It’s been a week now since Brexit became official. As I look across the financial landscape, I see one recurring theme – Ameribuy! Let’s take a look at what the Brexit effect on U.S. is.
Yes, America has its problems. It’s just that everyone else’s problems are worse – at least for now.
My sense is that there is a powerful flow of wealth piling into US based assets … as well as into gold and silver. It’s the safe haven play … and America is, and will be for a long time to come, the safe haven for the world’s wealth. Let me show you what I mean.
Over two months ago, my SSI system triggered a new entry signal on the S&P 500. At the time I wrote, “I’m nervous about this new entry signal. I don’t want to believe it. Which is all the more reason that it may well be time to get long again.”
Once again, I was wrong … my signals were right. Here’s how things look today.
Brexit gave us a violent V shaped dip that didn’t even manage to penetrate the Low Risk Zone before soaring right back to the point where the Brexit correction began. My suspicion is that this violent wash and rinse type move is just what the stock market needed before making a fresh assault on new all-time highs.
It may have been enough to finally convince enough bears that this market ain’t goin’ down no more. Bears jumped onto the Brexit breakdown and just got badly hurt in the rally of the last three days. It was a frying pan to the face … and the bears will likely be licking their wounds for a bit.
Just to be clear, the case isn’t completely closed yet. The S&P 500 has not broken through overhead resistance. It’s right back where it was a week ago. Here’s the current volume-at-price chart on the S&P 500.
I’m not buying the S&P 500 myself yet … but I’m not selling it either.
Other major US-based asset beneficiaries of the post-Brexit world are the US dollar, US Treasuries and gold and silver.
A strong US dollar is the last thing that a lot of the world’s central bankers want but it looks like a strong US dollar is what they’re going to get.
US Treasuries are moving higher as well. Two weeks ago I wrote to you about my belief that interest rates were headed lower and interest rate sensitive assets were headed higher. Since that time US Treasuries, TLT and XLU are all sharply higher and look to go higher still.
Gold and silver have also headed sharply higher. It’s great to see them finally fulfilling their safe haven roles during this mini crisis. Yes, I know that I’ve questioned the current rallies in gold and silver for a while now … and I still have my short-term doubts … but I’ve always been a long term gold and silver bull and it’s very exciting to see the way that they’re behaving right now.
I’ll have to leave it at that for now. I hope that all of our US based friends have a restful and family filled 4th.
To freedom and independence … wherever we may find them,
Richard M. Smith, PhD
CEO & Founder, TradeStops