If y'all are planning a European vacation, I reckon it'll be a lot cheaper than last week.
British voted 52 to 48% to leave the European union, with a 71.8% turn out, highest since the 1992 general election. It was a fist in the eye followed by a Bowie knife to the gut for the globalist Elite, topped off by a kick to the head. Markets roiled & boiled.
Don't confuse a trigger with a cause. The Leave vote wasn't the cause markets came apart, only a trigger for shells already loaded, politically & economically. Never did the smug Elitist politicians expect the scruffy, unwashed people really to exercise their "democracy" and vote against the Elite. This ain't over by a long shot, & forecasts bad things for Hillary Clinton's job security.
After setting themselves up for a fall yesterday, stock markets around the world tanked. All dropped furiously, but recovered somewhat before the close, the result no doubt of Nice Government Men's watchful efforts. Shanghai lost 1.3%, Nikkei 7.92%, German DAX 6.82%, French CAC 8.04%, and the London FTSE 3.15%.
Dow Jones Industrial Average plunged 3.39% or 610.32 points to 17,400.75, closing within 45 points of the low. Not much recovery there. S&P500 sank 75.91 (3.59%) to 2,037.41.
Here's the Dow chart, http://schrts.co/02VKh5 Note that momentum collapsed, volume shot up (confirming price decline), RSI tanked, and in one day the Dow managed to just about complete that Right shoulder of the Head and Shoulders top. Parlously near the 200 DMA at 17,235.41, which coincidentally is about where the H&S neckline resideth. Breaching 17,235 will pull the plug. A big plug.
S&P500 chart is here, http://schrts.co/dqPY43 I've given y'all the longer term version with the S&P500 so you can see the bottom of the August & January/February breaks. S&P500 has traced out a vast Jaws of Death or Broadening Top formation with the top line about 2,115 and lower lows at 1,870 and 1,810. Present plunge promises to burst through that last (1,810) low. Yep, 'tis a long ways from 2,037.41 to 1,810.10.
Did I mention that stocks will follow through today's breakdown? They will, count on it, although the Nice Government Men will be out Monday in force, manipulating their little grimy fingers off trying to boost stocks. Might as well be King Canute ordering the sea to recede.
The volatility index ended at 25.76 today, up 49.33% [sic]. Top of the range is about 30, but last August it hit 52 in the panic. (Thanks, WR, for reminding me.)
Lo, for us the payoff came in the Dow in Gold, seen here, http://schrts.co/8Sv0tc Observe that it fell 7.77% today (1.11 ounces) to 13.19. Mark also that it fell below the bottom boundary of that megaphone reversal formation. And below the downtrend from the December 2015 high. Another 0.65 troy ounce and it falls below the February 2015 low.
Don't forget the Dow in silver, http://schrts.co/ohwLZP Stocks are in a more advanced state of decomposition against silver, as today the DiS crashed through the support line that had contained the February and April lows. Descent should now toboggan at light speed.
Gag! US Dollar Index leapt tall buildings at a single bound. Added an eye & ear popping 205 basis points (2.19%) to end at 95.57. Cut through the downtrend's upper boundary, sliced through the 20 & 20 day moving averages, shot up to cut into the 200 DMA 996.50) for a high at 96.70, but then the Guardians Of Wall Street's Order woke up and it closed down at 95.57. Above 95.50 resistance. Pointed toward the March 2015 high at 100. Chart, http://schrts.co/OkJ5UT
Yen completely erased its island reversal with a 4.51% gap up jump to 97.85¢/y100. Euro lost 2.8% to $1.1104. Y'all will find the yen chart at http://schrts.co/UuqBFa & the yen at http://schrts.co/HcRUv0
The CME a.k.a. Comex raised margins all around today, on stock futures, bond futures, currency futures, and sold futures. They also raised margins on butter futures, but y'all probably don't care about that.
Last night about 10:00 central time as I was climbing into bed I couldn't resist looking at the gold price on my phone: $1,293, up already $32 from the close, so I knew the Leavers must be winning. I wasn't quite prepared for the panic into gold that took it to $1,362.60.
There's a glitch on my chart I can't explain. Looks like about 6:00 or 7:00 last night that gold dropped to $1,206. Don't know if that's a glitch or reality. Doesn't show on StockCharts.
Today gold closed Comex up $58.80 (4.7%) at $1,320. Silver rose 44.1¢ 92.5%) to 1778.9¢.
Get this straight: today gold closed higher than the year before for the first time in FIVE years. Lock that in your brain, because it validates the conclusion that the December lows were the final lows for the 2011 - 2015 correction.
Load up this fact, too. 2015's high came on 22 January 2015 at $1,302.10, with an intraday high at $1,307.80. A $1,320 close is not a mealy-mouthed, timid move above those levels, but an unequivocal victory.
Bore this into your brain while you're at it. On the WEEKLY chart gold has broken out upside from a trading channel that began in mid 2013, and today it closed ABOVE the 200 week moving average ($1,311). More validation.
Drop this into your brainpan, too. On the MONTHLY chart gold broke out in January from a bullish falling wedge, and has stayed out for 5 months and closed today about the 50 month MA (1,319.10).
Am I making my point? Okay, add the Gold/Bank Stock Index. I guffawed when I saw this, http://schrts.co/PBJpq4 Remember this spread measures confidence in financial markets versus confidence in gold. Sinks when confidence in financials is growing, rises when confidence is draining away into gold. It shot up 13% today, jumped clean out of the Trading channel, ready to fly to the moon.
Okay, Moneychanger, if everything's so hunky-dory, why didn't silver rise more than a measly 2.5%?
Don't niggle. Back up and think. Silver has been stronger than gold most of the time since January. Today was fueled by panic, so gold led the way. Besides, silver's long term charts look better than gold's. On silver's weekly chart, http://schrts.co/DnvNAL the Mighty White Metal has broken ABOVE the post-2011 downtrend line, traded back to that line for a kiss good-bye, and headed back up. Has stayed above that trendline for 10 weeks. Once it climbs over 2025¢, the 200 week moving average, no doubt will remain.
Silver's monthly chart showeth similar unconquerable vigor. Busted through the post-2011 downtrend line, and is trading above the 200 month moving average (yes, 1457¢) and the 20 month MA. Monthly rate of change, negative since 2012, is positive and climbing.
I know, I know, y'all's next question is, "WILL IT HOLD? Will today's gold breakout hold? Will the stock breakdown hold?"
I still remember the 2008 panic, and NEVER from Summer 2008 through December did gold perform like today. It was uniformly weaker than the dollar, miserably weak. Hear my words: today's panic ran not into fiat dollars alone, but into gold. This reflects a big change in investors' thinking.
If stocks crumble terribly, the US dollar & US government bonds would benefit, sure, but today's performance suggests that a panic now won't play out as in 2008. Today, more folks, many more, will run into gold.
So my answer is, "Yes, it will hold." It's a watershed turnaround, closing higher than the foregoing year. It sets gold up for a run to $1,367, the 2014 high, and then $1,394 and $1,434. But the big target is $1,550 where gold was trashed in April 2013.
Behold, the gold & silver surprises are all coming to the UPSIDE. Plainly the character of a rallying market in a primary uptrend.
Y'all better stop waiting for lower prices and buy.
Y'all enjoy your weekend.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger