It’s a repeat of the reaction to Brexit and the US election. Italy’s referendum has triggered all the usual stock propping mechanisms: CL, USDJPY and VIX. CL officially busted its H&S pattern, USDJPY has rallied over 1% off its lows, and VIX broke down below its rising red channel bottom…again. The result: the eminis have spiked 27 points higher off Sunday’s lows.
The most startling reaction was the EURUSD, which is improbably higher than before the referendum (but, importantly, has merely backtested the falling white channel it broke down from.)
As the talking heads ruminate over Greenspan’s irrational exuberance comments of 20 years ago, there seems to be little concern about the even more irrational (but, predictable) reaction to fundamentally disturbing events.
A popular website posted the comment this morning “[we] wonder if the ECB has its own plunge protection team.” I would take that a step further. What is the ECB, if not a plunge protection mechanism?
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