S&P issues a negative outlook on the US debt rating

Fundamental, Techincal or global investors' mindset?

From East to West,
Japan - earthquake, tsunami and nuclear crisis,
Europe - PIIGS and now
US.

I stress again and again, markets are extremely volatile. The consolation is that despite the volatility being higher, the trend is upward sloping. Caution will be noted, if techically, the support is broken!

US - The latest being Standard & Poor's, (becomes the first major credit rating agency) to issue a negative outlook on the US debt rating, while affirming its AAA rating. (The USD Impact was less straight forward).

If we get down to a point where the U.S. has its debt downgraded, the deflationary effects will be felt globally, A lot of credit is priced off U.S. denominated debt and those effects will be felt around the world.

The news bore particular significance when S&P said there is a 1/3 chance of a credit downgrade in the US long term trading within 2 years. The news immediately triggered sell orders in the USDX.

So the MAIN QUESTION BECOMES, will the USD extend last weeks selloff on the S&P news (the USD actually strengthen!, ironic it may sound)?, OR, will it continue to stabilize following the accumulated selloff in US equities and US treasury bonds on the risk aversion play?

The answer to that question is anybody's guess. In other words, the direction the herd is going.

While risk aversion is at play, commodity currencies weaken as a result of unwinding of carry trades. The carry trade currencies - CHF, JPY and USD strengthen!

Gold surge to a new lifetime high of USD 1,497.60 while Silver is at 43.54! This would continue until QE2 is withdrawn. Meanwhile, Crude Oil is nuetral.

I suspect, the Asian markets will follow through, Tuesday morning. From past experience, a similar event lasted 1-3 days.

What would i be looking for?
Improved investor sentiment, for e.g.  from a better US ciorporate earnings season, more M&A or response from US spokesman on improved debt situation.