Marketview: Downgrade Edition, Consumer Staples Select Sector SPDR (XLP), Energy Select Sector SPDR (XLE)

• Posted by DynamicHedge
• on August 7th, 2011

The week started off somewhat dovish as it was reported on Sunday that congress had arrived at an agreement for the debt ceiling.  Markets quickly devolved into panic selling as the week wore on, fueled by an obvious leak of the S&P downgrade of US debt sometime Thursday or Friday.  Then came the announcement on Friday evening that S&P would downgrade US debt one notch from AAA to AA+.

Winners: $MA, $KFT, $PEP, $CL, $PG, $MCD

Losers: $BHI, $NOV, $WMB, $HAL, $APA, $FCX

A lot of what happens in the coming weeks depends on the actions out of Europe.  As shocking as it may be for some, the news of the S&P downgrade is now behind us.  We won’t know the true ramifications for weeks or maybe months.  Don’t get too distracted by it.  If European leaders continue to stall then volatility should continue to escalate.

All bull markets eventually run their course.  We’ve broken key support support and should confirm a bear market in equities soon.  If there is such a thing as a jobless recovery, can there be a recession-less bear market?  Something to ponder.  Sentiment and emotion are clearly running this market but the data doesn’t suggest a double-dip.  It’s all fear, uncertainty, and doubt.

The markets look like death warmed over, but that doesn’t really mean much from an analysis perspective.  We are living through an unprecedented situation, so anything can happen this week.  We should see expanded ranges and violent moves both up and down.  We could see a surprising rally as many traders and managers want to buy this market on Monday.

Winners:

Losers:

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