The Standard and Poors 500 index (SPX) was trading sideways earlier this week, but the downgrade of U.S. debt spooked traders and the market lost 2.3% this week, closing today at 4478, down 4 points or 0.5%. Trading volume continues to run at or below the 50-day moving average (dma).

The effects of the Fitch debt downgrade pushed VIX, the volatility index for the S&P 500 options, higher on Wednesday and Thursday, rising above 17% both days, but VIX opened and moved lower today, reaching 14.6% before spiking higher to close at 17.1%. Are we whistling in the dark?

I track the Russell 2000 index with the IWM ETF. IWM traded down with the rest of the market but with a smaller move lower. IWM closed at 194.2 today down 0.4 points or -0.2%. The weekly loss was 1.4%, less than SPX’s loss of 2.3%.

Similar to the S&P 500 index, the NASDAQ Composite index closed at 13,909, down 50 points today for a 0.3% loss. But NASDAQ had a tough week, losing 3.0%. The trading action yesterday and today seemed to show the index finding support just below 13,900 (today’s low at 13,898 and yesterday’s low at 13,881).

I find it interesting that the debt crisis of our country has been given little or no attention in the financial media. It is almost as though those stories are not allowed. The scary facts are that our debt to GDP ratio is approximately the same as Greece’s debt ratio was several years ago. Their solution required significant hardships for the Greek citizens, and also help from the European Union. But who is in a position to help the United States?
The downgrade of our debt only occurred two days ago, and the story is already fading. We are behaving like an addict, making excuses, and refusing to admit we have a problem.

The discussion that has replaced the debt crisis is whether the combination of inflation and Fed rate hikes will result in a “hard landing”, code for a painful recession. Unfortunately, our leadership in Washington largely consists of feckless people who have never had to run a business, pay the bills, and balance the books. It is becoming harder to kick the can down the road.

IBD moved their market assessment from Confirmed Uptrend to Uptrend Under Pressure on Wednesday. Be cautious about entering new positions. Cash is king.