Brexit ! That's all that matters in the markets at the moment

Discussion in 'Market Commentary' started by SimonDenham, Jun 13, 2016.

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  1. SimonDenham

    SimonDenham Simon Denham CEO Mercor Index Staff Member

    The chickens are coming home to roost.

    For years the UK public has been fed a diet of anti EU rhetoric…. From banning sausages, straight bananas, massive fraud, getting rid of imperial measures and the almost permanent vision of political snouts in the ‘Brussels gravy train’ there has been very little good printed in the UK about the EU project. It is hardly surprising that this perception is taking rather more than a few weeks to reverse.

    When you travel through France, Italy, Spain etc there are solid reminders in the shape of huge notice boards proudly stating that such and such bridge or road or tunnel was built with EU funding. But, back in the UK (where I assume the same thing happens) there are no such acknowledgements. We receive no constant reminders that things are better because the EU is there.

    I do not have long discussions with many people under the age of thirty these days but I can tell readers that those over the age of forty seem almost wholly bent on voting for the Exit door. In discussions with my neighbours, people at sporting events, work colleagues and “people down the pub” the impression that I am left with is that the vote is not even going to be close. One of my friends is a hairdresser and his poll of clientele revealed a 100% (!?) exit intention.

    Yes, if I was young, lived in London or was part of a unit that benefited directly from EU funding then maybe the impression would be diametrically opposite but ..I am not.

    Apparently the Remain Camp, which thought it had just about done enough a few weeks ago to ensure a solid victory, is now in desperation mode. Presumably private polls are saying pretty much the same as the recent newspaper samples. The London ‘bubble’ has soothed them into a false sense of comfort.

    As we commented last week in our ‘Top Gear Effect’ missive

    “In one corner we have three middle aged blokes (Messrs Gove, Johnson and Farage) and in the other we have every single Party Leader (plus all their infrastructure), every Economist and Financial Institution on the Planet, the Trade Unions and most of the great and the good ….. and somehow the three seem to be swinging the argument. Even the newspapers, many of which had been heavily pro the exit choice, now seem far more in favour of the Remain option.”

    As we commented this looked like a classic sell the rumour buy the fact scenario.

    The Fed seem to have (once again) created a false market in heavily promoting a possible rate increase only for their nerve to fail them when it came to the crunch. Ms Yellen has (apparently) now ‘indicated’ that it will not be this month but also warned investors not to be complacent as rate hikes were coming. The best way to make sure that markets sit up and take notice is to raise when not expected to do so. So traders should be wary of seven o’clock on Wednesday evening.

    Economic Data

    Pretty academic over the next couple of weeks but still today we saw the Japanese Business survey slip to negative 11.1 and Chines retail sales fall to their lowest increase since 2000 (only up 10% !).

    Indices

    FTSE

    What can we say? The next ten days will probably be violent and subject to sudden surges in Bullish and Bearish tendencies.

    Once the 23rd is out the way we can look to a bit of normality again.

    Support is at 6045/50 and 5980/90

    Resistance is at 6220/30 then 6340/50 and 6410/30

    DAX

    As mentioned on Friday’s comment. “a day for tin hats”. Today is the same and whilst it is possible to make money in the wild swings it is also very easy to lose it. All we can really suggest is to save your investing for more normal times.

    Support is at 9640/50 , 9575/85 and 9510/20

    Resistance is at 9800/10 then 9880/90 and 10280/90

    Dow

    The US is somewhat insulated from the European lemming like behaviour but even they are finding it hard to completely ignore the 200 point fall in the FTSE and the near 700 point drop from the highs for the Dax. In equivalent percentage point falls the Dow should have fallen almost 1,300 points but has (in fact) managed just 200.

    At some point there will be a case to sell the Dow and buy the Dax/FTSE but… probably not today!

    Support is at 17710/20, 17605/15
    Resistance is at 17995/05, 18050/60, 18215/25

    FX markets

    Euro

    With Yellen seemingly giving up the ghost on US rate hikes one might have expected some positive reaction for the Euro but everything is being swamped by the tsunami unleashed by Cameron’s misguided populist move on the referendum.

    If the UK pulls out (bad enough for the EU project as this might be) it could unleash the pent up frustrations of other more integral members. In recent polls France is apparently even more anti EU than the UK, of course the EU has manipulated referendum in the past (and will no doubt do so in the future) but a UK exit brings into doubt the entire project.

    Support is at 1.1223/35 and 1.1110/20
    Resistance is 1.1370/80, 1.1460/70, 1.1590/00 then 1.1720/30


    Sterling

    The Polls late on Friday and the even more extreme one this morning have hit the pound in the solar plexus and we are back at the bottom of the Brexit range. One wonders what the remain camp have left to hit us with. Every single reputable organisation has said a vote to exit is bad for the UK but voters appear to be totally deaf.

    Or maybe they are just tired of being told what to do?

    Support is at 1.4130/40, 1.4050/60 and 1.4000/10

    Resistance at 1.4250/60, 1.4320/30 and 1.4380/90


    Gold

    With equities falling .. gold is going up.

    That is about as technical as it gets.

    Support is at 1270/75, 1252/54, 1240/42 1228/30 1216/18, 1204/06

    Resistance is 1286/88 1294/96 and 1303/05

    Oil

    With the economic and political outlook rather up in the air at the moment oil is understandably sinking a little. But $50 seems to be holding for the moment (just about). Whilst we are in a bull market the fall has reminded people that there is still a glut of the black stuff around and it will take some time for this situation to reverse itself.

    Support is at 4950/60, 48.60/70, 47.40/50, 46.60/70 and 45.35/45,
    Resistance is at 50.50/60, 51.70/80 and 52.05/15
     

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