While the UK and the rest of the world was trying to figure out who really won the vote on Thursday night, I can tell you beyond a shadow of a doubt the real winner was WD Gann. Oh yeah, I wouldn’t kid you about something like this. Here is what I wrote to my clients on Thursday afternoon (along with accompanying chart) before anyone knew anything about the outcome.
Here is the Thursday STU: So let me conclude by showing you the calculation on the DAX which we normally put up only on the weekend but it’s important enough for today’s update. There’s a lot going on here but basically the calculations for the low had a difference of 74-33=41 at 40 days down. Today’s high is 10340. So 40’s are wild and the initial indication is it could square out here. You can figure out the rest. Regardless of how the vote turns out, we could at least have a near-term high. The rest of the dominoes could fall into line.
Here's the before and after. When I wrote Thursday’s update I didn’t know who would win. But If I’m going to play up a 40 relationship in a newsletter to subscribers you can darn well bet I felt fairly confident Thursday’s high could be a turning point.
We’ve all traded markets long enough to know the market can be a speeding bullet train but when it stops and it really stops it can turn on a dime. When it gets to that point it wants to turn on a dime there is no power on earth to make it go even a single point further, right? Go back to Thursday, when America woke up we saw a huge rally which of course followed on the heels of a strong rally in Europe. The reason given was London bookies claimed a good share of money came in on the Remain side. As you know, the markets were rooting for the Remain side. But here's the deal, it stopped exactly on 10340. Here’s a speeding train that stopped at that exact spot. When the dust settled after the vote it dropped hundreds of points in a massive gap but it did not go a single point higher than 10340.
For me, I spent the week looking for the classic buy the rumor, sell the news scenario. It appeared market participants were going to buy, get what they wanted and come the last trading day of the week take profits as they have done so many thousands of times in the past. That was one possibility. The other possibility of course was Remain would not win and in that case the market would have a hissy fit. It was also the classic heads I win; tails you lose scenario. As you can see, my new charts are extremely calculation rich. I posted around 4pm Pacific Time on Thursday and within the hour it appeared Remain would win. In fact,UK Independence Party leader NIgel Farage had already conceded defeat. So not only did this turn out to be a classic market event, it turned out to be the modern day version of Dewey v. Truman. I was completed drained from the day-- which you’ll remember--started out with a pair of Supreme Court rulings, a verdict in the Freddie Gray case and a shooter in a German cinema. I crashed out on the couch in front of a NY Mets game, of all things. When I woke up 2 hours later I saw red on the screen, markets going berserk and suddenly the Brexits were in the lead. The rest as they say, was history.