Nb. Our comment from the 05/26/21
We have to start this comment on the June expiry with a few final words on the last one, and as the market closed at 4159.12 on the Thursday immediately prior to expiry, and our zone was 4145-4155, we are taking that as a hit.
OK, so the EDSP was a bit higher, but worth noting the actual close on Friday was 4155.86.
Getting back to June, and the obvious stuff first, being that this is a “biggie”, triple or quadruple to the US, and is a more conventional 4-week trip.
Now, the reason why we harken back to the May expiry, is because although it appeared rather volatile, it was nothing compared to what it could have done.
Back then the respective Y ratio bandwidths, although they did narrow at the end, were on average about 260 and 480-points.
So, looking at June, the Y1 ratio bandwidth is today 310-points, and the overall Y ratio bandwidth is 410-points.
Absolutely remarkable, and in the days of yore, basically BC (Before Covid), in a biggie you would normally struggle to find any Y ratio at all, let alone more than in an intermediary.
The main point of this is that in a lacklustre intermediary you might get away with it, but due to the sheer volumes in a biggie, then this is highly unlikely.
Having just said that, the intraday high on Monday was 4209.52, and 4213.42 yesterday, and on both days Y2 was at 4205, and so if the market is struggling at just this minimal level of ratio, then it is fair to say that the sensitivity is still here, or at least for the time being.
As we are running out of space, one final point is that the zone is looking very likely to move to at least 4120-4130, but it is still the vast expanse of Y ratio that should be concentrating your thoughts.
Range: 4005 to 4205 / 4255
Type: On balance only just bearish
Nb. Our comment for 06/02/21
What an absolutely epic battle the SPX has been having with Y2, then at 4205.
Virtually daily the incursions were getting deeper and deeper, and twice, they even tried a gap up at the opening, trying to leapfrog this level, before yet again closing below it.
But, at last, it has today conceded ground, and with our honest respect, as it put up a mighty battle for what is essentially a minimal ratio level.
We haven’t mentioned this in a while, but the entire reason for even having the Y ratios, is because they are so minimal that they are a very good and accurate first indication of any trend, or even an acceleration or relaxation of said.
However, because of Y2’s stubbornness, what we have witnessed is a build up of the ratios below the zone.
Appreciated, we have said for a while now that we fully expect the zone to move, but with this release of pressure, we think it will start to move up very quickly now.
So much so, where before we were looking at 4120-4130, now we would not be surprised to see it settle around the 4200 level.
This indeed could be a game-changer, apart from the obvious fact that Y2 is now 4230, but more along the lines of the ratios overall above the zone being in retreat.
Obviously, it is making extremely heavy weather of it, after all we are talking about just Y2, but the point is that the way forward is now open.
However, having just said that, please also respect the fact that although the war with Y2 at 4205 has been won, the ratios are firming up below the zone, which itself is very likely to move up, considerably too, but there is still a vast amount of Y1 ratio below this market.
In fact, Y1 currently goes down to 3945, which is a sphincter-clenching 260-points away, so just don’t kid yourself that this is a risk-free market.
Range: 4005 to 4230
Type: On balance bearish