Actually, the first thing we should
point out that back on the 24th R2 was at 2770, as seen in the table
above, but it was unchanged when we calculated the ratios in the SPX on the 28th,
and referenced in our comment on the DJX on the 29th.
This is very important, as yesterday’s
intraday low was 2766.06, but also it was the manner of this low that was
significant, as this was just a spike, whereas the market did hover around the
2770 level for quite a while.
Whilst, on this subject, it was a very
similar story for the DJX and their level at 25000.
Even more significant, is the fact that
R2 has receded to 2745, and interestingly this is the only ratio to move.
2770 will naturally turn into what we
refer to as a “step-up”, but hopefully, unless you are a bear of course, the
market will not need to test this level again, the job being done yesterday.
However, this is far from being a done
deal, and below the zone the market is in bear mode, and falling ratios are
bearish, but it is the first decent level of support this index has
encountered, so it might rejuvenate the bulls.
Having said that, it is worth noting
that yesterday this index gapped down at the open, starting at 2790.25, so
already significantly below R1 at 2795.
Of course, this now makes 2795 a hurdle,
so now a critical level.
Basically, now the front line between the
bulls and the bears.
Also, please be aware, above the zone, which is still 2845-2855, there is still acres of Y ratio, so if the bulls do regain control, they have an awful lot of space to express themselves in.
Range: 2745 to 2795
Type: On balance only just bearish
Nb. Our comment on 06/05/19
What another titanic battle with R2 for
the SPX again.
As we said, “Even more significant,
is the fact that R2 has receded to 2745” and “if thebulls do regain
control, they have an awful lot of space to express themselves in”, so we
sincerely hope you took note.
Between the SPX and the FTSE, we have
just witnessed two rather epic ratio inspired support battles, and the good
news is, there is still two more weeks of this expiry to go.
The new ratio table is above, and the
two aspects to note are that R1 below the zone has slipped to 2770, and R3 to
The fact that R2 hasn’t moved doesn’t
mean it is not weakened, just that it is now at the lower end of R2 rather than
the higher end.
Therefore, the ratios are obviously
continuing to weaken below the zone, which is bearish, with the saving grace
being that the zone itself hasn’t moved.
This, may not be the case for long,
unless the bulls really do establish a rally, as the weakness in the ratios
below the zone could now easily precipitate a move for it to 2820-2830.
More to the point, the longer the market
stays below its zone, the more likely that this could just be the first step.
At the end of the day, fantastic bounce
off R2, but it is still in the middle of an enormous Y ratio bandwidth, so
nothing resolved yet.
And, if anything, perhaps a sign of things to come, as 2% or 3% daily moves in these conditions are actually only to be expected.