Stock Market – taking stock of the events

Posted: July 4, 2016 in Uncategorized

After Brexit, we had quite an amazing week. We did a few really good trades out of it.

But now it is time to wait.

The Post Brexit rally has been propelled by “chatter” of Reserve Banks taking action – larger than usual US Pension Funds re balancing.

But everything went up (including, surprisingly, gold) from oversold to almost overbought.

Now (or well tomorrow as it is Independence Day in the USA) we need to wait a moment and see what happens.

Notwithstanding the big bounce (on thin volume) the money flows indicate a bearish pattern

US Stock biggest stock outflow since August 2015

Outflow from Europe: biggest since October 2014

Biggest inflows in utilities and gold since January/February 2016

So while we continue our thinking “market positive with high stress”, we proceed with caution. Brexit created some gaps in my models that need to be filled.

A note for Australia – definitely the outcome of the election (neither party will be able to govern properly) is a negative for the economy (probably losing its AAA status) and the Australian Dollar.

The Reserve Banks will cut again interest rates – most probably waiting for next month in order to see what happens.

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