Thoughts {06.27.16}

Stocks once again have been repulsed in that same zone we've seen time and time again.  Go take a look at this chart here if you want to see what I'm talking about.  Nothing in that sense has changed.

Markets now though at least have their excuse to sell off with last week's vote in Great Britain.  Investors want to know what happens next.  Here's my thinking.  Markets were flirting a few weeks ago with breaking out of this trading range we've seen over the past few years and which we've discussed many times here on the blog.  Then investors  started to become unnerved by the upcoming British vote.  In particular markets became more defensive when polls in the UK started to show "leave" winning.  Markets rallied last week as confidence grew that "remain" was taking the lead only to turn tail on the actual results.  Probability suggests we will probably remain locked in this same range now for some time, possibly now through our elections in November.  You now have too many items of an unknown nature for investors to focus on in the next few months.  Both of our political party's political conventions are coming up in July, there are meetings of the Federal Reserve in July and September and then attention will focus in on the election itself.    Don't forget that August is also time where investor interest in the markets seems to wilt in the summer sun.

While I think it is possible that markets experience a bit more of a correction from last week's vote, evidence right now suggests the US economy just sort of continues to chug along.  Growth isn't explosive, but the economy is growing.  That should put a floor under stocks at some point.

I think it is possible we could see some further weakness early in the week, fallout from last week's vote.  The reason I'm leaning that way is the typical pattern you see when markets have an investment shock on a Friday is a few more days of sellers the next week.  Barring no further negative developments, buyers begin looking for bargains into the at part of the decline and the markets experience some sort of reflex rally.  I think we'll have to look at the clues after that rally to try and gage where we me be going next.

You can read a pretty decent write-up of last week's decision from Bloomberg here.

Back Wednesday unless events warrant a break-in.