11.00
^BKX			6/11/2009			38.19			1.00			1.13			-1.44			-3.82
^BKX			8/7/2009			45.45			0.00			0.00			0.00			0.00

Based on this, we can see that a short term divergence between GS and BKX is not necessarily a negative, and in fact may have positive implications for the short term..