The Brexit vote is tomorrow and our informal survey shows that it's just as tight as the opinion polls suggest. The 'leave' vote is probably more solidly entrenched but that may just reflect our sample of subjects - middle-aged, middle class, white. One respondent asked us 'Who are all these people who want to remain? I don't know any'.
Meanwhile the European equity markets have bounced back to where they were before the polls briefly swung toward 'leave' and caused a sell-off. There are compressions in this area and so it is probable that the rally will encounter resistance hereabouts. Some examples:
The UK market is obviously more directly interested in the outcome of the vote and it has rallied strongly. Prices have briefly pushed through the resistance offered by a compression that also occurred at the beginning of the recent drop. Prices remain in a trading range, so this 'push through compression' may only be a curiosity.
Meanwhile US indices have made multiple compressions in the last two sessions as prices 'mark time' waiting for news:
This makes trading difficult. We have advised long positions in the US and Europe and now would 'lighten up' the exposure on little rallies. If there is a dip on the day of the Brexit vote, or in the few days after then we would be happy to advise buying again. If prices push up through resistance in Europe/break up from compressions in the US then a new trend will have started. We expect that this will be the outcome but we can never be certain when markets compress, which is why we are retreating a bit here. The close Brexit vote is also a reason for reducing risk here.
Elsewhere there has also been a new compression in copper. This is the second of these this month and has yet to break. Our neutrality when faced with a compression is a little biased here as we have seen weekly-scale top extensions in a few commodity indices lately, that makes us inclined to the bear view. However, in liquid markets there is always the possibility of a short squeeze, so we will not remain short if this compression breaks upward. Our short advice in Copper is approaching the end of its useful life (tomorrow in fact) and we will probably 'time out' of the trade unless this compression breaks down.