Italian Prime Minister Matteo Renzi announced his resignation after voters in a national referendum soundly rejected his proposed constitutional reforms.
After Renzi’s announcement, the euro dropped to a 20-month low and European stock markets were poised for a weak start. This is not a Brexit; Italy is not leaving the euro or the European Union.
But it is a vote of no confidence, and it will lead to a deteriorating condition down the road. France will be next, with the rise of the nationalist right Marie Le Pen party, then the contagion will spread to Spain, Portugal and Greece.
As I have said all along, the great European Union experiments and the euro – are an inevitable failure. There is no saving them. It’s just a matter of time.
Right now, however, the euro is oversold and the dollar overbought. So, I am happy I recommended grabbing gains there last week. For now, stand aside the currency markets. Also, stand aside the precious metals until further clarity evolves. They’re weak again this morning, but very deeply oversold and a major rally could begin at any time.
If so, we will catch it. If not, we capitalize on the next leg down.
One new trade for today: Buy the Direxion Daily 20 Year Plus Treasury Bull 3x Shares (TMF).
For All Members:
In short, the bond market, as you already know, has taken its worst shellacking in nearly 26 years, confirming the sovereign debt crisis I’ve been warning you about.
However, the bond market is now the most oversold I have ever seen it, and subject to a potential massive short-covering rally, one worth playing. Therefore, I recommend …
| Using 3% of you’re the allocated to this service, buy the Direxion Daily 20 Year Plus Treasury Bull 3x Shares (TMF) at the market. Place a good-till-cancelled protective sell stop at $14.70. |
Best wishes,
Larry
