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Brexit Surprise.....Will Others Follow Britain?....Still Nothing Bearish Yet...

Stock-Markets / Stock Markets 2016 Jun 25, 2016 - 02:26 AM GMT

By: Jack_Steiman

Stock-Markets

If you looked at the action yesterday one would have thought that Britain staying was a slam dunk. Poll after poll showed a tight race, but all of them had them staying. The market was smelling this out, and, thus, the strong action the market displayed yesterday. Funds were running to the buy button as they were afraid to miss the breakout over 2134 on the S&P 500. The market closed just one percent below that magical level that had the bulls frothing. Breadth was strong yesterday as well. Buying across the board, especially those financial stocks that were bound to explode once the vote for staying in the euro zone was completed. Sadly, and as usual, the masses were wrong. Why this reality occurs over and over again with regards to the stock market is a mystery, but the masses were clearly wrong once again.


Brexit was the vote. So long Britain. So long markets overseas. Massive falls were anywhere from three percent to more than eight percent. Some incredible blood baths. Naturally the futures here at home took a hit. Not nearly as bad as overseas, when are they ever, but down hard. The S&P 500 is down over one hundred points at the lows last night. They recovered beautifully, but still gapped down hard. After the gap down we saw the usual strong buying for a while that tapered off as the day wore on today. When all was said and done, the markets took a decent hit with the S&P 500 still above its bullish line in the sand, or the 200-day exponential moving average currently at 2038. The banks are below the 200's, and the Nasdaq is well below the 200's, BUT the S&P 500 is NOT! Until it is with force on a closing basis the trend is still not bearish. That will be the focus for the bears in the days and weeks ahead. For now, the S&P 500 has survived Brexit. It should get very interesting from here.

Here's what could get the market to dive further. Now that one has left the Euro zone will others follow? Will Italy and others want to do the same thing? It is quite possible. It's the roach theory. Where there's one there's always more to be found. You get the feeling more and more countries are going to talk the same talk as Britain. If that's the case the market could be in real trouble. The bullied bull market by fed Yellen still has low rates on her side. That's her best weapon for market protection. At some point you wonder if the real world will ever take over. If truth will be the name of the game instead of low rates by themselves. Think about the latest economic news as well.

Last month's Jobs Report was nothing short of a disaster. Then this morning, quietly, the durable goods report was a disaster as well. Expectations of minus 0.5% was met with a real number of minus 2.2%. Jobs and durable goods both reporting powerful misses on the negative side. The combination of problems is adding up fast, and, at some point, maybe the truth will take over for low rates. We shall see. Poor jobs. Poor economy. Declining earnings. Super high historical P/E on the S&P 500. Massive negative divergences. Britain waving so long. Maybe all of this will equal an S&P 500 below 2038. Maybe!

We tried over and over to break out over the 2100-2135 zone of resistance. It never happened. The bulls had many chances before the Brexit vote occurred. There were times when there was nothing bad happening in the news world, but no dice for the bulls, so no excuses. In times such as these you play from safety. You don't play from fear of missing or boredom. We need to learn a lot more about the intentions of both sides. Will 2038 hold, or fold away with force, is what we need to learn. Slow and easy here folks.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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