RBS: We're Shorting The S&P While Going Long Greek Debt

S&P Dshort March 4th

Photo: Doug Short

In this morning’s RBS Global Views newsletter, analyst Andy Chaytor details his plan to short the S&P 500 now that it’s hit the 1120 level.

Apparently it’s a bit of a technical trade:RBS: The S&P has rallied up to my target level at 1120 and taken me short. Unsurprisingly in the run up to Non-Farm Payrolls, it has not done a lot since there, but I am confident to get short at these levels. At this stage, I’m viewing it as a semi-tactical trade, so I would set a stop above 1150 and a target down at 1050. We shall now watch to see how it plays out in the next few weeks. The major issues to deal with being sovereign structural concerns and the data.

On the former it does feel like we are inching towards some kind of deal. This morning’s announcement of a new 10 year benchmark deal is a definite positive. You will hopefully have seen that a couple of days ago Harvinder Sian recommended getting long 2y Greek paper vs. Portugal. The trade has already moved 25bp, but has another 110bp to go to his target (not counting the monster positive carry) so still very much worth entering now. I really like this trade as I do think Greece can snap back from current levels, but bigger picture I will reiterate that Greece is not the only country with a worrying deficit, just the first in line to be challenged by the market.

So he’s, perhaps oddly, shorting the S&P while going long Greek debt. One of those will probably be right in most imaginable scenarios.

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