Futures vs FV: SP +16.55; DJ +147.17; NASDAQ +34.19
The undecided have it. Voting is taking place in a rainy London and Scotland while the weather elsewhere is better in the UK. The average of polls show neck and neck, and that leaves the 10% or so undecided voters making the decision. CNBC reports that wherever you go the people you talk to are for exit; finding a 'stay' voter is not easy. Which begs the question, are they really undecided? Perhaps the silent deciders with minds made up. Polls close at 5:00PM ET and results are expected at 2:00 t0 3:00AM.
Stock futures are already in the 'stay' camp with a celebratory rally pushing SP500 near 2011 resistance again, the level tapped at on this week's highs and hit in the early June peak. A key level to may traders. Futures jumped higher after hours Wednesday, then spiked upside at 5:00ET again.
The questions are: 1) is it premature? Likely not but the vote continues closer than comfortable for the status quo. 2) How long will it last even on a 'stay' vote? Staying results in no change and the market did not price in much of any kind of hit prior to this spike.
We have plays in position to work on this move. We have new plays that are in good sectors that are leading the market. While buying into this pre-vote euphoria is a somewhat dicey proposition, buying into these kind of stocks limits that . . . diciness? Oil, NSC and the like.
Watching how AAPL, FB, AMZN, NFLX perform will be a key. Some have lagged, others are dragging, looking heavy. If they don't celebrate or just show up then leave the party, that tells a lot in terms of a shorter celebration.
Jobless claims: 259K vs 273K expected vs 277K prior.
42 year lows or close to them.
Federal Reserve National activity Index, May: -0.51 vs +0.11 expected vs +0.05 prior.
Worst since 1/2014
57 of the indicators lower to just 28 indicators rising.
EU PMI: 52.6 vs 51.3 vs 51.5
Germany PMI: 54.4 vs 52.0 exp vs 52.1 prior
France PMI: 47.9 vs 48.8 vs 48.4
OTHER MARKETS
Bonds: 1.746% vs 1.68%. Bonds selling hard as it views 'stay' as in the bag.
EUR/USD: 1.1389 vs 1.1300
USD/JPY: 105.78 vs 104.478. Dollar bounces
Oil: 49.87, +0.74
Gold: 1264.60, -5.40
Bonds, gold, currencies, and stocks suggest a 'stay/remain' outcome in the UK. None are, however, surging in the moves except perhaps bonds with their 6+BP move. Others are more in line with their recent ranges, not breaking any new ground.
It would appear at first blush that stocks are in a bit of an over-reactive state. Is no change in the UK status worth such a move? Everyone in power can breath a sigh of relief and clink glasses, but then all is the same. Nothing will change as their world order has been confirmed. Thus this break higher doesn't have real underpinnings unless it is using the UK vote to continue the move to higher recovery highs that it was going to do anyway. Dubious but always a possibility.
Accordingly, we look for leaders that make the moves and hold the moves. If they can do that, they get our vote. Oh wow, that was corny.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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