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Never has Economic Data and fundamentals been so inconsequential to market direction


Mercury

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Brexit may not be the reason the markets are going to drop, we have discussed the reasons many times on this forum, but one thing has changed for good, the political status quo is broken and more political contagion will follow.

 

In such a situation whether GDP is up or down a bit or what CPI is doing or even NFP is neither here nor there.  The markets are currently reacting to the one way Remain bet they lost out big time on and are now retracing, rationalising the overreaction they were all part of.  I expect central bankers to rush out more calming measures than they would ideally have wanted to at this juncture, quite probably emptying the armoury once and for all and causing a brief rally in stock (any FX rally will not last long at all).  The US Large Cap markets will be over optimistic as usual while smaller cap markets everywhere look soft and European and Japan stock markets remain soft.

 

It is the beginning of the end in my assessment, finally, let's get it over with so we can reset and, hopefully, learn our lessons in terms of politics and economics...

 

As traders we now need to find the right entries to take advantage of this once in a lifetime moment.  Fundamentals cannot help spot the right entries you have to use technical analysis, or as  might say, let the market show you and then follow in.

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I'm busy watching the political fallout, it's such a shame, Labour in meltdown, Tories rudderless. I only hope Jeremy can survive to continue guiding Labour forward to the utopia of 1950's Marxism.

Can't wait for central bankers to wheel out the 'whatever it takes' speeches.

Have been watching gold as it has fallen back to 50% of Brexit gains, there were rumours on the night that hedge funds were shifting out of currencies (way before the result) and into gold more as a hedge and to avoid the inevitable currency volatility and likely to shift back at opportune times. Always be weary when a hedge fund manager talks to the main stream media, famous for talking up their own book. 

Most of the currencies are back to normal bar sizes except GBP which continues to throw it's self about.

Longer term direction should start to become clear, I'm wondering about continued JPY strength and the possibility of USDJPY retesting 9900? Interesting times.

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Hi   The political fallout is interesting, if sadly predictable.  I am not surprised at the Labour "night of long knives" moment, the majority of the Labour MPs never accepted Corbyn and despite what people may think of him or his ability to win the next election he is the choice of the Labour party grass roots and I think he will be returned by them.  In that eventuality those that revolted are out, I can't see their constituencies returning them in the next general and they will probably all be gone long before then anyway.  Cue a new SDP?  And a long term Tory/coalition run in government and the markets reaction to that uncertainty.

 

Tories will get their act together and frankly Osborne needs to stop whining about how difficult things are now going to be in that "I told you so" fashion or resign.  I think Cameron ought to have held off resignation if he truly wanted to steady the ship but he was clearly making emotional decisions in the immediate aftermath.  The Lib Dem and SNP leaders reactions are frankly disgraceful.

 

Back to the markets, this is a turbulent time but also a time to take great advantage if you are in place and brave.  Gold retrace may offer a great opportunity to get Long when the time is right.  Re the Yen, I just posted on that while you were posting this and I agree a leg down looks on, of course USDJPY already hit 9900 so a retest would take it further in my view.

 

I expect the emotions to settle down over the next few weeks and the government to get on with it while the EU scrambles around to address their much more critical issues (Eurozone stock exchanges took a much bigger drubbing than the FTSE so far).  Cue a natural retrace on FX prior to a major fall in favour of USD and eventually Commodities and Stocks to keel over.  Bond bubble could well burst also.  Cue also a house market drop in London and the UK, thank the gods, people might actually be able to afford a house soon...

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