Coming into today, it was Goldman Sachs on Capital Hill that was the headline news in the financial markets today. It was still a big story, but it all changed when S&P downgraded the debt rating of Greece to junk and Portugal to -A. The US & Europe stock markets collapsed (DOW -213.04, S&P -28.34), currency traders bought the US dollar & Japanese Yen, gold surged (+$25 to $1172.00), the VIX shot up (+5.30 to 22.81), crude fell (-$1.76 to $82.44). It was truly a flight to safety.
Last week, I pointed out we made a move to new highs, which needed confirming, or it would be a whipsaw. It formed a whipsaw, and violated the last trendline I have been highlighting it could violate. It closed a hair away from the 23.6% Fibonacci level. The next major support I am personally looking at is at 1147, as it was the high of the previous up trend that ended in January, but the 23.6% is an area not to be ignored.
Since it was debt, and finances that caused the downturn today, I thought I would take a look at what the XLF ETF did compared to the S&P intraday today. By no surprise, but confirming, it correlated virtually perfectly all day. Only an observation as to what moved the market.
The VIX is showing what could be an interesting picture. It surged when the news out of Europe broke, +5.30 to 22.81 (31%). The VIX hit a resistance point today at 23.20, which also happens to be at a resistance point for an upper trendline. If it violates both tomorrow, and the next day, fear will be returning to the financial markets for the immediate term. I have to give credit to my friend, Ashraf Laidi, Chief Market Strategist at CMC Markets in London, who shared with his blog readers, for noticing the VIX went through it’s 55, 100, and 200 day MA today.