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fib_1618

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With the interest rate sensitive issues here in the United States continuing to move to higher cumulative highs in their money flow components, our ongoing expectation of seeing higher stock prices going into the July 4th holiday remains in focus, though with the concern by many of the U.K.'s decision hanging in the balance, a more laborious path toward this goal hasn't changed from last week.

With the equity markets showing good strength coming out of last Friday's quarterly OPEX period, the results of the U.K.'s historic EU Referendum took many traders by surprise on Friday and the market tanked lower with an average daily loss of 3.86%. But when all was said and done on a weekly basis, the major market indices were only down by an average of 1.59% from last Friday's closing numbers, with the NASDAQ Composite Index taking the biggest hit for the week at -1.92%, while the S&P 600 Small Cap Index only coming in with a loss of -1.35%.

Looking over this week's array of cumulative breadth charts shows that the market internals remain buoyant across the board with the NYSE Bond CEF advance/decline line once again closing at new all time highs, while the NYSE Preferred, Junk Bond and NYSE REIT advance/decline lines did the same just the day before. With this ongoing strength we're seeing in the interest rate sensitive issues, this promises us that we will see new highs in equity prices in the not too distant future. Also of a positive note is that Friday's sharp price declines in the U.S. markets have now produced bullish "trend" divergences between prices and their accompanied advance/decline lines. This divergence also extends to all of the breadth and volume McClellan Oscillators that we cover in our chat sessions. Taken together then and this would indicate that we're likely to see prices firm up sooner than later in an effort to fill the "too far, too fast" vacuum created by Friday's selling, with a very real possibility of a broader challenge of the all time price highs in all of the major indices over the next couple of weeks.

After going through the technical motions of backing and filling to build a better internal platform for most of the week, the voting results in the U.K. on Friday propelled the price of gold up nearly $59.80 an ounce on Friday as it closed at its highest levels since July of 2014. With that said, however, the money flow pattern in both the Precious Metals and XAU advance/decline lines have now broken their rising trendlines from their January low points, but at the same time, look to be moving net sideways in consolidating these same cumulative gains made since that time. That said, and with the price of gold finishing the week at $1319 an ounce, the bottom line for now is that we have new upside price targets to work based on the breakout of a right angle triangle on the daily chart to around the $1375 level. 

The data from Europe this week may seem a bit surprising given all of the emotionalism we had on Friday, but here too, breadth of market in the CAC, DAX and FTSE are showing strong trend divergence patterns between their A/D lines and prices. Because of this, the odds are fairly high that we may be looking at a important buy point in all three of these markets given that clarity of the UK vote is now known and can be traded accordingly.

So in spite of the knee jerk reaction we saw on Friday, the market technicals have held up nicely against this news driven backdrop as we saw the NYSE TRIN move to a reading of 2.29, and this pushed the NYSE Open 10 to a deeply "oversold" reading of 1.26. Additionally, speculative option buyers were heavily buying puts on Friday with the ISEE coming in with a reading of 54, while the Climactic Volume Indicator (CVI) moved below 50 and suggesting that we'll likely to see a price bottom in the next 2 trading sessions. Taken together then, we now have all the ingredients necessary for a major price rally to take place at any time. Just when it actually gets started, and how far it will take us, will only be known in the fullness of time.

Have a great trading week!

US Equity Markets:

[breadthspx062416]


[breadthdjia062416]

[breadthspec062416]

[breadthpre062416]

US Interest Rates:

[breadthtnx062416]

[breadthig062416]

[breadthjunk062416]

US Real Estate:

[breadthreit062416]

Precious Metals:

[breadthpm062416]

[breadthxau062416]

Australia:

[breadthaus062416]

England:

[breadthftse062416]

France:

[breadthcac062416]

Germany:

[breadthdax062416]

India:

[breadthbse062416]

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