That ugly beast above is the ANF (Abercrombie & Fitch) 10 day chart. Charts like this remind me why i try not to waste brain matter while "experts" make investment recommendations on retailers. Predicting retail sales and consumer trends is no easy business, and this type of chart makes me wonder why I would ever participate in such a hard to predict area when this kind of risk is on the table. I would rather try to focus on what I can know, and how best to put that knowledge to use. For instance, if new information on sovereign debt were to come to light from say, a rating agency, that might pique my interest. Fitch, the rating agency, not the retailer (though I am about as interested in what they have to say as I am in wearing A&F's clothes) can take credit for today's late day sell off. So why doesn't this get me intellectually curious to hear what they have to say? Because they are not saying anything new.
"Fitch's current outlook for the industry is stable, reflecting improved fundamentals at most banks combined with ratings lower than at pre-crisis levels. However, risks of a negative shock are rising and could alter this outlook,"
This causes the market to sell off?! Anyone with a 56k dial-up modem and a morsel of interest knows that the bond yields have done nothing but blow out. Italy 10 year over 7%, and the other peripherals spreads all widening is not news. I even commented to a friend this morning about how well the market seemed to be holding up given the news that was out. The morning note he had sent me had bullet points showing that Unicredit, the Italian bank was looking for ECB funding, followed by talks of growth concerns in Japan, and and the potential inability of Chinese developers to pay off loan interest. While we were lower, given what looked like important NEW news, I thought we held in pretty well. Then all of a sudden Fitch (where were the rating agencies pre- last financial crisis by the way?) warns of contagion if the Eurozone does not get its act together soon. I have to wonder if I started a rating agency, and came out with a statement on how cheaper labor in underdeveloped nations poses a risk to job growth in the United States, if the market would react the same way.
All negativity aside for a moment, it is hard not to pay attention to this news. Not because it is news, because, I repeat, it assuredly it is not. Rather, for some reason the markets seem to care. Maybe it was a convenient excuse to try to stop out some longs; but either way, the market cared. After the US rating was downgraded in August, what happened? We tanked (see August 5th graph), and there was nothing that was news then. It was simply a reiteration of known information by the big bad rating agencies. If human psychology hasn't changed, I see no reason to think this time should be any different. A nice short term dip is likely in the cards.
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