Europe up for the day!

Good evening!

Today is a holiday in the United States as it is the festive of Martin Luther King Day. As a result of that, the US Stock Markets have remained closed all day. So all we have seen is trading in Asia as well as Europe.

Let’s recap what happened on Friday: the S&P rating agency downgraded most of Europe last week at its close in at least one full notch or more. Special attention goes to France for being the first country to lose its AAA rating in the Eurozone.

So, in view of this movement, what did we expect today? The normality is that the equity markets should have corrected a little bit and pulled down their value. INSTEAD, the opposite happened. The CAC40 has closed just short of a +1% for the day, the DAX with a good +1.23%, AEX Amsterdam +1.29%, BEL20 and IBEX35 have remained flat for the day.

Does this mean that we have to wait for America to wake up from their holiday and decide what to do with the European indexes or has the effect just worn off over the weekend? Does it mean that Moody’s is more balanced than S&P and the markets have understood that France is still a strong country inside Europe?

It will be an interesting day tomorrow to see what happens.

Many traders and investors are standing on the sidelines waiting to see what happens and go with the flow. We still believe that there will be a good rally this year in all equity markets. The only issue is to decide when to enter.

We firmly believe that by the end of 2012, all indexes will be relatively higher and those who are capable of trading with guts and courage as well as with the technicals will make good money this year.

Trade safely. Trade with discipline.

Stay tuned and have a great day!

-Amar.

The Bad judgement of the Rating Agencies!

So ... another powerful Friday with the downgrade from S&P of many European countries. France gets hit with a full notch. Rather than just the usual half a notch, the French get downgraded from AAA to AA. Austria bumped to AA+. Cyprus, Italy, Portugal, Spain also got hit by two notches.

The question is: what is happening with all the rating agencies? From the time they decided to downgrade the USA, and consequently the president of the S&P Mr Sharma conveniently resigned, they’ve attacked almost everything they have been able to.

One thing is for sure, and that is that the ratings of all these agencies have no more value for us. Zero! The more they lower the ratings of countries, banks, etc, the more they prove that they are wrong. At least in their timing.

Let us remember the time when the rating agencies approved of all the subprime mortgages and other toxic assets funds, granting a good view on them. Now, there is silence on that side.

Let´s follow a simple logic here: when the situation was really not that good, the rating agencies were giving a green signal (end of 2006 – 2007), and now that they have decided to red flag almost every financial entity and country in the world, shouldn’t we understand that things are actually going well or maybe turning around?.

It is true that Europe needs to get their act together. And so far they are working hard at it. Their bond auctions are going off not that bad. The Euro is a currency that needs to devalue a little bit and be under the level of 1.20 vs the USD, hence all this correction is healthy too. What we like the most is the timing of the rating agencies. At least this time they’ve waited for the beginning of the long weekend. This way, the markets can squirm off the negative effect by Tuesday.

Remember that Monday is Martin Luther King day and only GLOBEX and Europe will be operative.

See you Tuesday and have a great weekend.


-Amar.