This is what you need to know today.

Brexit Wins

British voters have decided to ‘leave’ EU.  The following points are important to note for all investors.

• This will be the most complicated divorce in history.
• There will be many twist and turns ahead over the next two years as negotiations between UK and EU take place.
• There are many scenarios under which Brexit is a good thing for the long-term investors.

Nexit

‘Nexit’ is a newly coined phrase.  We do not know if it will catch on but we will use it for the time being.  Who will be the next to leave the EU?

Large Dry Powder

With the exception of permabears, all of four services came into today with more cash and more hedges than any other comparable service or major mutual funds.

Deploy Dry Powder

Now it is time to start deploying the large dry powder at better prices.  We will be mainly guided by our proven algorithms.  The following are the important points.

• Between today and Tuesday next week, there will be large number of margin calls. These margin calls will put pressure on the markets due to forced liquidation.
• There is a huge amount of cash on the sidelines.  Some of this cash will step in on any big drops.
• The plan is to scale in slowly as new opportunities develop.

For new positions, a heavier weight will be given to our Quantitative Screen than normal.  Quantitative Screen is one of the six screens of the ZYX Change Method.  Please click here to learn about the Quantitative Screen.

CASH IS BEING REDUCED BY 3%.  THE PLAN IS TO FURTHER REDUCE CASH IN SMALL INCREMENTS.  Cash based on new posts or reinstated zones and also on ‘New Ideas’.

Buy/Target Zones

All Buy/Target zones are being temporarily suspended.  These zones will be reinstated or revised in the near future as more data becomes available.  Use stop zones judiciously.  The markets will be very volatile.  For this reason we suggest the following:

• Do not use regular stop orders.  In regular stop orders when the stop point is hit, it becomes a market order.  In a period of high volatility, like today, you are likely to get really bad fills.
• Use stop limit orders.  In this order type, you specify the price limit for your order fill.  The disadvantage is that your order may not fill because the price may gap through your limit. You will need to adjust stop limits often.
• THE BEST WAY IS TO USE APPROPRIATE HEDGES AND CANCEL ALL STOP ORDERS. Hedging has to be custom tailored to each portfolio.  However as a general guideline, consider using an inverse ETF such as QID.

To help investors learn hedging, we offer online Hedge The Risk seminar.

For tracking purposes with some exceptions, we will cancel all stop zones and rely on new out of money hedges as appropriate.

Markets

Main play is in currencies.  Dollar and yen are stronger.  Most other currencies are weaker.

Interest rates are falling and bonds are rising.

Oil and most commodities are falling.

Gold and silver are rising.

Our very, very short-term early stock market indicator is negative.

Gold futures are at $1323, silver futures are at $17.96, and oil futures are $47.91.

S&P 500 resistance levels are 2063, 2100 and 2120; support levels are 2038, 2017, and 2000.

DJIA futures are down 487  points.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash or treasury bills 30 – 42%, and short to medium-term hedges of  30% plus very short term hedges of 10%.

The plan is to slowly deploy cash as better opportunities become available.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.  With some exceptions, a better way than using stops in extreme volatility is to hedge all positions.

This is what you need to know today.

Brexit Vote Day

British are voting on Brexit today.  New polls favor ‘remain.’  The first results will start trickling around 7:00 pm ET.  Full results are likely to be known around 4:00 am ET Friday.

Stocks To Fly

Stocks are set to fly when the market opens on new polls favoring remain.

In our prior analysis, we shared with you that there is a lot of money on the sidelines.  The money is jumping in today ahead of the news.

Big Losses At Some Funds

There are big losses at some funds where managers thought they could predict the results with certainty.  Such funds went heavily short stocks especially European financials, British pound, and euro; they put leveraged long bets on gold, yen and volatility. Every single component of this trade has worked out to be reverse of what these managers thought.

This is another teaching moment as to why it is important to leave opinions at the door and use hard data to calculate probabilities and use probabilities to make investments.

Sell The News Reaction

If the rally in stocks sustains the rest of the day, the ‘sell the news reaction’ enters the picture if the results are ‘remain.’  Of course considering that market participants are deciding before the results that the results will be ‘remain’, a result of ‘leave’ will lead to a vicious sell off.

Stay Cautious

For the long-term investor there are always going to be opportunities.  There is no reason to take extraordinary risks.   Consider staying cautiously bullish.  Please see ‘What To Do Now’ section below.

Markets

Momo crowd continues to buy gold and oil.

Bonds are ticking down and interest rates are ticking up.

British pound and euro are strengthening, yen is weakening.

Our very, very short-term early stock market indicator is positive.

Gold futures are at $1262, silver futures are at $17.29, and oil futures are $49.84.

S&P 500 resistance levels are 2100, 2120 and 2132; support levels are 2063, 2038, and 2017.

DJIA futures are up 167 points.

This is what you need to know today.

Three Risk Events

There are three risk events ahead.

• Brexit vote on June 23rd, this is the big one.
• Russell re-balancing on June 24th.
• Spanish elections on June 26th.

Calm Before The Storm

Markets are calm ahead of the storm.  The odds have shifted in favor of no damage to the stock market.  Please scroll down to ‘What To Do Now’ section.

Yellen Testimony

There were no surprises in  Yellen’s testimony in front of the Senate.  She will testify again in front of the House today starting at 10:00 am.

Interest Rate Hike

The probability of interest rates not climbing until January 2017 is now 50%.

Oil

Oil experienced a short squeeze going into the close at 2:30 pm ET.  At 4:30 pm ET API data was released.  It showed oil inventories fell by 5.2 million barrels vs. 1.9 million barrels consensus.   Oil crossed $50 on this bullish data.

IEA Inventory Data will be released at 10:30 am ET.  This data is considered more authoritative than API data.

Markets

Momo crowd continues to buy gold and Smart Money continues to lightly sell it on up spikes.

Currencies, interest rates and bonds are range bound.

Our very, very short-term early stock market indicator is neutral.

Gold futures are at $1266, silver futures are at $17.24, and oil futures are $50.10.

S&P 500 resistance levels are 2100, 2120 and 2132; support levels are 2063, 2038, and 2017.

DJIA futures are up 19 points.

This is what you need to know today.

Brexit

The reason we pay attention to British bookies and gamblers is because of their remarkable track record.

Over the last 24 hours, fully 95% of new bets have been placed on ‘remain.’

As of this writing, odds given by bookies translate to 82% probability of Britain voting in favor of ‘remain.’

In sharp contrast, opinion polls are still too close to call.

Asymmetric Out Come

Given all of the data we can see, at least for today, we will not take additional defensive measures before Brexit.  However, we will also not reduce present cash level and hedges at this time.

Present risk in our positions is in line with the hard data on Brexit.

Yellen Testimony

Yellen will testify in front of the Senate at 10:00 am ET.  Given her recent flip flop, it will be interesting to see how she justifies it.  Most important will be any indications of future monetary policy.  Her testimony may be a market moving event.

Markets

Oil is giving up some of the gains from yesterday’s short squeeze.  Smart Money is lightly selling oil.

Temporarily buying by momo crowd in gold is not being able to overcome selling by Smart Money, gold has broken the support at $1280.

Dollar is slightly weaker.

Interest rates and bonds are range bound.

Our very, very short-term early stock market indicator is neutral, expect a positive start to the market and the rest will depend upon Yellen testimony.

Gold futures are at $1276, silver futures are at $17.32, and oil futures are $48.99.

S&P 500 resistance levels are 2100, 2120 and 2132; support levels are 2063, 2038, and 2017.

DJIA futures are up 36 points.

This is what you need to know today.

Brexit

Last week, we were early in deciphering that the murder of British politician Jo Cox would shift sentiment on Brexit.  Latest polls are showing that the ‘remain’ camp is pulling ahead.  Especially striking was that the murderer gave his name as ‘Death to traders, freedom for Britain.’

India

Respected Reserve Bank of India Governor, Rajan, lost his job.  He brought marcro economic stability to India.  Initially Indian stocks and rupee fell but later clawed back on Brexit polls.

Markets

All risk assets including oil are being aggressively bought.

Safe haven assets including bonds and yen are being sold.  The only exception is gold and silver where Smart Money is selling but momo crowd is still buying

Our very, very short-term early stock market indicator is positive.

Gold futures are at $1283, silver futures are at $17.39, and oil futures are $48.93.

S&P 500 resistance levels are 2100, 2120 and 2132; support levels are 2063, 2038, and 2017.

DJIA futures are up 205 points.