Nb. Our comment from the 10/28/20
It possibly doesn’t feel like it, but rest assured, those that don’t like volatility should be exceedingly pleased this market remains as sensitive as it is, and as we mentioned above.
The first point to note, is that we have indeed seen the zone move up, and it now resides at 3395-3405.
Again, those fearful of volatility should be very pleased with this, as despite the fact it has been a bit scary coming back down to this level, the fact the market hasn’t gone past it, is a good measure of its sensitivity.
It is also a good measure, that is at least for now, that this market is clinging on to bullish territory.
Having just said that, this now puts the spotlight firmly on yesterday’s close, as it didn’t quite make it back to its zone, meaning it is going to be a rather significant battle between the bulls and the bears today, despite their best efforts.
The other good news, is although both ratio levels have firmed either side of the zone, above it is akin to a tentative creep, whilst below, it is more like a purposeful march.
However, the problem, as it has been from the very start, has been the ginormous Y ratio bandwidth.
Admittedly, it has shrunk considerably, from 535 to 410-points, but this is still huge.
And, if you hang your hat on the market’s sensitivity remaining, then currently Y2 below the zone is at 3245, and above it at 3515.
In either scenario, this represents a serious move, which brings us neatly back round to our opening paragraph, as for those that don’t like, or want, volatility, then best keep those fingers crossed that the zone continues to exert, for as long as it already has, its unlikely and surprising influence.
Don’t forget the last expiry, which went down to Y2 before reversing all the way back up to its R ratios, in a 10% or 350-point recovery. Nb. The purists would note if you caught the down leg at the start, that adds another 3% on to the 4-week total round-trip ride. Nice.
Range: 3245 to 3395
Type: On balance definitely bearish
Nb. Our comment for 11/04/20
Well we sincerely hope that you did read our last note, premarket on the Wednesday 28th October, as the market has pretty much played out exactly as we guessed.
In fact, this is really the reason why we always repeat our previous comment, as it is so much easier doing this than using up space having to reference it.
The real battleground was last Friday, and despite the intraday low coming in at 3233.94, we actually lost count of how many times the SPX bounced off 3245, or just below it, meaning this was the real, or pragmatic, intraday low.
Will this expiry play out exactly the same way as October’s?
Nobody really knows, and, of course, there is an election issue to consider this trip.
We would like to think so, but we have noticed that the zone could easily reverse its recent gain, and that is not good.
Unfortunately, the table above is slightly misleading in this respect, as it shows R1 slipping 25-points, but R2 gaining 15.
The fact is actually different, as R1 has been marginally lower, and not recovered much, whereas R2 actually dropped to 3045, and has recovered up to and beyond its previously published level.
Above the zone it is more accurate, as in the last week the ratios have continued in one direction throughout.
However, the overriding issue, has always been the gargantuan Y ratio bandwidth, which has only slightly improved but is still 395-points wide.
The problem, for us at least, is that if the zone flips back to 3345-3355, or even worse.
But, as there is still two and a half weeks to go, and, importantly, activity has kicked in, we suspect that this expiry is only just getting going.
Don’t forget, next up is Thanksgiving, but until the ratios and zone, become a bit clearer in what way they are going, we have to say we are pretty much back to square one this expiry, especially as the market is now right between the original zone and the new one.
But whichever way it decides, it won’t be gentle.
Range: 3245 to 3395
Activity: Very good
Type: On balance bullish