Moody's DownGrade of France AAA Aa1

Coming across the wires in After Hours, Moody's downgrades France a notch:

• MOODY'S DOWNGRADES FRANCE'S GOVT BOND RATING TO Aa1 FROM Aaa
   
• FRANCE MAINTAINS NEGATIVE OUTLOOK BY MOODY'S

The initial reaction in the EUR/USD is probably as to be expected, but looks worse in the EUR/USD than it does in ES at the moment.

 This is the NY 9:30-4 pm regular hours trade at the green and red arrows...

 Here's a close look at the knee-jerk reaction in the Euro as Moody's announced the downgrade...

 Here's ES during the regular NY hours, as you can see it has held up much better thus far than the Euro/USD.

A closer look at ES since the 4 p.m. close, ES was closed as usual in after hours when Moody's made the announcement, many expected ES to re-open much lower.

NQ/NASDAQ futures are holding pretty well also considering.

With the markets closed, the only real 3C indication we can get outside of the futures is EUR/USD which has been pretty reliable so this is a bit surprising...

This is actually a positive divergence in the FX pair.

While some are making a big deal of the downgrade, like one website that has accurately pointed out the last 2 times Goldman has come out with a market opinion, the market has done the opposite, the first time was when they said it was going higher during Q1 of 2012, the same time we were shorting and the market never went a percent higher from the GS endorsement. The next time Goldman said the market had a lot more to go on the downside, shortly thereafter the June 4 lows were put in and the market rallied from there, however this time when Goldman is giving out free advice to all of the same people they fleece everyday, this website has decided to give GS some credibility!

Like I mentioned many times today, even with an undeniable move up, Wall Street will never make it easy whether you are short or long, they make their money keeping you guessing and on the wrong side of the trade.

Before the Moody's news I was looking at charts, what I saw would make me think we would see some downside maybe early tomorrow, however the longer term charts have actually improved. A pullback with the longer chart continuing to improve would put in an amazingly strong divergence above where we already are.

I'd like to say it's surprising given the move today, but this is what we've been seeing clear signs of, the longer term charts whether the Q's, the IWM, the SPY or the DIA, have all improved today, sending some leading positive divergences to the 30 and 60 min charts! With a move like today's, most of the time we'd expect to see distribution in to a move like that, not the case, at least not where it counts.

If we can get some downside/pullback, I'd be watching very closely for another opportunity to open a call position in something like AAPL, maybe GOOG, or several others. Making a 100+% gain in 1 day sits well with me, especially if the big picture actually improves on a pullback/consolidation (this wouldn't be an issue I'd be bringing up if the longer term charts weren't so much stronger today despite a move up which they could have easily sold in to in large size.

As far as leading indicators, the other thing I was watching for today as wether they confirmed the SPX move or diverged negatively, in many cases they actually diverged positively, meaning they performed better (on a relative basis) than the market itself!

As far as how these indicators relate to tonight's events, these downgrades usually make their way in to the market somewhere, the fact leading indicators held up either means the market wasn't aware or it really doesn't care as much as the initial move in the EUR/USD would make you think.

In any case, it's certainly an interesting event after a day like today.

Another notable performer today was the TICK Index, as mentioned earlier it barely moved below 600 area more than once today, most of the low side range was -500 which is very mild, whereas on the upside we saw nearly +1800 (almost unheard of) with a strong close in the  +1400 area.

We can speculate all we want, but the market is obviously the final arbitrator, the advantages in the market are solidly built in and have been for sometime with huge improvement the last 3 days of last week. So does a downgrade of France that is hardly a surprise to anyone throw off the bigger picture? I lean strongly toward, "NO", in fact I think this could open some great opportunities to get in to positions like Friday's AAPL calls closed today for a 115+% gain.

I'll keep an eye on the market overnight and let you know if there are any interesting developments.