BREXIT Spot Article

BREXIT: To be or not to be?

A fortnight after the people of Britain voted NO, some markets are still digesting what BREXIT means. We’ve seen some sharp reversals in global stock markets as it becomes apparent that central banks are willing to accommodate and react to shock events very quickly.

On Friday the 24th June, we covered the BREXIT event LIVE with our members in our CHAT ROOM. Leading up to BREXIT we warned of extremely high volatility. As a desk, we were not looking to actively trade markets as the votes came in; but rather only when high probability setups presented themselves.

‘While many analysed the market, we actually TRADED it’

 

Two of those opportunities came in the DAX and the S&P500. Both markets were sold-off very heavily throughout the course of the day. At one stage we saw the DAX down -1300 points, whilst the S&P500 went limit down and trading was halted (which turned out to be an excellent BUY).

In our LIVE CHAT ROOM, we posted some of these trades, including two DAX longs that netted over 600 points within a few hours! 

LiveChat

Image 1: Snapshot of Live Chat Room on Friday 24th June. Click to ZOOM

The question on everyone’s mind is now: “After BREXIT, what next?”

The first thing we should remember is Britain must first submit a formal application to be begin talking with the EU. Without this application (termed as Article 50) there are no negotiations. This will be the first key milestone markets will be watching.

Another important point worth considering is this negotiation process is likely to take a long time. During this period, and so long as Britain remains part of the EU, all EU rules will remain in full force; until (if) there is a Brexit.

 

So in the years to come, will we actually see a BREXIT..?

We’ve seen many instances in the past where a majority NO vote has NOT been accepted:

table

Table 1: Examples of past referendums in EU area

Many of these events have unsettled the Euro region, however member states continue to keep the constitution and union together.

For now it remains to be seen whether Britain will actually leave the EU. From our perspective- don’t be surprised if the EU, the UK government, Germany or other conglomerates (multinational corporates..?) show some resistance. This could come in the form of another referendum; or perhaps negotiated terms that span for years and prevent BREXIT from really happening.  

 

Whatever happens, one thing is for sure: BREXIT is a long way from a done deal.

 

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