Brexit Polls Dominate: Should I Stay Or Should I Go?

Until recently one could be forgiven for not knowing what Brexit stands for. It may sound like a version of Britain’s famous Wheetabix  cereal, but actually translates seamlessly from financial geek speak to “British Exit” from the European Union (EU). Brexit has now moved beyond financial circles and into the political and social discourse. If the UK left the EU there would be politicians  instilling fear into the public at a level rivaling normal US Presidential campaigns and cause a sharp drop in the British Pound currency and rally in the US Dollar. A Brexit would likely be more of a short term market shock than long term panic, but lower stock markets across the board short term would result. Will there be a Brexit? That is THE question of the month.

Survey Says

Just one week ago the shockingly dismal US Jobs report created clear consensus that Janet Yellen’s Federal Reserve would NOT hike interest rates on June 15th. This cleared the way for a very sharp drop in the Dollar and run higher in Stocks and Gold. At the time polls or at least the London Bookies assumed a Brexit was unlikely. With little other news to focus upon we suffer the condign behavior of watching polls. We are now people watching people who are watching other people to make major financial forecasts. In fact Investment companies are paying Millions to garner the latest exit polling data to glean special insights. Billions of British Pound currency has been moved off shore to hedge against a Go vote.

The latest poll gives the “Stay” vote a slight edge as of June 6th.

brexit polls

Looking at the individual polling data for the last 10 polls show an even split between Stay and Go outcomes. However, if you look closer and throw out the ORB source as an extreme outlier, the weight of the polls favors a GO or rather a “Leave” vote on Brexit.

brexit table

Pound IS Getting Pounded

Pulling out the magnifying glass and just looking at the price chart of the Pound hints that investors have shifted more decisively beginning June 7th/8th toward a Brexit Go vote as Sterling has begin probing beneath key 2 month support today. Apparently a new poll today shows a huge lead in the Leave Brexit vote. *However, let me caution that the source is ORB which has a history of very large voting swings and makes us very skeptical. ORB has had a 22 point swing in less than 5 days. We believe the odds strongly favor the next couple of polls will show a much tighter vote once again. Today’s volatility has strong odds of continuing. Don’t be surprised to see prices ping-pong here and bounce off of this 1.42 – 1.43 support. A Yes or Go vote on Brexit would likely devalue the Pound toward a test of a 7 year low of 1.40 to 1.38. 

pound 6-16

Large Spec Funds -smart money – have been selling the Pound heavily since last September and are near 3 year extremes in their negative sentiment positions. They are most negative at a bottom and currently hold relatively large net short position. Expect some major short covering if Brexit is rejected.

Go Vote Means Lower Pound, Oil and Stocks

Nobody can be truly certain of a the remaining 13 days of streaming Brexit Stay or Go polls that have been well within the margin of error either direction. The big money bets favor an Exit which means: (1) If they are wrong there will be an strong short covering rally in the Pound, Oil and Stocks &  (2) If they are correct, then not only will the Pound fall toward multi-year support near 1.38 – 1.40, but stocks will also sell off in the short term. The Option traders in the stock market may not be at major extremes in their consensus, but are clearly at vulnerable overbought sentiment levels that will be sensitive to a Brexit Go vote. Have some dry powder to Buy stocks upon a sharp drop with a Brexit or prepare to add to holdings upon a rejection “Stay” vote.

 

Should I Stay Or Should I Go?  Stay Tuned Until June 23rd!

Update: June 14th: New Polls performed exactly as we expected above – for a day – then new reliable polls began gradual shift toward Brexit once again. ORB data looks specious, but trend to a Brexit is a bit more decisive at this point with just over a week until the June 23rd vote. Until new polls show a new trend toward Staying, we will now expect our downside target to be reached at 14045 and possibly 13880 should confidence of a UK Exit of the EU become even more confident.

Brexit polls 6-12-16

 

 

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