Merkel admitted that: “There’s no way around it: Today is a watershed for Europe and the European unity process.” Of course, people like Schulz are the entire problem. His arrogance ensures the demise of Europe. He had the audacity to to say that there is “no chain reaction” after BREXIT. Once a politician makes a decision, they will NEVER concede error. They will take Europe down with their entire elitist ideas.

We will indeed see rising movements to exit the EU. Their policies are insane and this idea of forcing the federalization of Europe is exposing old wounds. It is not eliminating the threat of European war with one government imposed upon everyone, which was the idea of Hitler and Napoleon, What we are seeing the fragmentation of Europe. The sooner these referendums come from other states, the better it will be for Europe and the entire world. It is now the only way to save Europe since the people cannot vote to change those in Brussels.

Merkel’s unilateral decision to take in refugees was not a democratic decision at all since she made a decision in which no other country had any power to object. They cannot see that this is a system totally anti-democratic and forces the people into a corner with no recourse to change the direction of Europe or their own country. The EU has become a total disaster.

Brussels simply went too far. They cross the line moving from an economic union to a political subordination of Europe. Now five more countries want to hold referendums to exit the EU – France, the Netherlands, Italy, Austria, Finland and Hungary all could leave. With Hollande approval rating at about 11%, Merkel lucky she is not tarred & feathered, the Front National leader Marine Le Pen has pledged to hold a French referendum. If she emerges victorious in next year’s presidential elections, that means the next major player in the EU after Germany is out and there goes the EU.

This entire civil uprising in Europe is underway ever since two months ago when Dutch voters overwhelmingly rejected a Ukraine-European Union treaty. Angela Merkel’s Germany now faces having to pay an extra 3 billion euros a year to the annual EU budget once Britain leaves. This alone is prompting German government officials to propose that Britain is offered “constructive exit negotiations” to keep their dues coming in. Some are now talking about a quasi-membership for the UK calling it an “associated partner country” to keep the money flowing.

Yet the French government of Hollande just does not understand. The governor of the French central bank will exert pressure on UK banks. They are taking the view that it would be paradoxical if Britain could retain privileges after the withdrawal from the EU. First Banks are preparing apparently preparing to shift part of its employees in London to the continent. They obviously fail to grasp that it is European continental banks that are on the brink of collapse – not British.

Italian ministers warned on Saturday that the European Union MUST change course or risk total collapse after Britain’s vote to leave the bloc. The Italian  Finance Minister Pier Carlo Padoan said. “A double reaction to Brexit is under way, one financial, one political. The financial one, at least until now, is limited. I am more worried about the political one.” Indeed, the unthinkable is happening. And they worry the pound might crash? Pay attention to the euro.

Meanwhile, another critic of the EU has been the leader of Poland’s ruling party. Poland’s Foreign Minister Witold Waszczykowski also now responded and said that the UK referendum result shows the need for reform of the EU. “This is bad news for Europe, for Poland. (…) This is a great dilemma for the eurocrats, we all want to keep the EU, the question is in what shape.” He continued: “We will be trying to use this situation to make the European politicians aware why this happened. And it happened because this concept, which was created some time ago, is no longer popular in Europe.”  Then again, the Hungarian Prime Minister Viktor Orbán intends to campaign in the British press for the UK to remain in the EU, according to a Hungarian government spokesman. Orbán is clearly one of those who is out of touch with the people and fails to understand that a federalized Europe is not going down very well with the people. He is extremely arrogant to think that he has any right to intervene or suggest that the vote be ignored.

To add insult to injury, Turkey proclaims the “Crusader union falls apart” demonstrating that memories in Europe go back centuries. The United States people did not want to enter World War II. Roosevelt even traveled to Boston promising that American boys would never defend Europe. Boston was a very Irish community and they were upset at being asked to defend Britain after their migration to the USA because of Britain. Old wounds never quite die.

Our sources are saying that the central banks have come to an accord to cooperate in an effort to support financial stability in the wake of Britain’s vote to leave the European Union. This is akin to the Plaza accord of 1985. Central bankers urgently gathered at the Bank of International Settlements in Switzerland to discuss the implications of the BREXIT referendum. The central banks are endorsing a contingency of measures to be put in place by the Bank of England. While the central banks will carefully monitor market functioning and stability, they are clueless what to actually do other than try to prevent currencies from swinging wildly.

The entire crisis has come about because the EU has attempted to federalize Europe and impose its will upon the people and suppress all efforts to resist. This is now reaching a major crisis and the elite refuse to accept that they are simply wrong. This crisis will merely increase. It cannot be rectified without abandoning the entire philosophy behind the EU of one policy fits all.

A petition has circulated gained they claim 1 million signatures to overturn BREXIT and hold a second referendum. Of course they will do a far better job at rigging this one if it goes through. Such people deserve what they petition for and should surrender the pound and the Queen. They have zero idea of what is coming from Brussels but this is playing into the hands of Cameron no doubt and the rest of the establishment. They assume government will survive. They are clueless that Brussels will collapse as we move forward.

The Dow has been bouncing off the Reversals as well. Despite being above 17800, it would fail to close above that. The question becomes WHEN will the Dow breakout to test new highs with the next target zone in the 21,000 to 23,000 area? With the closing on Friday below the first Minor Weekly Bearish at 17434, the Dow should move a bit lower now to test the 17120 level. We have a serious gap there after both technically and on our Reversal system. We can yet see a thrust to test the 15000 zone before turning back up again. The numbers tell us when the big moves will come. But we need not move down that far. We can hold technically the 16900 level, fail to elect any reversals, and the flip back up.

The key to all the markets is CONFIDENCE. We are witnessing a global revolution against career politicians. BREXIT is the first of four critical elections we have been warning about. There is no real chance of a major stock market crash because retail participation (both domestic and foreign) is at historic lows. There is no retail market that would panic. The “professionals” are baffled trying to figure this mess out watching the Fed and reading headlines. More hedge funds are closing because performance is collapsing. Opinion really drives the bulk of investment and nobody is getting this right because there is nobody who has ever lived during such a period. Those in search of guru will lost everything. The ONLY way to trade this mess is DISPASSIONATELY and just go by the numbers. The market is the only one that is never wrong.

The slingshot is coming. These four elections will change the perspective of government for the next few decades. Those in power will fight back tooth and nail. You can see it. Republican Elite hate Trump just as the Democratic Elite hated Bernie. Both represented upsetting the apple cart. Nevertheless, we are looking at a serious issue here. The slingshot comes WHEN everyone realizes the future will not be anything they dreamed of. The negative interest rates are destroying pension funds, Central banks have lost control and credibility, and socialism is dying very hard because government is consuming the bulk to fund its own pensions. The slingshot comes when people realize governments are collapsing. Then there will be the mad rush into all private assets.

The true impact, on Britain and on Europe, will start to become visible rather quickly.  It is absurd to think that anything has to change in respect to trade between the EU and Britain. What this  means is really that Britain will not be subservient to Brussels and would be in the same position as the United States. However, our sources are telling us that the EU will try to punish Britain, as they did the Greeks, for having the audacity to reject their superiority. This may become more of a nasty divorce where when a couple moved in together the wife hated his lucky lazy-boy to watch games. In divorce, it will cost him $50,000 in legal fees to get the lazy-boy back that she threatened to throw out many times. NATO is nothing without Britain. Indeed, Europe is incapable of defending itself without Britain and the USA.

The Scottish are threatening to hold their own referendum to separate from the UK and remain in the EU. That too is insanity. Sottish independence is one thing. To remain in the EU is to surrender their independence and become subservient to Brussels. Ireland wants a referendum to unite North and South. That will probably only result in civil war. Britain should step out and let them duke it out.

When the markets crash in Europe as Brussels tries to outlaw short selling to prevent markets to go against the politicians, this means that Britain will remain as the place to do business and Euro will suffer. The banks were just doing what the establishment told them to do. The threats that banks would leave makes no sense whatsoever.

Meanwhile. the arrogance and threats of Obama who told the Brits back in April they had to go “to the back of the queue” and would not be able to strike a trade deal with America “any time soon” if it leaves the European Union, has shown just what politicians have become – buffoons who will say anything to win the moment. Now Obama said: “The people of the United Kingdom have spoken, and we respect their decision. The special relationship between the United States and the United Kingdom is enduring, and the United Kingdom’s membership in NATO remains a vital cornerstone of U.S. foreign, security, and economic policy.” He continued: “The United Kingdom and the European Union will remain indispensable partners of the United States even as they begin negotiating their ongoing relationship to ensure continued stability, security, and prosperity for Europe, Great Britain and Northern Ireland, and the world.”

Vice President Joe Biden said: “I must say we had looked for a different outcome. We would have preferred a different outcome … but the United States has a long-standing friendship with the United Kingdom and that very special bond will endure.”

So much for go to the bank of the queue. There are trade agreements already in place with Britain. Nothing new needs to be negotiated.

Brussels will try to now punish Britain as they punished the Greeks for daring to vote against them. Our sources are already saying the attitude behind the curtain is turning nasty as in how dare those “limies” vote to leave. The derogatory remains off camera and quite telling. Brussels will try to be hard on the Brits because there are already movements to enter referendums to leave the EU surfacing in the Netherlands, France and the Northern League in Italy. Indeed, the Brits just slapped the face of those elitists in Brussels who refuse to see they are ever wrong. It is always everyone else’ fault. The entire EU project has gone way too far. It is no longer about trade – it is an autocratic anti-democratic establishment hell bent on federalizing Europe.

Interesting price action – it is the UK that is leaving Europe and yet we saw the DAX fall 6.8%, CAC -8.35% and IBEX down 12.35% whilst FTSE declined just 2.8%! Bank share were hit everywhere with some of the large institutions (Deutsche Bank, Barclays and RBS) falling between 14 and 18%. The afternoon behaved a lot calmer than the morning session but it is the weekend press that will probably jolt markets come Monday morning. After David Cameron’s resignation earlier in the day, it was interesting we had not heard from the Chancellor, George Osborne, has who has been noticeably missed today but rumors say he is either addressing G7 ministers or writing a letter. It was also speculated this afternoon that a new PM may have questions for MR. Carney as he appeared so vocal for the Remain campaign ahead of the vote.

Having seen the weakness in Europe and the Nikkei close-down 8%, it really was no surprise the US markets opened lower with the DOW down 500 points at the open. VIX was last trading around 23%. By the close of business the DOW had fallen back to exceed opening levels and finally closed on the days low, down over 600 points. Gold fell from intraday highs and watched as oil fell over $2 to around $49. Next week is Month End so check Reversals accordingly. DXY rallied 1.6% to close at 95.15.
GBP Money Markets saw Short Sterling up around 20bp but saw reds about 30 better. This is indicating the market is looking for an emergency cut in rates sometime soon (from the Bank of England). GBP currency obviously suffered over 9% at one stage and closed the day near the lower end of the range. Having seen an 18 point trading range this is the largest recorded in at least 30 years. Watch for the month end close as all still looks extremely negative.

A $62 (5%) rally in Gold and huge demand for the belly of the US Treasuries market certainly kept dealers on the toes. 2/10 treasury curve closed +93bp (4bp flatter on the day) with 10’s having rallied 17bp to close 1.58%. In Germany the 10yr Bund closed -0.05% closing the US/Germany spread at +153bp (12bp tighter on the day). The flight to quality was reflected with a widening of peripheral spreads, as followed – Italy 1.55% (+15bp), France 0.38% (-7bp), Turkey 9.49% (+27bp), Portugal 3.30% (+25bp) and UK Gilt 10yr at 1.08% (-33bp).

The Dow has fallen in a knee-jerk reaction to BREXIT, which really is hype thanks to politicians. The gains for Britain are clear. It escapes the forced immigration and it escapes from EU draconian regulation. It is effectively the same as the American Revolution where the slogan was “no taxation without representation,” and the EU structure is outright anti-democratic where the people are not represented at all. Britain has stronger trade links with the United States than with the EU. Only about half of its exports are to the EU, but that is offset by EU imports. There is nothing to gain here with regard to trade. The EU will try to play it tough and hurt its own people to try to demonstrate they will punish any other country who seeks to leaves. Referendums are already being circulated in France and Netherlands, in addition to the sentiment to exit in Greece, Italy, and Spain.

Nothing will change with NATO, and in fact, Britain has proven to be the real backbone of military power within Europe. They stand absolutely nothing to gain from BREXIT and now it’s all about trying to punish the markets so politicians can live high off the hog as they say.

We can see that this was the target week. We had three Directional Changes in a row this month and this is exactly what has resulted. A choppy pattern back and forth. Note the high bar in volatility for this week as well. We have a Panic cycle starting the week of July 4.

Turning to the numbers, the TV is trying to make a huge deal out of the 500 point decline. Our two Weekly Bearish Reversals remain unchanged at 17434 and 17120. Only a weekly closing below 17120 will signal a serious drop. That opens the door to a decline to test the 15450-15300 zone. Only a June closing BELOW 15340 would warn of a more pronounced decline where our support lies at 14750 followed by 10400-11000.

A closing BELOW 17434 today at least implies we will see some follow-through into next week. A close today below 17120 opens the door to a drop down to August/September or as late as October. Pulling back instead of breakout out extends t6he chaos and the cycle it appears until post-elections.