Tuesday, August 16, 2011

Fitch Affirms U.S. AAA Rating

The market is trading lower this morning on some weak economic data out of Europe, and concern that the big meeting between France and Germany to address their fiscal conditions won't produce anything significant. This is overshadowing the news that ratings agency Fitch affirmed the U.S. AAA rating.

There were some positive earnings reports from large retailers like WMT and HD this morning, and those stocks are bucking the weakness so far. Financials are leading the action lower this morning, while consumer staples are down the least.

Asian markets were mixed overnight. The 10-year yield is flattish near 2.27%.

The dollar is up slightly this morning, and this could be weighing on oil prices which are lower near $86.90. But gold prices are higher, trading above $1780.

The VIX is also higher this morning near 32.70. Although it has come down a lot since last weeks huge spike to 48, a level above 30 still indicates that the market expects heightened volatility in the near-term.

Trading comment: The market has bounced a lot in the last few days, but the move higher has been accompanied by very low volume levels. This brings into question the conviction behind the buying. I am not sure a retest of the recent lows is today's event. Mostly likely any sort of retest will unfold in the weeks or even months ahead. But as I have said, I prefer to wait for that retest before adding to stocks. At that time, I will likely add to those that have held up the best. In the meantime, I will look to trade around our positions small, and use market rallies to add to our hedges which will help preserve capital in the event of another trip lower.


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