Tag Archives for " brexit "
The Truth About the Brexit: It’s All in the Charts
Want to know the truth about the Brexit? Look at the charts. We didn’t hear much about the GBPUSD since the Brexit decision… and then there was the pound’s flash crash. Now that the GBPUSD is really moving, we’re seeing countless headlines about economic uncertainty and political instability and central banks gone wild. But does all this explaining — after the fact — help us make money? Nope… The right question to ask is how could we have seen the pound’s collapse coming? And how could we capitalize on it? If we are always waiting for news and the next story to drop, by definition, we will always get left behind… similar to a reporter that’s last to the scene. In most cases, the answer is right in front of you. Just look at the charts. People lie. But charts tell the truth. With the charts, you will see the story before it hits the front page. The GBPUSD is a great example of this truth. Post-Brexit, the GBPUSD was in a sideways range for several months. Most people wrote it off, looking for other opportunities. But the pound remained in a downtrend throughout the entire sideways move. This told us to be bearish overall. To see that, look no further than the weekly chart below. If any traders were fortunate enough to see the action prior to the breakdown, they probably would not have pulled the trigger. Why? Because every other time it tested the lows, it rallied. So why should this time be any different? This is where your ability to ‘listen’ to what the chart is saying becomes so crucial. Look at this daily chart. I have highlighted the three main pivot lows. What happened prior to the breakdown was the key. The first two pivots pushed up relatively easily. When GBPUSD came down for the third time, it struggled multiple times to move up. In other words, supply was increasing and demand was decreasing. And for the first time, price was staying below the moving averages. This told us GBPUSD was getting close to making a move. And once it broke down, that was the time to act. This was the story: fear overcoming greed. Not a slowdown in the UK or negotiations with the EU. Humans love stories. We always want to know why. But does why matter as much as when… and how much? I think not. I’d love to hear your thoughts on this. Email me at kurt@t3live.com.
Continue Reading -->Maybe the Brexit Didn’t Kill Planet Earth After All…
European stocks are up this morning after German’s Ifo’s business confidence reading came in better-than-expected, implying once again that Brexit-related fears have gone too far. As we’ve been noting on the Virtual Trading Floor again and again, global economic data has actually outperformed expectations since the Brexit. Below, you can see 2 charts showing the Citi economic surprise indices for Europe (first chart) and the US (second chart): In both cases, the trend is UP, not down. Plus this morning, Irish airline Ryanair kept its 2017 profit forecast in place even though presumably, the Brexit and recent string of terrorists attacks could impact air travel volume. And in fact, traders are once again pricing in Fed rate hikes this year. Fed funds futures now show a 45% implied probability of a rate hike this year, up from 9% after the Brexit. So faith in the economy is returning… whether that marks a near-term top remains to be seen. We’ve got some deal activity this morning. Yahoo (YHOO) is selling its main web properties to Verizon (VZ) for $4.8 billion. Yahoo will operate as a publicly-traded investment company with holdings in Alibaba (BABA) and Yahoo Japan. CEO Marissa Mayer says she will stay with Yahoo. AMC Entertainment (AMC) raised its bid for Carmike Cinemas (CKEC) by about 10% to $1.2 billion. SPX futures are as flat as an ironing board this morning. We are seeing minor profit-taking in commodiites, with oil, gold, and silver all off as US Treasury and Euro bond yields rise. The 10-year German bund is still negative though. Sentiment measures including CBOE equity put/call, VIX spreads, and the II survey still show that traders are in a pretty bullish mood, so the best past forward may be a little break that lets moving averages catch up, and lets the bears reload. I still think we’re heading for a summer stalemate that looks like the amazingly boring April-May stretched, and that’s ultimate a good scenario for the bulls. My main worry now is that crude oil just trades horribly. Crude was a major catalyst for equities off the February 11 low, and with oversupplly worries coming back to the forefront, it could just as easily serve as a downward catalyst. It would also be nice to see the Nasdaq and Russell 2000 confirm the SPX all-time high. But it’s very rare that markets behave cooperatively across the board, so keep your eyes on the important stuff. As long as biotech (IBB), high-yield (HYG), and the Russell don’t break down, equities will likely keep it together. And oh yeah — the Pokemon-driven Nintendo hype train just got derailed. The stock is down 18% today after investors that Nintendo’s clearly not going to make enough money from Pokemon to justify a doubling in the stock price.
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