Posted Jun 9, 2017 by Martin Armstrong
It’s looking like a hung Parliament and the polls got it wrong again in Britain. The Conservatives appear to be 12 seats short of the 326 to rule with a majority vote after a 20 point lead back in April. Theresa May is facing a serious backlash over her shocking election campaign gamble following an exit poll suggested that her snap election roll of the dice has completely failed to pay off. Where before the BREXIT vote was purely conservative, Corbyn had to embrace that position but then he turned to the youth and got a massive turnout in some areas at 75%. London itself is filled with a lot of students. Corbyn appealed to them promising healthcare and tuition deals and thus was tapping into a reservoir of people who would not normally vote.
This election illustrated the entire problem I have been warning about. We are facing a generational battle. Ironically, the youth do not quite realize that voting Labour was a vote for the very neo-Marxist policies that have created the crisis we have in pensions going forward. It has been this type of promising manna from heaven with assurances to make the rich pay for it. This is exactly the same policies of Hollande in France, which proved so disastrous. Yet the old saying; Ah to be young again, but know what I know now comes to mind. What the youth have done looks very well like fulfilling what our computer has been projecting – the fall of the British pound long-term.
The problem with this Corbyn Hung Parliament is the fact that his own party pretty much wrote Corbyn off and wanted him to resign after the last election. Since this time he made it really a personal battle, he is unlikely to back-down and will be pushing a Marxist agenda. Ah, how the wheel of fortune revolves. This Corbyn Hung Parliament now casts a huge doubt over the negotiations for BREXIT. We ran our model fearing that this could be the outcome or if Corbyn would actually win pulling off a surprise victory for Labour. It came back and said SELL Sterling! It is very curious how markets never lie and they show you the trend if you listen to them rather than try to fit their movement to a predetermined outcome. While our computer did show the Conservatives would win, something was wrong since the outlook for the pound was bearish – not bullish.
Socrates Pro Version wrote in the pound concerning the Long-Term:
“Diagnostically, my wide-ranging projection recognizes that the major low in British Pound Spot took place back in 1985 completing a 52 year decline, but we have seen lower highs with each thrust upward leaving the major high intact as of 1959. We have not elected any Yearly Bullish Reversal from the major low of 1985 warning that we remain in a bearish long-term trend. Only an annual closing above 24280 would signal a change in long-term trend. There has been a post low rally after 1985 moving upward into a key high during 2007. Nonetheless, the market has undergone a reaction back to the downside for the past 9 years. This has warned that the overall trend of this market remains bearish since it has been unable to make higher highs. There remains a long-term risk of a decline extending into 2017 or as far out as 2020 in real terms adjusted for inflation. Unquestionably, there remains a risk that we could see a complete monetary reform as early as 2018 going into 2020 or the latest 2032 insofar as a change in the currency base system. This is likely to follow a Sovereign Debt Crisis which should begin to erupt by 2018.”
Our model has been showing that the major resistance stood in the 134 zone both on the Monthly and Weekly levels of our model. Just to achieve a positive signal, we required a monthly closing ABOVE 12954. Socrates has been writing: “Critical resistance still stands in this market at 12954 and a break above that level on a monthly closing basis would warn of a continued advance becomes possible.”April closed precisely one tick beneath at 12953. This was perhaps the first hint that there would be trouble ahead since that is when May announced the snap election. Then the next month of May exceeded the April high intraday, but it also fell back to close at 12889 and still could not break above 12954. Now Sterling has dropped sharply to below the 127 level on the news of a Hung Parliament. How it now closes today will be the market speaking loudly so listen.
Since the computer has been warning that Sterling can fall back to the 1985 low at $1.03, it was hard to reconcile this with the polls calling for a major landslide for the Conservatives. This is Corbyn’s chance for the big time and you can expect he is going to really muddy the waters because he truly believes in Marx. The distinction between Brexiteer and Remainer stands a real chance now of fading away. Battles would still rage on, however, yet the terms and methods of restoring British independence will be completely thrown into the air. Eurocrats in Brussels now face the prospect of an entirely different negotiating team in the event of a cobbled together coalition, which would also need time to thrash out its own Brexit strategy.
Our own interaction with British institutions and corporates has been interesting. Many who were against BREXIT and saw that as the end of the world, flipped their position and said hey – they is pretty good. After accepting BREXIT, now the terms are up in the air thanks to May misreading the discontent rising among the youth. We have also warned that revolutions come from the youth, not from the old establishment who have too much to lose rocking the boat.
Corbyn is a full blown neo-Marxist who would love to convert Britain to a modern version of Communism. Instead of guaranteed minimum wages, he wants maximum wage limits. He has been preaching the same old solution – just rob the rich, which Hillary was preaching while stuffing her own pockets. The problem is the big numbers he hears that CEOs make is stock options typically more so than salary. Nevertheless, in his mind if everyone is reduced to the same wage, somehow that will solve everything. Nobody should earn more than he thinks is appropriate. His policies would be the final straw that ends Britain as any type of financial capital whatsoever. The talent will be on the first plane to New York or Hong Kong. With Corbyn in Britain and the EU insanity on the Continent who wants to outlaw short-selling, the pound will not survive even to be a hedge against the Euro.
The real question is somehow the market is always correct and forecasts the future with extreme precision. The pound could never elect a single Weekly Bullish Reversal which all stand above 13400. Yet the first Weekly Bearish Reversal is 12772 on the cash. If that is elected tomorrow, then the markets are warning that this is going to be a very hard road for Britain. The absolute critical technical support for this week’s closing lies at 12748.
We can see from both the arrays on the pound against the dollar and euro, that the computer projected a turning point for this week. It also generally warns of higher volatility next week. So pay attention to the Weekly Bearish Reversal at 12772.