FREDAlert!
Volume 8, Issue 3
June 24, 2016
The result of the British vote to leave the European Union has stunned financial markets although this possibility had existed and is doubtless factored in by some investors. The politics and long-term ramifications of this vote are unclear intermediate-term and outside the scope of Technical Analysis, so we will restrict commentary to some of the themes we have been discussing on conference calls and in the Reports.
- First, on yesterday’s conference call we mentioned using an exit vote to sell bonds and buy dividend-paying stocks. We would continue to do this and give some ETFs of interest. PID and IDOG are two interesting international dividend paying ETFs that we would use, and SPHD and SDOG are domestic ETFs we would use. We would try to buy positions in these early in the day, with the idea that they will be added to over the next week.
- Second, GLD is up, which is in line with the positive long-term trend systems we have discussed over the past month. We would hold or even add slowly to this for investors. As part of this, we have noted the possibility of a second half rally in the dollar and this seems more likely now. UUP now looks like a move to 26 is in the cards, unless 24 is breeched on the downside. We have mentioned and continue to believe that the relationship between the dollar and commodities, especially gold, is changing and they can rise together.
- Third, the SPY is almost certainly going to move through the 205 stop on the open. We have two scenarios: a close below 205 would cause us to be more defensive and lessen the chance of a move to 223, our target for 2016 before the end of the fourth quarter. Second, a close below 202 would increase the chance of a test of the 190’s before another advance. We would not trade aggressively in the first hour of trading, except for buying dividend-paying ETFS as mentioned above.
- Last but not least – we have been concerned about the big shift to the bullish side on our sentiment numbers over the last few weeks – and this is likely to swing back aggressively due to this vote and market action. More time than just a few hours is needed to digest this. We may have some commentary later today but will likely wait to see weekly numbers after the close. RELAX.