Market Lab Report - Premarket Pulse 6/21/16

Published : June 21 2016 at 8:35 ET

Major averages gapped higher at the opening bell on news that the UK would be more likely to remain in the EU according to polls, finishing higher though on lower, below average volume, and closing near the lows of the day.

Futures are currently higher by roughly half a percent, but keep in mind the current bounce is merely correcting for the recent selloff due to Brexit concerns. Without the Brexit issue, UK and European stock markets have still been eroding since mid-2014 as the global economy continues to suffer.

The central banks have trapped themselves. The government debt they have generated will default if thousands of years of history is any guide. There has *never* been a time when governments ran up massive debt then repaid the debt. Not one time. Consequently, central banks have converted government bonds into a ticking timebomb as they shift into becoming one of the riskiest asset classes.

Meanwhile, capital generated by QE tends to find its way into the strongest hard assets, one being the US stock market. Thus while all foreign markets are trading well below their all-time highs, US markets are only a couple percent from all-time highs. Since central banks remain focused on keeping the QE spigot open wide, US markets may find themselves moving reluctantly higher, fighting the loss of confidence in our central banks.

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