While the post Brexit S&P looks a lot like the pre Brexit S&P, structural shifts across asset classes have us more concerned this time around. European Banks have barely budged off of all time lows on the bounce and given the strong correlation between Banks and Yields, it is reasonable to conclude that both will continue to make new lows.

Moreover, the policies designed to stabilize markets are now part of the problem, not the panacea, in so far as they put downward pressure on Yields and Banks. In Japan, the Yen and Nikkei have barely bounced and both have violated their 200 week moving averages for the first time in over 3 years when the rally began in earnest. The charts are not “good” and continue to cast doubt on the Japan story, which is a pretty big story. Gold and Silver are surging and project upside to 1,565 and 22 respectively. The Pound has collapsed to a 30 year low and projects downside to 1.16. In addition, EURGBP has surged above its multiyear downtrend and now targets upside to .88-.92. During the financial crisis of 2007 the Pound collapsed and EURGBP surged in similar fashion. While Crude continues to act fine for now, WTI stalled and rolled along with Inflation Expectations in July of last year.

In addition, the S&P established its highest weekly close of the year in July of last year. In July of 2007 the S&P had an 11% decline which commenced on a breakout to a new all-time high and ultimately marked the beginning of the end of the Bull Market. It is July. The Chinese Yuan has not firmed off the highs and displays no signs of exhaustion. On the positive front, Commodity Currencies continue to firm against the Dollar, EM has stood its ground along with High Yield Credit, and the Cumulative Advance/Decline (Breadth) has pushed out to another new all-time high; all of which is constructive. In sum, while we are impressed with the alacrity with which some risk assets have rallied post Brexit, on the margin the world is worse off technically, not better.