U.S. Dollar Surge, Gold Surge and 10 Brexit Side Effects

U.S. Dollar Surge, Gold Surge and 10 Brexit Side Effects

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“Central banks around the world are having more and more influence on the markets. Many people are trading off of anticipated policy moves and the crowded trades are even more profound. However, the sentiment of investors making bets on the “great divergence” has reached a fever pitch.  Fed funds futures are expecting at 78% of a 25bps rate hike, far too many people are on one side of the boat.  We believe credit risk will veto the Fed policy path next year.  We do not see rate hikes coming in 2016. We implore you to buy the gold miners GDX and long U.S. Treasury bonds.”

The Bear Traps Report, December 9, 2015

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Brexit Side Effects

  1. Spanish Yields Surging on Brexit Credit Risk Contagion

Prime Minister Rajoy’s People’s Party on track for 116-120 seats in Sunday’s election, according to a Gesop survey published by El Periodic d’Andorra.

• PP rises from 114-118 seats in Friday’s poll, BUT down from 123 seats in Dec. 20 election
• Left wing Podemos set for 90 seats vs 71 in December
• Socialists on 83-87 seats vs 90
• Ciudadanos 38-42 seats vs 40
• Poll based on 900 interviews conducted June 22-24
• Majority in Spanish parliament is 176 seats


  • 10-year yields jump most in 2016 Friday as U.K. chooses Brexit
  • Sunday’s election may once again be inconclusive, polls signal

Spanish government bonds may see more volatility next week after voters go to the polls Sunday to try to break a six-month political deadlock over who will govern the euro region’s fourth-largest economy.

The nation’s securities plunged on Friday, with the 10-year yield jumping the most this year, after Britain voted to quit the European Union. Riskier assets suffered as the decision threw uncertainty onto the political future of Europe, bolstering speculation other nations will move to hold similar referendums. – BN

Brexit Side Effects

2. European banks are off 47% from their 2016 highs, off 18% yesterday.

EU Banks new

Central banks are intervening globally in currency action, the Bank of Japan, S Korea, India and Denmark are all believed to have intervened overnight Thursday into Friday’s market price action.

The Eurostoxx 50 is fell 9%, that’s nearly 2000 Dow points.

3. Gold is a safe heaven once again, the media lectured us late last year that the metal had lost its security touch, wrong.

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4. S&P 500 FUTURES TUMBLED 5.1%, then closed 3.6% lower Friday.

S&P 500 1999

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5. We are witnessing a blow off top in panic bond buying, 0.15% for 30 years in Japan.

Japan 30 Year


6. The Fed once again is wearing the dunce hat. US markets are currently pricing out any chance of a tightening (rate hike) this year.  U.S. 2 year Treasuries’ yield plunged to 0.53%.

2 Year

7. Emerging Markets and Oil’s enemy, the global wrecking ball that is the U.S. dollar is back on the march higher.  WTI plunged 9.1% from its June high.


iShares MSCI Emerging Markets -6.2%

Brazil -2.8%

Mexico -2.7%


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Dollar Surge


8. The Pound is in Lehman Land

The pound slumped to the lowest level in 30 years on Friday, tumbling as much as 13%, as investors took fright at Britain’s shock.

HSBC and Standard Chartered Bank plunged 11%

Pound 5

We now have a Pound in Lehman land at 11;07ET

9. A Classic Trading Lesson, too Much was Priced in.  Too Many investors were on one side of the boat (Bremain) Thursday.

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The 70 Handle Plunge

S&P Terror

Too much was priced into the Bremain trade.

Thursday, currency volatility plunged on the pound from 24 to 13, the biggest one day move in the post Lehman era.  The market was well priced in for a Bremain.

Next, Mr. Market did what he always does, “exerts the maximum amount of pain on all participants.”

Look at this incredible move:

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Pound Plunge

At one point this Thursday if you wanted to trade pound sterling the bid offer reached one big figure 1.49-1.50, she closed at 1.36 now!

Leading global currencies shouldn’t trade like biotech stocks, but in a Brexit world full of “over ego filled” central bankers, they do.

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