The Dow is off almost 250 points and is falling fast after S&P changed their outlook on the U.S. debt situation to negative. They maintained their AAA rating on the U.S., but made it clear that things are deteriorating.
The reaction in the stock market to this news underscores two key truths:
1.) Valuations are obviously very rich, otherwise negative news would not elicit such a negative response in prices;
2.) The serious debt issues facing countries across the globe is not going away, even though investors seem to ignore the obvious.
I remain cautious; looking for opportunities to re-enter at lower valuations/lower levels on the S&P. Watch for the S&P 500 to challenge the 1,250 level shortly. If it hold, I will likely put a little cash back to work. If it cracks 1,250, I will look for lower levels before I risk my cash.
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