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DETROIT COLLAPSING ON THE MARKET

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Despite threats of a downgrade to the credit rating in the US, markets headed higher. In fact, stock markets in the US broke new records and look to continue this trend today. Things were helped along by Bernanke’s reiterated comments, made originally on Wednesday, in addition to economic data about the jobs market. Binary options traders were probably more focused on the dramatic events that unfolded in America’s core as Detroit, the Motor City and cradle of American auto-workers for decades, has declared bankruptcy.

 

 

Binary options traders watched the events of the develop and probably had a hard time making heads and tails of it all. After all, it certainly seems that the bad news outweighs most of the good. If the credit agencies downgrade US credit, everything takes a hit. But that didn’t happen to be honest, so apparently the threat alone just isn’t enough to make markets overly jittery.

 

 

In addition to this news, which was taken rather well, the news that Detroit has gone belly up is nothing really new. It’s been years in the making and markets were well aware of the magnitude of the problems in Michigan’s biggest city. Things are just likely to go from bad to worse now for the city that made America go “vroom”. It’s simply not that city any longer and if creditors have their way, it will likely be a desert by the end of the day. But that’s not going to happen either. This is going to be a an ugly and long legal battle and as such, again, markets didn’t pay much mind to it all.

 

 

What were the issues that paved the way to new records? Ben Bernanke reiterated his calming words while testifying yesterday. He originally stated that the tapering off of the quantitative easing program would be done with flexibility. Specifically, he said that nothing was or would be set in stone and this tone of accommodative monetary policy is really exactly what the markets wanted to hear.

 

 

Add to this a great Initial Jobless Claims Report and you have the makings of a great day, which is really what it was. But looking forward at the day ahead, things might take a turn. For starters, this whole Detroit thing only exploded after US markets closed up for the day. So although everyone knew that Detroit was a complete and utter disaster, bankruptcy deserves a reaction by the markets and a reaction the markets will see today.

 

 

Stock index futures are already heading lower and with no other news slated for the day, it seems that this Detroit thing will leave a mark on the indices. Expect some serious volatility at market open. Thereafter, things might take a calmer tone. Note too that liquidity and volume might be very low today, which is a relative norm in the summer months as brokers and investors head out of the markets for long weekends.

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
Adam Stone
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