Wall Street slips on reports of euro-zone downgrades – RSI picks IJS, IWB & KRE

Stocks dropped on Friday, snapping a four-day winning streak, after news reports that Standard & Poor's would downgrade credit ratings on several euro-zone countries.

The ratings agency was reportedly set to downgrade euro-zone countries, including France and Austria, but leave the ratings of Germany and the Netherlands unchanged. French Finance Minister Francois Baroin said the country has been notified of a one-notch cut.

After the market's close, S&P followed through with downgrades of France and Austria as well as seven other members of the 17-nation euro zone bloc.

The Dow Jones industrial average .DJI dropped 48.96 points, or 0.39 percent, to 12,422.06 at the close. The Standard & Poor's 500 Index .SPX lost 6.41 points, or 0.49 percent, to 1,289.09. The Nasdaq Composite Index .IXIC fell 14.03 points, or 0.51 percent, to 2,710.67.

For the week, the Dow rose 0.5 percent, while the S&P 500 advanced 0.9 percent, and the Nasdaq gained 1.4 percent. (commentary & photo courtesy of Reuters)

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Although the market was down 1/2% today the RSI portfolio managed a small gain, demonstrating the opposing forces of the risk-on balancing out the the risk-off positions. I guess you might say the RSI portfolio was perfectly hedged today.

After the close the RSI system gave four new risk-on picks:

• Buy 102 shares iShares S&P SmallCap 600 Values (IJS); Stop = -$9.77 Target = +$29.32 Volatility = 5.38%
• Buy 155 shares iShares Russell 1000 (IWB); Stop = -$6.42 Target = +$19.25 Volatility = 3.60%
• Buy 241 shares SPDR S&P Regional Banking ETF (KRE); Stop = -$4.15 Target = +$12.44 Volatility = 6.33%

I’ll make some quick comments about the charts below.

IJS looks great but I would wait to see where it is headed from here. The same comment applies to IWB. KRE has especially strong accumulation and I would buy it here if I wanted to add a risk-on position. It was also picked last October.

Have a great weekend. Remember the US markets will be closed next Monday.