After the uncertainty injection from the British vote to exit the European Union, major U.S. stock indices turned negative for the year. I remember sitting in the office of one of my financial consultants on January 15, 2015 and watching the battle for 2000 on the S&P 500 Index. Apparently, the battle rages on.
From the beginning of 2015 to the present, the stock market has traded in a very tight range. With the exception of an air pocket early fall last year and one early this year, the S&P 500 Index has traded roughly in the 2000 to 2130 range. How can that be? It seems to me the powers that be want to keep it there until the 2016 U.S. Presidential election is complete. Whether they can achieve that is another matter, but so far they have pulled it off.
Monday, stocks rose as “investors” speculated that Britain would vote to stay in the European Union. In Asia, stocks rose 2%, in Europe 3.7%, and in the U.S. 1% on light volume. The VXO fell 8% to close at 17.09 while the 10-Year U.S. Treasury Bond yield rose 3% to close at 1.67. Crude oil also closed up 3% for the day.
Tuesday, stocks rose again — in Asia and the U.S. 0.5% and in Europe 0.7%. Volume in the U.S. was light. Wednesday, stocks in Asia closed little changed, rose 0.5% in Europe, and fell slightly in the U.S. on low volume. The VXO shot up 16% to close at 20.12 while precious metals miners rose 2%.
Thursday, stocks rose worldwide — in Asia 0.4%, in Europe 1.3%, and in the U.S. 1.6% on light volume. This bumped the Dow and S&P 500 indices above their 18,000 and 2100 benchmarks respectively. The Brexit vote was the major story. The VXO lost 21% to close at 15.92 and crude oil fell 4%. The 10-Year U.S. Treasury Bond yield rose 3% to close at 1.74.
Friday, traders were uneasy in response to the surprising British voter’s choice to exit the European Union. Brussels has yet to declare civil war against Britain to “preserve the union.” Stay tuned. While the single-day loss was dramatic, it represented little more than a correction slightly below the intraday low six trading days earlier.
In Asia and in the U.S., stocks fell 4.3% on strong volume. In Europe they lost 6.7%. The VXO blasted 46% higher to close at 23 — a level not seen since February. The 10-Year U.S. Treasury Bond yield collapsed 9% to close at 1.58. Crude oil fell 4% while gold and its miners rose 4%. Turkey-stock IBM broke below 150 again.