The market’s rally attempt just ran into a wall.
Yesterday, the S&P 500 pushed right up into the 38.2% retracement level from the recent decline — and today, it backed off hard.
In case you missed it, I called out the 38.2% retracement level as significant during yesterday’s Market Radar session.
While yesterday, it looked like momentum might carry the market higher, clearly the rally stalled out fast.
Seems a warning from Moody’s lit a fire under the sellers...
Moody’s Just Raised a Red Flag
Just so you know, Moody’s is one of the big credit rating outfits — they rate the financial strength of countries, and when they issue a warning about the U.S., markets sit up and take notice.
And that’s exactly what they did today.
Moody’s warned that the U.S. is losing fiscal strength because of rising deficits and ballooning debt. That kind of talk spooks the market — and you could see it plain as day.
S&P futures opened around 5831 and dropped nearly 90 points — over 1.5% before recovering slightly towards the end of the day.
That little bounce at the end? Don’t read too much into it. It’s a wiggle, not a recovery.
Why This Matters
Markets don’t like surprises — and while everyone knows the national debt is large, having a major ratings agency like Moody’s formally question U.S. fiscal strength carries weight.
Pair that with:
- A fragile market trying to rebound
- The Fed’s recent comments on slowing growth
- And a critical PCE inflation report due out on Friday…
And you’ve got a recipe for more volatility.
What I’m Watching
For any kind of meaningful recovery, we need to:
- Take out yesterday’s high — the level where the rally attempt failed
- See buyers come in with conviction
- Get through Friday’s PCE data without more bad surprises
Until then, this market remains vulnerable.
Stay sharp,
—Geof Smith
P.S.Speaking of U.S. fiscal weakness… One recession indicator I’ve had my eye on has just started flashed red! But I’m not panicking — because a recession could send this asset through the roof!
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