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The Markets
This week we moved quickly from Fed Day - No Surprises, to Suprise! Fitch Downgrades U.S. Government Debt.
Fitch Ratings announced yesterday evening that they were downgrading U.S. Government Debt, lowering it from AAA to AA+. The announcement seemed to come by surprise and stock index futures reacted with a quick dip.
Now the late summer seasonal selloff has a catalyst. So far the damage has been mostly contained with many stocks and indexes staying near or above the shorter-term moving averages.
Let’s go to the charts (with a few extras) for a look at the potential further implications.
The Charts
SPY Has touched its 21-day MA for the first time this summer. It’s trying to stay above to maintain the bullish momentum. If it doesn’t $443-$444 is an area to watch.
QQQ moved a little deeper closing below the 21-day MA. This puts things in more of an either/or state for now.
IWM could be a failed breakout from the bullish consolidation pattern. But it did get a mid-day bounce and if it can stay above the 21-day MA it remains healthy, short-term.
DIA held up best for a while before selling picked up later in the day. So far it is still well above the 21-day MA and the breakout level.
I’ve included this chart today as bonds will have clues for the situation. TLT has broken lower from the box. But a strong reversal today suggests the possibility that a flight to safety trade could be getting started. We’ll need to see if tomorrow’s action confirms.
BTC Bitcoin initially jumped at the news but the move faded quickly. Overall it continues to be undecided and underwhelming.
DXY The Dollar is finding strength and continues to bounce. This puts more downward pressure on stocks.
VIX Volatility expansion has arrived. Nothing alarming yet as it’s still at a very low level. But worth keeping an eye on.
The Closing Bell
So we’ve got some action and excitement. The downgrade news seems perfectly timed with the seasonal tendency for a selloff and markets that already felt due for a rest.
The action is a bit tame so far. And many analysts and traders are suggesting that this rating change will have very little impact. We shall see.
As always, price action will be our guide, helping to adapt and adjust to whatever happens along the way.
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The Disclosures
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors prior to making any investment decision.
POSITION DISCLOSURE
July 21, 2023, 4:00 PM
Long: ADBE0818C575, RIOT, SNAP0818C14, TOST0818C27
Short:
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike