Business Magazine

Brexit – the Scapegoat

Posted on the 07 July 2016 by Technicalanalysistalk

Good day all,

Let it be known: Brexit will not bankrupt the world; Brexit will not bankrupt the UK. If anyone says he is a free man, if anyone says he is free to make his decisions, then shame on those who lambaste the British people for bringing financial catastrophe on the world. The British people have voted - against the avalanche of an environment pushing a globalist agenda - and they have decided on taking 100% control of their own country. What crime have they committed? Yes, there is going to be a lot of work to be done by lawmakers, legislators, businessmen, etc; but is there any crime in that?

Since this is a website pertaining to the financial markets, I will keep the scope of this post focused on the financial markets' side of the issue. Even till this day - 15 days after the referendum - the mainstream media is still raining a deluge of criticism at Brexit voters, and preaching about the impending collapses that will stem from a Brexit. What is worse for me, as a trader, and for all of you out there who have been following the markets for years, is when I hear of how a Brexit will cause the next 2008-style financial collapse. Seriously?

First, we do have at least a week's worth of trading to see if we are on the cusp of disaster. To that end, we have a definite answer: no. The FTSE is already above levels seen during the referendum week! European indices are off the lows made after the referendum, ditto for Asian indices, and American indices have just about recovered all ground lost after the referendum. If Brexit was as bad as the media portrays, the markets would continue sinking. The Pound, I grant you, is still falling but give it some more time, and it should bounce back. The mainstream media may be fooling everyone else but I hope that we, as financial market followers, will stay calm and know that this is simply a knee-jerk reaction.

A little hindsight analysis while zooming in on the referendum week. It seems to me like the markets moved quite closely in tandem with sentiment portryed by the media. At first, the markets dropped 4 sizeable red (or black) candles 2 weeks before the referendum when polls seemed to indicate that a Brexit was actually in the offing, then in the week leading to the referendum, I remember very well that the Bremain camp seemed to wax stronger and stronger - especially coinciding with the shocking attack and subsequent death of MP Jo Cox. So, with the chart in view, it is very clear that price action was almost dictated as according to the media. Why the FTSE has shot up higher is beyond my comprehension although one thing we can be very sure of: Brexit is not to be the scapegoat for any kind of disaster hereafter.

Brexit – the scapegoat

With that said, let us not climb onto the bull so quickly. For quite a long while now, I have been feeling uneasy about the markets in general. The generally huge, "toppish" patterns in many indices globally is certainly cause for concern. Some people in authority - including Brexit poster child Nigel Farage - have indicated that the UK will head into recession regardless of Brexit. According to the charts, this is quite a strong statement to believe in. Markets have been rounding off for some time already. While this can simply be a large breather in a continued bull-run - like in the aftermath of the US credit downgrade (how come the media did not blast Obama for that?) - generally-speaking, it is supposed to herald the stagnation or decline in the economy. So, taking the chart into account, it is a very probable scenario to expect in the coming twelve months. Why should Brexit take the rapping for this? The charts were already turning; the markets were already tanking long before anyone was concerned about Brexit.

In conclusion, I hope we can all bear the big picture in mind: financial markets have been tanking for quite a while now instead of sauntering up in a typically strong uptrend channel. If the UK does enter into recession, it is not because of the Brexit but for other reasons that have already been factored into the financial markets.

Brexit – the scapegoat
All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Back to Featured Articles on Logo Paperblog