Jun 24, 2016, (8:26 AM EDT)
For the first time, common people have taken the wind out of market- speculators’ sails (globally) by voting for Brexit.
After the killing of Jo Cox, a British Parliamentarian and anti-Brexit campaigner, global markets rallied, as market-whales and speculators took it for granted that “Brexit” danger has been “managed” and now an emotional public will vote against Brexit. It was a rally by the 1%, for the 1%, of the 1%, lacking volume (read general support).
Unfortunately for them, Brexit happened. Stock markets all over the world were literally gobsmacked by this anti-climax to their “event-management” capacity. They forgot, it was not some economic data or central bank decision that could be managed.
That is the only reason why global markets are falling. They did not see it coming. They lost that one big bet that they thought, was already in their pockets.
U.S. stock futures and European markets have pared some of their losses in last few minutes as these market-speculators took some consolation in negative Goods Orders reports from the U.S. economy. Negative economic reports mean, maybe new stimulus for the Fed?
We have yet to hear what the market- friendly Fed has to say about this unexpected turn of events. Will the Fed Chair come to market’s rescue and make some comment that will help markets bounce back?
Anything can happen. Trillions of money has been wiped out globally in all corners of financial markets; currencies, bonds, stocks, commodities.
Now, markets and market-managers will try to recover those losses.
So traders should watch out for any support coming in after the gap down opening in U.S. markets today.
Dow Jones futures are still -500 points down, indicating that this mega index will open near its major support of 17,500. Usually, markets recover in initial trading after such gap down start. The thing to watch will be, how much Dow Jones will recover and if the closing levels will be better than the opening numbers? If that happens, then it will provide some balance to global markets next week.
However, if Dow Jones keeps below 17,500 then it will be a negative indication of this index and broader U.S. markets and we may see more gloom and doom next week in global markets too.
Keep your fingers crossed and watch how Dow Jones trades after the opening bell. The index could trade between 17,500- 17,600 on the upper side or between 17,500- 17,400 on the lower side initially. Any higher recovery than this will provide relief to broader U.S. markets. At the same time, if Dow Jones tumbles below these lower supports then a negative trend could emerge in U.S. markets.
Consider all possibilities, do not make the same mistake as markets did, only follow the trend after it takes shape.
Good luck, enjoy the session!