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Brexit ramifications

The Brexit referendum has come and gone and the UK is to leave the EU. Market anxiety boiled over and there are now massive tectonic pressures involved in the UK, with:

  • Brexit;
  • new Prime Minister;
  • move toward Scottish independence;
  • potential merger of the two Irelands;
  • pressure for Northern Ireland to break away from the UK;
  • constraints from the EU (notably timing);

The beginning of the end for the EU as we know it is the real issue now as Brexit is a reality. Most of the damage on Friday was in the EU:

  • FTSE100 ended down 3.14%;
  • exceeded massively by other markets:
    • France down 8%;
    • Italy down 13.5%.

This was a protest vote by the masses against the elites which is happening worldwide as the establishment continues to erode the wealth of individuals: People are angry. There is much discontent in the EU and polls in countries such as Italy, Holland, Denmark, Spain, France, Sweden, Austria, etc. indicate a UK lookalike intention to leave the EU: It is now only a matter of time.

Where to from here?

The task now is to continue to identify threats and opportunities as we move into a new world with an increased risk of global contagion, as new norms evolve out of all this. The UK will probably move into recession with a new phase of QE together with many more countries in the EU doing likewise as the real risk of EU contagion flares up.

  • US$ set to strengthen;
  • International equity markets look threatened;
  • Gold set to move higher;

US$ exhibits a completed bullish ‘Morning Star’ pattern. Indicates more upside to come.

USDsmall

International equity markets ended lower:

  • Flirting with bearish ‘head and shoulders’ necklines;
  • Further drops can be expected if these are breached;
  • Massive top patterns continue to pre-empt further downside;
  • Brexit and EU uncertainty threatens;
  • Risk of global contagion threatens;

Gold broke up to an intraday high of $1358.54 but closed at a new high of only $1319.10. The trend continues up with all the attendant ratios equally bullish in lower Dow/Gold, and Gold/Silver ratios, but this was essentially panic buying and not investment buying. Probably more short term downside is expected, but within the overall bullish pattern.

Goldsmall

 

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