Australian Investment Blog

Looking through smoke that's surrounding markets It's amazing that an Australian election next month is being ignored by the local stock market but that's the power and importance of the BREXIT vote. We also have Janet Yellen speaking tonight in front of the Senate Banking Panel as part of her two-day semi-annual testimony – but it’s getting very little attention. The UK staying or leaving the EU is a binary outcome that will be determined by Thursday's vote and the subsequent trading on Friday is likely to be historic in its nature. At Market Matters, we like to combine both technical and fundamental analysis with this week's anticipated volatility requiring an extremely clear thought process. Markets often tell us the outcome of events beforehand and hence must be watched closely. The recent price action in most markets from the VIX, currencies, bonds and stocks tells us that investors have understandably positioned themselves very cautiously. Yesterday’s surge in stocks, as the "Remain vote" appeared to edge ahead in the polls, clearly illustrated the mountains of cash sitting on the sidelines and in safe havens like gold and bonds. We still believe that a BREXIT will not occur assigning it a 30% weighting BUT that remains a huge risk for an event that will potentially affect equities for much of 2016. Let's have a simple look at what markets are showing us today.....we look forward to a fresh market next week when the BREXIT vote will no longer be the only game in town! The ASX200 remains neutral but a close over 5275 and especially 5300 will be bullish, likely to be challenged early today. The obvious key to equities is how much of the "piles of cash on the sidelines" will venture back into stocks if the EU remains united. The ASX200 Daily Chart