Friday, December 16, 2011

About Fitch ratings, indecision and volatility

It looked like small caps and tech wanted to go up, and they broke yesterday's highs. Unfortunately S&P and Dow-stocks didn't agree and down we went. We're basically back near Wednesday's levels, except for small caps that are performing better than other major indices. The S&P tried to bounce of it's lows, but what was support yesterday, became resistance this afternoon.

What certainly was remarkable today: we bounced of the lows on the news that Fitch would put ratings of Belgium, Spain, Italy, Cyprus, Slovenia and Ireland on creditwatch negative. The news even seemed to cause a spike up... Contrarian? Of were we just too oversold and was this all a silly coincidence? Or maybe the news of Standard and Poor's a few weeks ago was already in the charts (the one when S&P claimed to put the whole EU-zone on creditwatch negative) and this Fitch news sounded better (less negative), hence the spike up.

Another important note. Volatility seems lower lately, confirmed by a lower VIX. Which doesn't mean we can't go down from here... But the moves seem less eratic.

5m-chart SPY in the trade section below.

Daily charts DIA, SPY, QQQ and IWM:

Gold, silver and copper finally bounced some, up 1.7% to 2.7%. Meanwhile oil is trading about breakeven. The euro keeps hovering near the 1.30-level.

Two trades in SPY today. I bought the morning pullback which turned out to be a lower high... Out for a small loss. The other trade was catching the bottom right after lunch (unfortunately I wasn't around to trade the breakdown in between my 2 trades).

Trade 1: long 122.74, out 122.63.
Trade 2: long 121.48, out 121.86.
One is a loss of 11 cents, the other a gain of 36 cents. But my position size in the second trade was even much smaller than the one in the first trade, just enough to compensate the earlier loss.

5m-chart SPY:

I would like to finish the week with another article:
Year to Date Stock Market Returns by Country
This clearly states that 2011 won't go in the history books as a good year for stocks. Or has Santa still got another trick up his sleeves? (I'm guessing he doesn't)

Have a great weekend!

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