Front Running the Brexit Vote

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. and European stocks rallied big time as investors appear to be front running or betting that voters in the U.K. will choose to remain in the European Union. Ahead of the vote, a new Ipsos Mori poll completed Wednesday night showed the “remain” supporters with a narrow lead — 52% to 48%. But the polling firm’s chief executive said 13% of those polled could change their minds.

With the HFT traders dominating market action, I would not read too much into this move as volume was utterly atrocious. On the other hand, things like lack of volume or slowing worldwide economies with ever increasing debt loads no longer matter in this run towards new all-time highs, until… one day… they do. Then, watch out below…

What investors do know, based on market action leading up to the closely watched vote, is that a vote by Britain to exit the E.U. – the feared Brexit – would deliver a bearish blow to so-called risk assets, which include stocks.

We also heard today that Bank of America (BAC), the nation’s largest bank, has agreed to pay $430 million in settlements for violations of regulatory rules that safeguard customer funds. Apparently, the bank misused brokerage customers’ cash from 2009 to 2012 to finance its own trading and generate profits, the SEC said. This is a reminder to always read disclosures thoroughly; I am sure everybody does.

Lastly, news came in that German automaker Volkswagen Group is expected to deliver a $10 billion settlement to cover government fines and compensate owners of vehicles fitted with software that cheated emissions standards, according to multiple reports.

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Major Indexes Pull Back Ahead Of Brexit Vote

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

An early rally, fueled by better than expected May home resales, fizzled out in the afternoon as Wall Street focused on the vagaries and uncertainties of tomorrow’s referendum on whether Great Britain will exit the European Union.

A poll published today shows pretty much a statistical tie with “Leave” supporters at 45%, which is just one percent ahead of the “Remain” folks, while 9% are undecided.

Should “Leave” prevail, I expect to see some fireworks in the European markets with a spillover effect to the U.S. Conversely, if “Remain” prevails, equities are bound to engage in a relief rally; the question in my mind is: Will it last or simply be a dead cat bounce?

Janet Yellen continued her congressional testimony for the second day. It pretty much was a repeat of yesterday with the usual jawboning that a recession is not likely but that the British vote and a slowing in U.S. hiring “pose risks to the economic outlook.”

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Markets Barely Back On Top

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The U.S. stock market slightly extended its relief rally as Wall Street and other global financial markets continue to be dominated by the pending outcome of Britain’s vote on Thursday to leave or stay in the European Union.

In a sign of just how high-profile and potentially risky the “Brexit” vote is to financial markets, billionaire George Soros shifted into high gear fear mongering mode today opining that a vote by Britain to leave the EU could allegedly cause grave damage to the living standards in the U.K. and trigger a massive drop in the value of the British pound.

In tech, Apple (AAPL) may finally be integrating into the India marketplace. Potential sales in India prompted Apple CEO Tim Cook to visit the country for the first time last month, where he met with India Prime Minister Narendra Modi, financial and tech leaders, and consumers alike. Apple has built a $59 billion business in China, its second-largest market, but it is in India, with annual sales of $1.5 billion, where Cook & Co. see the most potential.

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Relief Rally Fizzles

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Worldwide stock markets staged a huge rally this morning, which smelled like a dead cat bounce to me, as the much anticipated Brexit vote polls seem to be heading in the other direction with “remain” polls allegedly surging over the weekend casting doubt on the “leave” camp’s leadership.

With the European Union being most affected by the outcome, it was therefore no surprise that some of the EU markets gained 3.5% on the day. US stocks were up over 1% at one point but, after Europe closed, it was all downhill from there. Nevertheless, the major indexes managed to stay on the plus side as the table above shows.

The vote is schedule to take place this coming Thursday and will be one of the most anticipated events in recent market history. No matter what the outcome, US markets will be affected as well, although most likely not to the same degree as Europe. Stay tuned.

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One Man’s Opinion: Good News For Bulls: All Those Open Gaps Below Will Never Get Filled

Ulli Market Review Contact

ManBy Charles Hugh Smith

Market technicians have long observed that the holes in charts left when markets gap up or down at the open of trading almost inevitably get filled later on. When the market gaps down, it will eventually rise to fill that gap. When the market gaps up, it will eventually decline to fill that open gap.

Since there are open gaps galore lurking in the lower depths of the S&P 500’s chart, that would typically suggest stocks must–gasp!–fall to fill those open gaps. The prospect that stocks might not drift higher forever without interruption is deeply disturbing, and so the Powers That Be have issued a new edict: unfilled gaps below must never be allowed to fill.

This new rule simplifies trading, confidence and sentiment: Bulls can now relax, knowing that the market will never be allowed to decline. Sentiment can stay pegged at “extreme greed” forever, and there is no longer any need to hedge long positions because markets will only move higher.

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ETFs/Mutual Funds On The Cutline – Updated Through 06/17/2016

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 381 ETFs, of which currently 284 (last week 324) are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher. Volume figures can change in a hurry, so be sure to check first before investing.

These ETFs are generated from my selected list of 98 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 67 ETFs (last week 79) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 417 (last week 542) above the line and 363 below it out of the 780 that I follow.

Take a look:

  1. ETF Master Cutline Report
  2. ETF High Volume Cutline Report
  3. MF Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.