Home > Getting Global, Short-Term Trader > Spain’s Downgrade Dismissed – Good Sign For Global Risk Assets

Spain’s Downgrade Dismissed – Good Sign For Global Risk Assets

On Friday Fitch Ratings gave Spain its second downgrade in a month. This headline caused a bit of a tizzy in U.S. equities as we headed into the long weekend. However, today world markets largely shrugged it off, which is not to be unexpected if indeed the sellers have reached a point of saturation. By this I mean the news wasn't a shocker and was already priced into the recent decline.

The panic stage of the recent decline looks to be in the rear view mirror which should allow global risk assets to hold their recent lows and begin working off oversold conditions. Longer-term sentiment guides such as the II (Investor's Intelligence) and AAII (American Association of Individual Investors) polls did not reach levels of pessimism expected at a significant bottom, but breadth indicators did tank to levels associated with multi-week rallies and in some cases certain guides registered unprecedented readings, such as the McClellan Oscillator. 

In the S&P 500 futures I am looking for the recovery to take price up to a minimum of 1120 with a strong possibility of heading into the mid 1140's before having to reassess the situation. Never the less, I do expect volatility to remain elevated as this continues to be a trader's market. Should my views turn out to be overly optimistic and global markets begin unraveling again on the heel's of further Eurozone deterioration then I will be sure to make adjustments along the way.

As mentioned before, I am in the process of formulating a longer-term thesis as we progress into the heat of summer. I am about 30% of the way through finishing this thesis and will publish it as soon as it is completed. Stay tuned…….

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