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A new frontier awaits for U.S. equity markets to explore. They are fairing much better than other world markets, in spite of the Brexit uncertainty, and look poised to press upwards (likely choppily) for awhile, as shown on the 3-year comparison chart below of the SPX, World Market Index, and British Pound:USD Forex pair.
However, the closer we get to the U.S. Presidential election in November, we may see upward momentum begin to flatten out.
Each candle on the SPX chart below represents 1/4 of one year.
Further to my post of June 27th, and, as shown on the following updated 20-Year Quarterly chart of the SPX, the 2016 Q2 candle closed today at a higher level than — on what was a previously potential bearish hanging man — the Q1 candle. This bearish reversal warning was not confirmed.
Instead, what we’re left with, at the moment, is a wide-range high-base consolidation for the past 6 quarters, with price now near all-time highs.
If currency markets continue to experience high volatility with a strengthening US dollar, I think equity markets, including North American markets, will follow suit.
So, I’ll keep a close eye on those as potential canaries in the coal mine; e.g., to see whether the spread continues to widen (downward) between the SPX and the Pound:USD Forex pair, as shown on the Year-to-Date comparison chart below (the Pound lost 8.75% last Thursday and Friday).
Further to my UPDATES noted on my last post, a massive Head & Shoulders pattern has formed on this GBP/USD Monthly chart…catastrophe awaits as price flirts with the neckline.
In advance of Britain’s “Brexit” or “Bremain” vote on Thursday, June 23, the British Pound has gained momentum as of last week, and Sunday evening as I write this post.
The current price of the GBP/USD Forex pair is 1.4581, as shown on the Monthly chart below. It will need to break and stay above that level and, potentially retest 1.50, which represents the next long-term resistance level.
A break and hold below the 30-year major support level of 1.40 could have catastrophic repercussions, not only for Britain’s FTSE 100 Index, but also other major world indices. Price retested this long-term critical support level last week and is rallying.
