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Trading Lessons

Ireland EU Exit? - Wealthbuilder Stock Market Brief December 2016

Stock-Markets / Stock Markets 2016 Dec 08, 2016 - 04:57 PM GMT

By: Christopher_Quigley

Stock-Markets

Irexit: Ireland may have to consider leaving the EU.

Since the Brexit vote this summer most national and international media outlets were focused on the American presidential election. However, one story that got lost in the Trump firestorm was the fact that it increasing looks like the Irish government will have to seriously contemplate leaving the EU should the terms of the British Brexit “divorce” be hard rather than soft.


England is Ireland’s main trading partner and the main reason Ireland joined the Common Market (EU) in 1970 was because;” were the English market went Irish producers had to follow”. The prospect of Britain now leaving the EU within the next two year has put the Irish political establishment into an absolute tail spin. The matter is so serious that Enda Kenny, the Irish Premier, post Brexit, went directly to Germany to plead for a “special case” for Ireland in the negotiations. Angela Merkel was having none of it. Since this political failure matters have quickly deteriorated for Irish politicians and economic strategists.

Last Tuesday, December 6th, the head of EU Brexit negotiations Michel Barnier stated that there would be no “cherry picking” in the terms of England’s exit and he reiterated that negotiations would be swift and blunt. This statement was greeted with dismay in Dublin. The political mood has darkened to such a degree that Ruiri Quinn, a former Irish Government Minister stated that; “the Brexit issue has become the greatest crisis facing the Irish people since World War II”. The reason for Mr. Quinn’s  pejorative view is that  in addition  to pushing for a harsh Brexit treaty the European Commission is also moving  to quickly abolish Ireland’s favorable 12.5% corporate tax rate. It is this favorable tax regime that has supported Ireland’s success in attracting a disproportionate amount of American Foreign Investment over the last 20 years or so. Without this “hook” the future ongoing development of Ireland’s export manufacturing base looks bleak.

Thus the poor Irish citizen is receiving bad news on all fronts and therefore I would not be too surprised that, should it prove to be necessary for economic survival, within the next two years the Irish elite will put their media machine in motion and “motivate” Irish public opinion to support an early Irexit referendum.

Market Technicals: A Radical Market Price “Re-Set” Is In Motion.
Technical Summary:
Short Term Trend:                         Bullish
Medium Term Trend:                    Bullish
Long Term Trend:                          Bullish
Long Stochastics:                           Very Overbought
Short Stochastics:                           Very Overbought
Vix:                                                    Bottom of Recent Trading Range
McC. Oscillator:                                            Mixed
A/D Line:                                          Bullish

Before the American presidential election last November, while the Dow Industrials were reaching new all-time highs the same could not be said for the Dow Transports.  From July 2016, for four months, the Trannies languished in a trading range that was well off all-time highs. In Dow Theory parlance this indicated that there was divergence within the Dow Theory indices, indicating rising market risk and developing technical weakness.

However, what a difference an election makes. In 25 business days the Transports have quickly made up for their lost faith and have breached all-time highs with the Dow Industrials in full momentum agreement. This is a market that is now in full renewed bull mode. This fantastic momentum is obviously being powered by a price “re-set”, a modality still recalibrating the price-earnings effect of: increased American infrastructural investment, repatriated corporate taxes, de-regulated banking, empowered trade re-negotiations, freed American energy resources, significantly lower corporate tax rates, higher waged jobs, Federal government regulation shrinkage and accelerated military redevelopment.

Clearly the price re-set process has a long way to go given the current momentum prevalent in market price action, future interest rate rise shocks notwithstanding.

Thus with  a radical Trump presidency, Brexit negotiations, prospective Fed interest rate policy changes, Dutch, German and French elections and a possible French EU Exit referendum (Frexit),  I think 2017 is going to be one of the greatest trading years of all time.

Chart: Dow Jones Industrials: 8th. December 2016: Daily

Chart: Dow Jones Transports: 8th. December 2016: Daily.


Charts: Courtesy of StockCharts.Com

Christopher Quiqley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2016 Copyright Christopher M. Quigley - All Rights Reserved

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.

Christopher M. Quigley Archive

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