Monday, July 25, 2016

FTSE London Stocks Brexit Collapse and Big BOE-Induced Rally Afterwards

The bottom fell out of the pound and UK stocks after the Brexit vote. Long traders were screaming bloody murder. Investors were jumping from windows; fortunately the windows were on the first floor. The central bankers save the day, however, never allowing markets to fully correct over the last eight years. This time BOE (Bank of England) Governor Carney keeps the carnival going by running to a microphone proclaiming that the central bank will provide huge stimulus in August (pink circle). In addition, banking regulations will be tossed out the window to help promote lending. Traders trip over each other while guzzling BOE wine buying stocks with reckless abandon with all the proposed easy money. Can it be more obvious? The central bankers are the market.

The FTSE catapults from 5800 to nearly 6800 riding a magic carpet fueled by central banker Keynesian stimulus; a huge +17.2% gain in only one month's time. Traders cheer Carney for his money printing and celebrate lousy economic data since this guarantees more BOE stimulus and higher stock prices that make the wealthy super rich. What a glorious world! Well, if you are rich it is a glorious world; not so much if you are one of the faces in the huddled masses.

The red rising wedge says the move is long in the tooth. Ditto the neggie d shown by the red lines for the indicators. Stochastics are overbot but the RSI did not reach overbot territory as yet. Looking at the FTSE weekly chart, the MACD line has more juice, so this hints that the index will  pull back in the days ahead perhaps a week or so, but then likely come back up for another higher high in early August. If you made a  bunch of money on the way up with UK stocks, it would likely be prudent to take the gains then entertain a reentry in a few days time after a pull back. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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