The market has handled the French downgrade fairly predictably. The market pushed toward the 14SMA, as highlighted in the previous post, and is now chilling.
In the short-term, we may see two major developments.
1. China eases. With their FX reserves declining, and taming of inflation, we may see something out of China very soon. This should be very positive for equity markets, obviously.
2. Greece involuntary restructuring. This will trigger the CDS', and the US capital market banks should take a hit from this. But the hit should be temporary, and an opportunity.
Basically, there is a potential short-term hick-up, but overall things still look okay.
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