S&P Credit Rating Cut on United States Initial Reactions

By Lawrence

Initial reactions to the rating cut is exactly as predicted – target evaluation changes across the stock market indices, bonds, etc. by famous brokerage firms.

The all too normal reactions from the Fed and G8, G20 officials also happened.

Federal Reserve has pre-announced its emergency meeting on Tuesday which can happen much earlier if we see limit down on the index futures tonight.

ECB, G20 officials announced meetings, calls, etc. to discuss potential measures to deal with the rating cut impacts over this weekend.

Notable funny comments from the public or rookie traders across the internet includes “it is all priced in so big rally on Monday”, etc.

I think I have to make it very clear – the rating cut is not priced in.

The very survival of the 3 credit rating agencies depends on their licenses given by the United States government in rating the corporate debts, etc. The moment their licenses are revoked, they will have to shut down their businesses.

Giving credit rating to the United States, is like somone holding a gun pointed to your head telling you to answer the question “Am I handsome?”

Saudi stock market down 5% on Saturday.

Israel stock market halted after 6% drop at open on Sunday.

It makes no sense to do any long term price projections at this point until we see how G20, ECB, Fed, etc. reactions to this tonight to Monday.

There will be ample trading opportunities ahead this week but nothing beyond quick intraday trades until after the dust has settled.

There is no shame to not put on any trade in the coming week. It is not normal market condition and there is no point to force a trade that has less than reasonable risk reward prospect.

Read also Implications and Direct Impacts on S&P Rating Cut on United States


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