market folly

Today we're presenting commentary from Cazenove Capital's technical strategist Robin Griffiths. In an interview on CNBC a few weeks ago he said that we are approaching the best shorting opportunity of 2010. Given that last week we covered the bullish case for equities, we wanted to present the other side of the coin.

Technically speaking, Griffiths feels that April 2010 marked the "top" of the year-long rally that began in March 2009. As such, he is cautious, simply stating "do not put risk on." Ever since this top, the market has been in a downtrend and he feels the only way he would switch his stance is if the market blasts through the April 2010 high. He also points out that the next four months are typically the weakest of any in a year. He doesn't think that the market will break through its early August highs either (around current levels at 1125 on the S&P 500).

He feels the market will break the July low and can see a 10-15% fall. Specifically, he is targeting 940 on the S&P 500. If you were looking to trade around his comments, it would seem that shorting and placing a stop at the April 2010 high would mirror his take. Now, do keep in mind that it has been two weeks since he made this commentary. However, his stance is still relevant given that the market is sitting at levels that still sit within his parameters. It appears as though to the two main levels to watch on the S&P 500 are 1020 for possible support (July low) and 1220 for resistance (April high).

Embedded below is the video of Robin Griffiths' commentary at CNBC. Email readers will need to come to the site to watch the clip:



So, a bearish argument based on technical levels of support and resistance. For a completely converse look, last week we presented the bullish case for equities.