Monday, September 13, 2010

Ripe for a Short

Today the SPX rallied and finished up 1.15% to 1122.29 above the 200 Day Simple Moving Average. The rally was in large part driven by 'robust' Industrial Production and domestic demand data released by China over the weekend. The Energy and Materials sectors led the SPX higher today. WTI Oil was up over 1% on the session to $77.20. Copper and Natural Gas also benefitted from the rally.

GSCI Commodity Index

Last night Basel III capital requirements released and were essentially a practical joke on banks. Banks will be required to maintain a Tier 1 Capital ratio of 4.5% (common equity after deductions) and a buffer of 2.0% by 2013. Keep in mind, Lehman had a Tier 1 Capital ratio of 11% when the investment bank imploded. So much for stringent regulation. Needless to say, financials rallied hard on the session.

SPX 1 Year Daily


Where do equities go from here? 1131 is the next key level of resistance on the SPX. Tomorrow U.S. retail sales release at 08:30 and disappointing numbers could be the impetus to drive equities lower. In addition, we are approaching overbought technical levels on the RSI (62 on the 1 year daily). In addition, the VIX traded down around 21 today. The volatility index is ripe for a pop up to 23 to 24 over the next few sessions. Thus, now may be the time to get get short the SPX.

Sports: Jets vs. Ravens tonight. Gang Green will be victorious.

Patrick M. Ambrus
Twitter: AnalyzeCapital

Sources:, FT Alphaville,,

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