Market Lab Report - Premarket Pulse 7/1/16
Major averages continued their bounce yesterday on higher volume though serious issues remain. Even so, the US markets are close to recovering nearly all of the losses that came after the Brexit vote while the UK market has recovered all of its losses and then some.
Expect further in-fighting not just within the UK and the EU but also between central banks rallying together to further accelerate their easy money policies. This quantitative easing pushes reluctant markets higher while serious issues remain both economically and politically. Further, the growing loss of confidence in our governments and central banks creates additional headwinds.
The volatile sideways pattern that started in the US markets in 2015 is likely to continue with sharp rallies followed by sharp corrections. That said, at some point later this year, a breakout to new highs in the US stock market is always a possibility as there is no sign QE-based capital will slow anytime soon, but rather continue to increase as interest rates get pushed further down with a growing number of countries at negative yields. This QE-based capital born from central banks finds its way into hard assets including US stocks, real estate, and commodities.
The long three-day July 4th weekend is upon us. Volume may be somewhat muted as traders allegedly "head for the Hamptons" ahead of the holiday weekend.
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