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Trading Lessons

BrExit Stock Market Upwards Crash as FTSE Recovers 100% of Friday Plunge

Stock-Markets / Stock Markets 2016 Jun 30, 2016 - 02:59 AM GMT

By: Nadeem_Walayat

Stock-Markets

Friday's stock market plunge in the wake of BrExit that caught the financial markets, bookmakers and pollsters by surprise who had by the close of polls all but discounted a REMAIN outcome and thus sent stock futures and sterling soaring, only to do a panic reversal a couple of hours later as the actual results started to be announced with the initial triggers being results out of Sunderland and Newcastle. And so with each result a new wave of selling would hit the markets that by 5am had seen the FTSE futures plunge to below 5800, and sterling to spike below £/$ 1.32. Which triggered waves of doom laden commentary warning of End Times for the UK economy, stocks, housing and sterling, as so called analysts published reams and reams of nonsense to explain why the End Was now and stocks were set to literally crash into a brexit black hole.


Effectively all those who had been wrong for the 7 year duration of the stocks bull market were once more proclaiming its demise, and it did not matter what the FTSE actually did post Brexit for the blogosfear perma-doom infection had firmly spread and taken hold of the mainstream press such as the FT, who already predisposed to SELLING FEAR and PANIC to the masses, of doom laden calls of an imminent Brexit disaster, a BrExit Lehman's moment even!

So what did the FTSE actually do? Well, the FTSE futures bottomed early Friday morning at about 5750, before the markets opened, and then with each passing trading day has gathered strength and momentum to the UPSIDE! With the last FTSE close of 6360, its highest since April and positive for the year.

And as for trading BrExit, then as of 12th of June my forecast conclusion based on year long analysis was for a LEAVE victory on 51.3% against REMAIN on 48.7% (12th June 16 - EU Referendum Forecast) and as illustrated by the following pre-voting video:

BrExit / LEAVE Set to Win EU Referendum

 

Thus a Brexit forecast implied that the FTSE and Sterling WOULD PLUNGE on Brexit night, especially as in the immediate run up to the count the FTSE and Sterling were strongly trending in the WRONG direction by discounting a REMAIN win, which was also true of the bookmarkers and pollsters all of which was resulting in an excellent risk vs reward opportunities to profit from as illustrated by the following article and subsequent video posted Thursday afternoon as the bookmakers and markets increasingly discounted a REMAIN outcome.

23 Jun 2016 - Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast

In terms of trading the markets, and despite the markets apparently no longer treating Brexit consequences seriously, a case of whatever happens it will be business as usual, nevertheless a BrExit outcome will result in sharp downwards swings for sterling and FTSE, even if the moves prove temporary as the politicians and central bank officials are likely to respond to both with market soothing words of nothing has really changed and of course the Bank of England releasing tens of billions of more market liquidity support.

So taking account of my forecast conclusion for a BrExit outcome then the current stock and forex markets are offering the potential for good risk vs reward short-term trades. However remember that volatility will be HIGH which means that even if one gets the direction right then if the stops are not set wide enough then traders can get stopped out of positions BEFORE the profit making moves take place. Or that of REMAIN does win then the market may gap well beyond ones stops resulting in larger losses than the potential that had been allowed for.

And so also are the bookmakers giving what appear to be good risk vs rewards odds of 4.3 to 1.

Friday definitely looks set to be a very interesting trading day, your analyst hoping he does not get stopped out of short side profit making moves!

And then the polls closed and all hell broke loose as YouGov confirmed that REMAIN would win triggering a further sharp rally for the ftse futures and sterling that was sustained until the actual results started to be announced shortly after midnight. Which I covered in this comprehensive video of exactly what happened in the markets during a very volatile trading session.

Whilst the following video highlights key events out of 8 hours of the BBC EU Referendum results coverage.

Stocks Bull Market

So against prevailing year long perma-doom my consistent view ALL year has been that the stock market, FTSE and Dow would trend towards NEW ALL TIME HIGHS before the end of this year. Whilst my last in-depth analysis of Mid May concluded that stocks had entered a correction that would see the Dow trend lower towards 17,000 by the end of June 2016, just as that which has subsequently transpired.

Stock Market - Crude Oiil Forecast

Therefore, so far the stock market has been trending inline with my expectations i.e. to temporarily plunge on Brexit, and now having recovered ALL of the decline so has done nothing to alter my long standing view that the stock market remains on track to trend towards new all time highs during the second half of this year as the above video of Mid May illustrates, and which I will come back to in great detail in forthcoming analysis but for now take this as another warning not to listen to the perma doom near always wrong crowd who today are once more busy peddling crash, collapse, and worst bear market in history fear, that if they actually acted on their calls would now also be going broke! This whilst the likes of the FTSE clearly remains firmly within its trading range which for a bull market tends to be a precursor for breakout to new highs, as has been the case for over 7 years now and which is the message I have iterated for the duration of this stocks bull market.

Ensure you are subscribed to my always free newsletter for my next comprehensive analysis that evaluates the many future consequences of BrExit.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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