The S&P fell 1.5% Monday as ratings agencies expressed skepticism about the effectiveness of the new European pact agreed to in principle last week. The new fiscal requirements are not viewed as a game-changer by Fitch, Moody's and S&P, and their commentary cut risk appetite over the weekend. Stocks did surge into the close, however, to close off the lows.
The market continues to trade in a manic fashion. Last Thursday, indices resolved a steep mini-uptrend to the downside, but reclaimed all 2% of those losses the following day. Today, stocks fell right back down to break Thursday's low before paring losses into the close. Traders looking for bigger moves are being spun around, and most are now choosing to cut overnight risk and focus on intraday set-ups. In this market, it seems you need to have a very long-term or ultra-short term time horizon to prevent from being shaken out of trades.
Will Santa Clause show up this year to rally the market, or has Europe just been too naughty? Seasonal trends and early indications from this shopping season suggest a possible run into year-end, but you can't always blindly trust the past, especially as we find ourselves in unprecedented times. Stay on your toes, and do not succumb to the pitfalls of the herd.
*DISCLOSURES: Scott Redler is long AAPL, SPY.
