Over the weekend I heard from people I haven’t heard from in quite some time asking me for my thoughts on Brexit, and what it may portend for our own markets in the near future. As readers who’ve been with me for a while have come to know – I pull out the following chart. And with that, here is what I shared for those who might want to know.
Here is the current market as expressed via the SPX as of the close on Friday. To Wit:
As we can see we came down in one fell swoop and closed precisely on the bottom edge of those levels I marked as “#11 It’s all about….” and – it still is. When I was asked “Why is that level so important?” I replied, “It’ll take far too long to explain, just know I drew those lines months ago, all you need to know is the market’s reaction to them. The market is now showing you their importance, regardless of how important I claimed them to be.”
The phone went silent.
If we break free from this level with conviction and close well below it (as I iterated in previous discussions) I believe the next stop is to that #12 area I marked in grey and it will come in short order.
When I first placed it the potential for a Fed. rate hike in June was still on the table (albeit loosely.) That has now come and gone and the Fed. relented as to choose inaction, for action, once again. However, where I wrote “Where real concern should …….” I believe still stands. I’ve also just moved it more to the right as to line up with where we are, but the area is still the same.
I’m going to make one change and that’s from “Real Concern” to “Out right panic” should that level be hit in a waterfall styled event.
This is where I believe you’ll hear every central banker and who knows who scrambling to say “what ever it takes” and more. However, I think what ever happens at this level (if it is reached) will only prove out to be a respite before another real test of the now moniker’d “Bullard Bottom” is not only tested, but may in fact, not hold as the case previous. Why do I say such? Easy…
Mr. Bullard has come out and basically thrown in the towel for Fed. credibility. He went from being thought of as “a fair-weathered hawk” to an out right capitulating uber dove. I now think most (if not all) Fed. pressers or announcements during any turmoil will only slow or pause the momentum ever so slightly as the headline reading HFT algo’s react – but it will only be temporary. Then the momentum will once again resume. And it might get down right scary at times.
Whether or not any of this takes place is unknown. It’s all a best guess. However, as those of you who’ve been following the above chart since I began annotating it nearly two years ago know: the lines have been drawn well in advance – not after he fact, along with the commentary, and have been quite prescient. Whether or not it continues is, like I said, “anyone’s guess.”
But hopefully some of you now have a little more information you can use as to make your own decisions whether it be about business or other matters.
Which is the whole point of this blog to begin with.
© 2016 Mark St.Cyr