Stocks opened lower on Monday as concerns over the Brexit carried over the weekend into the new trading week. Buyers stepped up as there was some interest after Microsoft announced that it was buying LinkedIn for $26 billion. Acquisitions like that tend to mean the market environment is "friendly" but the excitement quickly abated and the bears took control again pushing the Dow (-133) down for a third straight day.
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The good news is, the S&P 500 hasn't been down 4 straight days all year. The bad news is, the reason for the selling is still very much a concern because the Brexit vote (Britain leaving the Euro Zone) is not being held until June 23. You can see the London FTSE is at an important level right now...
Ironically, while the polls are suggesting a "Yes" vote on the Brexit by a 10-point margin, the betting community has their money on "No". By a large margin: 43% "Yes" and 58% "No" as of this writing.This site may be blocked on your work computer, but see predictit.org for more info.
The global growth concerns are still abound and one of the ways we are checking the pulse of the global economy is watching the price of oil, which is just off recent highs, but now flirting with the longer-term support line off the February lows.
China's Shanghai Index was down 3.2% on Monday and when you add this up, it is apparent that the June rate hike is almost certainly off the table, but Janet Yellen and the Fed get together this week to let us know. They could raise at the July FOMC meeting, the November, or the December so investors will be listening for clues on Wednesday. They sure wanted to start "normalizing" rates but the economy hasn't been cooperating.
The DWCPF (S-fund) remains above key support and the 50-day EMA, but it has given back a good chunk of recent gains.
The Dow Transportation Index looks and feels like it is breaking down again, but that's just one close below the support line and 50-day EMA.
The EFA (I-fund) has been hit hard recently with the weakness in the dollar and the Brexit talk. The dollar was actually down a little yesterday but many European and Asian markets were hit hard overnight.
The AGG (Bonds / F-fund) moved up slightly, remaining in both a short-term rising channel, and a longer-term rising channel. The open gap is obviously a target for any pullback.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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