Update Jun 23, 11:53 PM:
BBC, Sky and ITV have all called it. The Brexit prevailed, and markets are none too happy.
Nikkei futures tumbled over 10%……while S&P 500 futures fell about 5.5%.Even oil futures were off an impressive 7.4% before going into damage control mode.EURGBP, the most telling of the currency pairs and the one we’ve focused on the last several days, is approaching our initial upside target and will likely tag the next.
Unless we get a massive bounce overnight, look for SPX to tag the downside target laid out earlier today in The Eve of Destruction – Part II and of course back on Jun 14 in our last Big Picture Update.Stay tuned, and trade safe.
UPDATE: 9:15 AM
Remember May 19, when SPX bounced sharply, going up to bust out of the falling white channel to new highs? I suspected it would, but was disappointed that it couldn’t manage a little lower in order to tag the yellow .618 at 2010 — also the level of the SMA200 at the time.CL, which had just reached the .618 retracement of its drop from 62.58 in May 2015 to 26.05 in Feb 2016, was almost solely responsible. It shot back up above the .618 (the yellow arrow) and spent the next month ramping SPX higher in a series of bizarre channels that defy all reason.I wondered at the time what the end game was. Now, it’s crystal clear. By breaking SPX out of the falling channel and extending the rising white channel an extra month, they were able to force it 110 points higher. If SPX were to lose 100 points from Brexit, it would be net ahead of where it was.
It’s a much better outcome for central planners than losing 100 points from 2010. If successful, they will have maintained the breakout from the falling yellow channel dating back to 2015’s highs — ideally with another (the 8th? 10th?) backtest of that channel and a bounce off the SMA200.
Sad, of course, that our “markets” are now so heavily manipulated that they require quote marks. But, it’s a smart strategy, and one that might just work.
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There are a couple of ways to play this for those who were on the sidelines last night. First, since this is Friday, be extremely cautious of anything that requires you to hold over the weekend.
Second, it goes without saying that TPTB will pull out the usual stops to try and stem the tide. Yes, this means USDJPY and (especially) CL should see some strong rebounds as SPX approaches our downside target.
Simply put: if CL isn’t spiking higher, SPX isn’t done falling.
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