Brexit Party Now! What is going on? UK is voting as we write this article on whether to stay in the European Union. What does this mean for UK, German, and US Stock markets? That is the big question. Like all parties, there is a big excitement going into the “party” but will happen at the party and afterwards?
In our June Monthly Newsletter, we spoke about the UK Stock market. Here is what we said “The major bullish resistance is 6454.68. Price missed this value by a couple of points and started to go down breaking a support at 6244.58. This resistance at 6244.58 is very critical. If it holds and price starts to go to 5972.82, there is a high probability it will break it and retest the low. If the resistance breaks, there will be a high probability of getting to 6454.68 and breaking it too”.
Where do we stand now? Below is the weekly chart provided by eSignal. At the beginning of the month, we had a 4 time frame Sell Ichimoku email alert (red arrow) at the resistance of 6308.04. This drove price down the major support at 5972.82.
This support held since we had a iMTF™ (Ichimoku Multiple Time frame Support) at 5972 last week. This increased the probability of price going back to the major resistance of 6308.04.
We are now at this level. It looks like price broke the resistance but we have to wait to the end of the week to determine this. Inter week, price could get as high as 6378.90 which it did but now we have to wait to end of week to see where we close unless the lower time frames could give us a clue.
Here is the daily time frame. The daily has a minor resistance at 6338 which is holding intra-day right now. Outside of this…there is nothing else that will tell us that we will go higher even more.
Below is the weekly chart for the German Dax stock market provided by eSignal.
The support at 9803.85 which stopped the possibility of a long term bearish trend developing. In fact, some people are calling this a “head and shoulder pattern”. The “neckline” i.e. the major resistance confirming this is at 10374.21 which is exactly the major resistance shown by Ichimoku. So far, price is holding the minor resistance level of 10242 with a “blip” level of 10708.
The daily offers no help at all.
We have now analyzed 2 of the 3 main markets. The last to examine is the US Stock market. For the US stock market, we are going to first analyze the $VIX, The Volatility index. We have been using this instrument to forecast the US stock markets for over 2 years now. We will continue to do so until proven otherwise. Please note, the $VIX has an inverse relationship the US Stock market. If the market goes up, the $VIX goes down and vice versa.
Below is the weekly chart provided by eSignal. In our monthly newsletter, we talk about the $VIX and what will happen with the market based on it. In June newsletter we wrote how the $VIX was holding the support at 12.77 and high probability of bouncing off it to get to the resistance of 20.74. Last week, we reached the resistance of 20.74 and held. As long as this resistance hold, we will have a high probability of go backing to the support at 12.77.
Below is the Daily time frame. It has a major resistance at 17.79 which is holding a major resistance at 21.41.
Therefore, the daily support of 17.79 is controlling the downside and the upside is controlled by 21.41.
Since the $VIX is illustrating that there is a high probability of going back to the support of 12.72, we will look at the Russell Index. Why? The Russell Index was the “laggard” of all the US Stock indexes. It was controlling the “bullish side” and it helped us determined when the markets had reached a major resistance.
Below is the weekly chart of the Russell Futures ($TF). The major resistance controlling the sentiment long term is 1182.42 . If this resistance is broken the sentiment will be bullish and price can start to try to get to the high’s again. The support controlling the downside is 1136.95.
Below is the daily time frame. I agrees with the weekly time frame and has the same support.
The daily and weekly are controlling the support. What is controlling the short term resistance. It is the 4h timeframe. See the chart below. Price can’t seem to get above the cloud at all!. It gets to the boundary condition and then reverses. Right now, the cloud boundary condition i.e. major resistance is 1158.82. Until we break this 4h resistance, we will not have a high probability of back to 1182.42. The major support that has developed on the 4h is at 1149.10. We will consolidate between 1149.10 and 1158.82 off 4h until we break one. We break the support, we will go to 1137.00. If we break the resistance, we will go to 1182.42.
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