Brexit Reaction

Typical, it always feels like markets make major moves while I'm away. So, in brief: [1] Markets (and more reliable forecast/betting markets) got the Brexit vote horribly wrong and it's going to be a long (long) time before market confidence returns: Broken Leave promises, broken Conservative and Labour parties,  a leaderless British government, a half-in/half-out Brexit with article 50 still to be administered, the Scottish/Northern Ireland problem, an EU which will look to throw the UK under the bus etc etc.  There are lots of questions to be answered before markets could consider breaking May highs (when markets had priced for a status quo vote). [2] What does this mean for Europe as a whole, or more pressing, the U.S. election? A Trump victory got a boost with the U.K. populist vote. Imagine how markets will react if Trump does win the November election... [3] The weekly charts had been consistent in forecasting long term weakness. I had highlighted this here if you

Before the Brexit Results

Markets plumped for a non-Brexit. While markets closed higher there wasn't the volume to suggest a great degree of confidence in the finish.  As of writing, it would appear the market 'got it right' and an opening gap higher will emerge. What bears will be looking for is a bearish 'black' candlestick, which is a close below open despite a higher close than previous session (day). The S&P is on course to tag upper broadening wedge resistance. Watch for a MACD trigger 'buy' as bulls look to press their advantage.

Brexit Vote

With Thursday's vote coming up, it's looking unlikely markets are going to make a sudden move before then. The S&P posted a small gain and helped to relieve the pressure exerted on bulls by yesterday's late selling.

Brexit Relief Rally Fades

A positive day on suggestions Brexit may not happen invited bulls back to market, Action to this point had the look of a pullback swing low (at least as from Thursday's action), so it was easy for buyers once it was clear there was a strong premarket. What was disappointing was the late sell off, which probably did more damage than Friday's selling, but this can be rectified with a Tuesday close inside the upper part of today's intraday range. For the S&P, today's action meant an inverse hammer crossover of the 20-day and 50-day MAs. It's interesting to see stochastics [39,1] court the bullish midline in what would traditionally be a buying opportunity - so on the chance bulls are able to open the S&P above today's close then today's damage on the intermediate time frame (up to 3 weeks) may be slight.

Friday's Action Overshadowed By Thursday's Buying

Bears returned on Friday, but weren't able to undo the action of bulls from Thursday. Volume did climb, registering as distribution, but Thursday's lows held. The S&P turned net bearish with stochastics [39,1] crossing below the mid-line. While relative strength (to the Russell 2000) improved.

Bullish Riposte Delivered

This was the perfect day for bulls. Early selling had squeezed any weak holders out of their positions and sucked shorts in, only for the late recovery to have forced newly minted shorts to cover and encouraged new buyers to come in at lows. What's needed next are solid white candlesticks on Friday to confirm a swing low. The S&P remained below converged 20-day and 50-day MAs, but a good day tomorrow should easily regain these moving averages as support. Technicals haven't all turned negative, but slow stochastics are hanging on.

Bears Reverse Early Gains

On my weekly post I had talked about the bearish position , which wasn't really apparent on the daily charts. Today was the first indication bears may be working on something more than what had looked to be a straightforward 'buy the dip' retracement. The Dow was the first index to return to a net bearish technical picture on the daily time frame. Volume was lighter than recent days, which will offer some comfort to bulls, but it's the manner of the weak finish which is of greater concern.  The 200-day MA is looking like a key support level.


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