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Brexit Bounce Back

The common stocks that make up the S&P 500 Index have experienced their second day of recovery as investors now realize that the actual exit in Brexit will not occur for a long time into the future.

SPX 2016-06-29

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If you look at the graph above, you will see that I’ve drawn some Fibonacci Retracement lines that mark the high before Brexit was announced and the low two days ago.  As of close of market today, we have retraced 62% of the Brexit Breakdown.

Below is the action for today only:

spx today

You can see that the market topped out today about 45 minutes before close and the computers kicked in, sending it lower while the Stochastic was in overbought territory.  This indicates that we could open lower tomorrow as people take profits they’ve made on this short term swing.  It will not impact us because we intend to hold our beta plays until the market gets back to or above 2050 as fits with my stair step lower scenario for the market for the balance of the year.

As far as the purchases go that we have made during the recent drop, the strategy was two pronged:  continue to move money into companies that are primarily domestic in keeping with the turmoil in the rest of the world or to move money into defensive or recession resistant companies that will have less volatility on the downside in keeping with my market scenario for the balance of the year.

The defensive or recession resistant investments did not move up as much as some of the higher beta domestic investments, but that is expected.  Here is a sample of the performance of some of the purchases the past few days:

AT&T up 1.50%

Nvidia up 2.50%

Southwest Airlines up 5.45%

Waste Management up 0.97%

Dominion Resources up 3.21%

United Kingdom ETF up 0.79%

This is on top of the 3.5% we made on the Long Term Treasury ETF we used to hedge against the correction and give us the freedom to capitalize upon the market moves.

I’ll be back with more as the market makes it moves – and I hope you enjoy this Pitbul remake of the classic Rolling Stones song.

Mark