Market Matters Morning Report Friday 24th June 2016

Morning Report 24/06/2016

Market Matters Morning Report Friday 24th June 2016

"Shorts" are for the beach today!

Traders who have positioned themselves "short" equities, looking for a BREXIT result of "Leave" the EU, leading to a subsequent sharp selloff in stocks will be licking their wounds this morning. Overnight, the US S&P500 is up 1.3% and the local futures market is pointing to the ASX200 opening up around 60 points.

At 7.07am, Bloomberg published the YouGov Poll, showing the UK vote at 52% Remain and 48% Leave – phew, it looks like that's finally all over, we have been getting bored of it!

The UK FTSE has rallied over 8% in just 6 days as markets have become convinced that the "Remain" vote would prevail, hence raising the question, is this a classic "buy the rumour sell the fact event"? Our simple answer is no, we believe stocks may consolidate and take a breather with the vote finally behind us, BUT they are going higher for at least most of 2016.

The S&P500 is only 1% below all-time highs with our target 5-8% higher. Market Matters has moved to over 85% invested during the last weeks’ nervousness and we are feeling relatively comfortable today - of course, this can be a dangerous feeling in markets!

US S&P500 Monthly Chart

We have been regularly focusing on US stocks before our own ASX200 for two simple reasons - the US has been technically clearer for some time and secondly, it's highly unlikely that we will unfold significantly lower without our American friends leading the way.

Technically we can now see a test of the 5600-5700 resistance area from the ASX200 as the market continues to climb a wall of worry and scepticism.

Our bullish logic is very simple and starts with the crowd is often wrong in markets. Fund Managers are sitting on 15-year high cash levels, which is approaching 6%. While they are unlikely to rush back into stocks into EOFY, who is now left to sell? Surely people looking to cash in their chips would have done so prior to the BREXIT vote, or like ourselves are expecting higher prices. Hence with no selling, the path of least resistance becomes up, even if economic fundamentals remain a concern.

ASX200 Weekly Chart

Lastly for this morning's short note before the "Après-BREXIT" fun begins is another glance at the US banking Index. Technically the US Banking index remains bullish targeting a strong advance which is great news for the financially heavy ASX200.

S&P500 Banking Index Monthly Chart

Summary

We remain bullish equities for at least most of 2016, assuming no surprises from BREXIT result over next few hours.

Watch for Market Matters alerts.

Overnight Market Matters Wrap

The US markets followed European markets and ended stronger on an expected ‘remain’ vote in the UK. The Dow finished up 230 points (+1.3%) to 18,011 whilst the S&P500 finished through the 2100 level to close at 2,113, up 28 points or 1.3%.
Oil was stronger also on the EU vote closing up 98c (+2%) to US$50.11/bbl.
The A$ has broken through 76c overnight, with a high of 76.48, having started the week around 73.86. Currently trading 76.19.
The results of the vote in the UK will start to filter through from around 9.30am with around 80% of the votes by 2pm.
The September SPI Futures is indicating the ASX 200 to open 70 points higher around the 5,351 level.

Regards,

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 24/06/2016. 9:00AM.

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