Well, now I’m stumped. S&P and Moody’s downgraded the debt of GM and F to Junk status today. I guessed that would be the tipping point for the market to start discounting a recession, rather than just a slowdown. I expected the negative market scenarios to start playing out and for the market to begin waterfalling downward.
However, the market has reacted quite well to the news. Has the market already priced in the downgrade to Junk? Certainly the bonds have – they are already trading at over 10% yields. But I didn’t think the equity markets had. The market reaction this afternoon would argue that it had discounted the news arlready, as well. Secondly, perhaps GM and F don’t matter anymore – has the equity market written the companies off already?
So if you’re bearish you’re looking at the Bearish Bat that has formed on the S&P:
Chart Courtesy HarmonicTrader.com
If you’re bullish, you’re looking at the confirmation of the double bottom that we got with yesterday’s rally:
