"Brexit" Market Perspective

 

We offer some perspective on today's purported "market panic".  

 

The DJIA is at the same level it was last Thursday morning, essentially the same level it  closed at 5 weeks ago on May 19, , and at the same level it dropped to mid-day exactly 3 months ago on March 24.  See the chart we posted Wednesday for further reference.

 

On February 11 the DJIA was 1897 points lower than today's close, despite today's 610-point drop.

 

The U.S. dollar is at the same level it was at the start of June, in mid-March, in mid-February, and through most of last year.

 

Gold is at virtually the same level it reached mid-day a week ago.

 

Oil remains higher than most of the past 6 months, and higher than it was just last week.

The euro is at the same level it reached in late May.

 

Lastly, Britain's currency is barely lower than it was in late February.

 

In other words, ignore the fear-mongering hype, because most everything continues to move essentially sideways, and this is not a "buying opportunity", nor are we close to one,  with respect to general equities.  Rest easy knowing we've maintained a bearish outlook all along.

 

Doomsday prognosticators have no idea what the "Brexit" vote truly portends, nor do those who voted either way in the referendum given such a move is unprecedented.  In the long run, nothing much will really change though we'd argue it's a long-overdue step in the right direction.

 

Also bear in mind that the Brexit vote is not legally binding.  Given a mere 1% swing would've resulted in a tie, it would not surprise us to see the referendum results ignored entirely or at least to some degree in the ensuing negotiations to "exit" the European Union.  It does seem like Prime Minister Cameron is respecting the very slight majority vote, for now, however it wouldn't be the first time a politician lied or entirely changed course without warning.

 

What may actually matter for our interests is that the DJIA closed below its 2016 break-even level, though just barely (by 23 points), which is bearish.  That's close enough to call it even, so markets may bounce from that key level next week.  

 

In any case we remain bearish and emphatically maintain that equities remain in a major topping process that will lead to a material and lasting drop in stocks before too long." 

 

Accordingly, we remain long SDOW and VXX.

 

 

 

 

 



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