A 5% bounce!
That's what we're seeing in Europs since Thursday's lows as the Brexiteers retreat in the polls and we're having a HUGE rally across the board with a gap up into the open but kind of flat since, which does make me worry that this low-volume Monday action may reverse once again.
But, for now, let's just sit back and enjoy the show. Remember, this all turned around due to the assassination of a British Member of Parliament, which froze the campaign and reversed the momentum that the Leave camp was making just in time for the Remain crowd to run another huge campaign over the weekend – all coincidental I have been assured and who am I to argue with people who might be arranging political assassinations to further their agenda, right?
Of course, in the bigger picture (like this weekly chart of the same index), a 5% bounce is what we'd expect after a 1,000-point (27%) drop in European stocks since last summer and, using our 5% Rule™, that's what we call a weak bounce and we're not actually going to be impressed until we see the 3,200 line taken and held for more than a week.
Until then, we'll keep a close eye on our local indexes, especially the S&P 500, which has to show us the money above 2,100 before we're going to believe this time is actually different. You can see on the chart below, how often we have been teased up here and, right after the Brexit vote, which won't be final until Friday morning's count, we are heading right into earnings season and already this week we hear from ACN, ADBE, BBBY, BKS, FDX, KBH, KMX, LEN, LZB, RHT, SONC and WGO – so we'll have an early picture on a few sectors for Q2.
Today's action is mainly the short squeeze that began last Thursday and we're on the wrong side of this as well – as we added hedges last week and cashed out a lot of longs but we cashed out over 2,100 on the S&P, so we're not missing anything as long as we're still below that line and I'm certainly not going to chase any longs with…