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Friday, March 29, 2024

Market Recap Jun 24, 2016

Courtesy of Blain.

Markets were caught wrong footed Friday as just about all signals were projecting a “Remain” vote rather than a “Brexit”.   Thus indexes gapped down sharply and were deep in the red all day – the S&P 500 fell 3.59% and the NASDAQ 4.12%.  On a percentage basis the Dow and S&P had their worst day since August 2015, while the NASDAQ’s decline was the index’s worst since August 2011. That said, the zombie apocalypse CNBC has been trumpeting appears to not have happened – but check your neighbor just in case.  While the losses were significant keep in mind the market has zoomed up Thursday quite a bit in the assumption Brexit would NOT happen so part of today’s selling was simply taking back that rally …and then some.

“The market was pricing in a different outcome yesterday even when the odds were too close to call and within a margin of error. The unexpected outcome is shaking up markets,” said Ben Carlson, money manager at Ritholtz Wealth Management.

“Positioning, hedging for this kind of event was super light. … When markets realized that (leave was ahead), it’s when everything started trading very badly. That was a function of very light positioning,” said Andres Jaime, global FX and rates strategist at Barclays.

The S&P 500 fell to its 100 day moving average, while the NASDAQ not only below our purple trendline which connects highs of the past year or so, it sliced through the blue line on our chart which connects major lows of 2014 and 2015.

spx

nasdaq

Here is the movement in the British pound, keeping in mind a 1% one day move in any currency is considered significant!

xbp

Japan had been hit very hard overnight as that market had an instant knee jerk reaction to the news, while U.S. investors at least some amount of hours to digest it.

sc

Financials – which had rallied quite sharply earlier in the week on the assumption the Brexit was a no-go, were hit particularly hard.

gs

c

The “flight to safety” trade was obviously back on with 10 year yields plunging.

tnx

It was a no brainer that the volatility index would spike.

vix

Gold!

gold

Fun fact, per Bespoke – buying 3%+ gap downs has been a very profitable exercise the past decade or so.

Today’s negative open will mark just the eleventh time in the last 20 years that SPY has gapped down 3% or more at the open. In the ten prior occurrences SPY averaged a gain of 2.54% from the open to close (median: +2.61%) with positive returns eight out of ten times. The most recent occurrence was last August when SPY gapped down 5.23%. On that day, it traded up 1.07% from the open to close, and then from the close that day out one week,it posted a return of 4.31%.

bespoke

Have a good weekend and see you back here Monday – just keep an eye out on those neighbors.

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