Obviously, the end of the March expiry was a train wreck, and because of this, the next expiry, April, just can’t adjust quickly enough.
This remains the case, as the table above shows a very unusual ratio configuration.
However, it does appear as if 5550-5650 will very probably be the next zone.
Which, if this is then the case, it is worth noting that the close on Thursday, 5815.73, would have been above it, as would have been Wednesday’s, at 5688.20.
Basically, it is just struggling to find a degree of normality, which it will just not do until the zone does actually change.
Then, and only then, can the ratios either side start adjusting into the more regular pattern.
However, if the zone does become 5550-5650, then we would expect to see R1 kick in at 5450 below it, and 5850 above it, but in the meantime, the above is what it is.
This would then still leave a 400-point Y ratio bandwidth, which would include the zone, but would give plenty of room for manoeuvre to this market.
It would be nice to see this market return to normal, not that it was acting normally prior to this, but past experience, specifically 2009 and 1987, suggest that it takes a good few months or expiries, for this to happen.
Although, this is more a London specific problem, as the US derivative markets “spin-on-a-dime” and practically adjust overnight, or at least in a matter of weeks, not months.
Range: 5450 to 5700
Type: On balance bearish
Nb. Our comment on 04/14/20
Strange how these things work out, but 5450 was the bottom of our trading range when we last looked, and here it is, now as the bottom of the new zone.
Truly and sincerely our apologies as we really should have looked at the FTSE since the 30th March, especially under the circumstances.
As you can see in the table above there have been huge changes, not unexpected of course, but now, we just don’t know when they happened.
But it is worth remembering what we said above, “However, if the zone does become 5550-5650, then we would expect to see R1 kick in at 5450 below it, and 5850 above it, but in the meantime, the above is what it is”, as the levels you see now were all in the picture back then.
Just not quite how we predicted, but then again, in these markets, and especially as it has been two weeks in them, then we are more than happy with this, ecstatic really.
The most interesting aspect, for us at least, is the fact this market is back above its zone, as that means it is back in bullish territory, and who would have thought that, even a few days ago.
Talking of which, this expiry has just 4 days to run, so for those of you unfamiliar with this analysis, this is now the rollover.
Boy, it would be quite something, considering all that has happened, if this index expired in its zone.
But, first things first, and it has R1 at 5850 to contend with, and how it reacts to this, will very probably tell us all we need to know about how this expiry will end its last few days.