Bargain Hunters May Rush in This Week

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Stocks plummeted Friday when Britain surprised the world by voting to exit the European Union. The Dow Jones Industrial Average fell 3.4%, the S&P 500 lost 3.6%, and the Nasdaq was pummeled for a loss of 4.1%.

The losses in European markets were roughly double those here at home, with the Stoxx Europe 600 falling 7%, Germany’s DAX declining 6.8% and France’s CAC 40 losing 8%. Japan’s Nikkei dropped 7.9%.

Investors’ risk-on approach in the days leading up to the Brexit vote was quickly reversed to risk-off. Gold jumped 4.7% to $1,320 an ounce, and the yield on the 10-year Treasury note fell to 1.57% from 1.74% on Thursday as investors bought bonds.

At one point on Friday, the British pound was down 11% against the U.S. dollar, following the resignation announcement by Prime Minister David Cameron.

The financial sector was the hardest hit, with notable decliners including Morgan Stanley (MS), down 10%, and Citigroup Inc (C), off 9.4%.

Friday’s volume was high, but this was due in part to a rebalancing of the Russell 2000 index. WTI crude oil (WTI) fell 4.9% to $47.64 a barrel.

At Friday’s close, the Dow Jones Industrial Average fell 610 points to 17,401, the S&P 500 lost 76 points at 2,037, the Nasdaq was hit with a 202-point loss at 4,708, and the Russell 2000 was down 45 points at 1,128.

The NYSE Composite’s primary market traded 2.5 billion shares with total volume of 7 billion. The Nasdaq crossed 3.8 billion shares. On both the Big Board and Nasdaq, decliners outpaced advancers by 5.2-to-1. Block trades on the NYSE increased to 8,495 from 4,828 on Thursday.

For the week, the Dow and S&P 500 lost 1.6%, the Nasdaq gave up 1.9%, and the Russell 2000 lost 1.5%.

IWM Chart
Click to Enlarge

Chart Key

The iShares Russell 2000 Index (ETF) (IWM) began with a mild sell-off, relatively speaking, supported by the 50-day moving average at about $113. However, that support quickly gave way, creating a 2-point gap between $116 and $114.

IWM also tested the support line near $112, closing less than a point above it. The next crucial support is at the 200-day moving average at $110.87, and then the fragile line at $107.

Conclusion

The market is likely to succumb to selling on the open today from margin calls resulting from Friday’s declines. However, gold and silver were beneficiaries of investors’ rush to safety, so they should not accelerate this. Once the margin calls are satisfied, we could see buying from bargain hunters as early as tomorrow, but more likely later in the week.

Note that the Dow Jones Industrial Average closed a mere 34 points below the May closing low of 17,435. A reversal from the Dow’s close on Friday could re-establish the trading zone of 17,200 to 17,800 that we’ve been in since October.

This is no longer a market of stocks, but a market of trends, caused by the public’s frustration with and rebellion against imperious bureaucrats.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/daily-market-outlook-bargain-hunters-may-rush-this-week/.

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