8/3/23 The Downgrade That Killed The Market?


Stocks tumbled on Wednesday.

The selloff came in the wake of the downgrade of the US gov’t credit rating. Fitch Rating puts it at AA+, down from AAA.

Image from CBS News

The indexes closed the day deep in the red…

  • Dow Jones -1.0%
  • Nasdaq -2.2% 
  • S&P 500 -1.4%
  • Russell 2000 -1.4%

Headlines blamed the selloff on the downgrade. But the market had no initial reaction to the news.

Stocks started falling about 12 hours after news of the downgrade broke. 

We’re with JPMorgan’s (JPM) CEO on this … It doesn’t matter.

Investors already knew that things are messy. The downgrade offered no new information to price in.

Sector Round Up

Despite the broad selling, 2 of the 11 sectors ended Wednesday’s session in the green.

The winners…

  • Consumer Staples (XLP) +0.4%
  • Healthcare (XLV) +0.1%

The risk-on sectors finished last…

  • Consumer Discretionary (XLY) -1.8%
  • Communications (XLC) -1.9%
  • Technology (XLK) -2.5%


The VIX is suggesting that some fear has returned to the market…

VIX Daily Candles – Chart by thinkorswim

The fear gauge closed above 16 for the first time since May.

The market was long overdue for some selling. We’ll be watching the overhead levels of 18 and 20. If the VIX breaks higher, the selloff can intensify. 

But if it holds inside the marked range, expect sideways movement to close out the summer.

Your latest readout…


We are in wait-and-see mode.

The week has two trading days remaining. And the first big news item of the month, the July Jobs Report, is about 24 hours away.

Trade safely.


*Low Float
^Open Position

*CLEU support at $1.80
EYPT support at $12
MNMD support at $4.20
EH support at $20
^OSTK support at $35
APLT resistance at $2
NRDY support at $4.50, resistance at $5
GDRX on watch
MVST support at $2.50

Secondary watchlist—float 100+ million

CAVA on watch
^RGTI support at $2.25
MKFG resistance at $2
^IONQ support at $18
AKBA support at $1.60
BGC support at $5
NKLA support at $3
^PLTR support at $18

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