B1 at 2195 in the SPX held on Mon, but it has since slipped, so fingers-crossed, job done.
Nb. Our comment on 03/20/20
We are going to start the April commentary with a reminder of what we said at the end of our last one; “Virus aside, any market that takes on the dynamic delta that occurs when it interacts with the DR ratio, in this case futures buying, is a market that has that many futures to sell to meet that demand, so worth bearing this in mind.
At the end of the day, if the market is happy to supply enough to meet this naturally occurring demand, then it will not have any effect, which will only come when that demand outstrips the supply”.
The point being, is that it doesn’t matter how much dynamic delta is generated until this is greater than the markets appetite.
And currently this market is ravenous, and fuelled by extreme emotion, so worth remembering.
However, there are a few points to take away, the first being that the zone is rather bizarrely, actually higher than March’s was.
Secondly, the Y ratio bandwidth is now a ridiculous 490-points.
Thirdly, we are now in an intermediary expiry, so everything, under normal circumstances, should quieten down.
Finally, and again, under normal conditions, the market should become more sensitive to lower ratios. As in we mentioned that in a triple it was not unknown for it to trade between the B ratios, well, in an intermediary, this normally changes to mid R ratios.
Actually, there is one other point, which is that this market is now as vulnerable to a crash-up as it once was to a downward correction, as bizarre as that may seem.
And, although we haven’t mentioned it for a while, we do strongly feel that the regulators should have been aware of how overstretched this market had become, and should have taken pre-emptive action, as they had at least two months warning to do something, if only a warning, so shame on them.
Range: 2345 to 2595
Nb. Our comment for 03/26/20
Well we couldn’t have published, on Sat 21st March, our last comment (see above) at a more opportune time, as the very next trading day, Monday 23rd saw the SPX hit an intraday low of 2191.86.
The fact it had closed the previous Friday at 2304.92, meant that B1 was the next line of ratio support.
And, significantly, it was B1.
Let us hope it has done the trick, as a quick glance at the table above, will show you that B1 has now slipped to 2070, which is really not good news, unless you’re a bear that is.
However, the main takeaway from this bounce for us, is that rationality has returned.
This is no minor facet, as last expiry there was no rhyme or reason, just panic, whereas now, it seems that the market is once again taking heed of the dynamic delta.
And the amount of futures buying produced by the dynamic delta of ratio the magnitude of B1, should really stop an express train, unless, like last trip, it is runaway mode.
Anyway, the market is now in a massive R2 ratio bandwidth, that stretches for 365-points, so volatility should remain, but hopefully this level of dynamic delta will take everything down a notch, or two.
Although, do not get complacent, as not only are the ratios falling below the zone, they haven’t really increased above it.
And, pointedly, the zone it self has not moved at all, and remains entrenched up there in the ozone layer.
Considering the dearth of ratio still surrounding it, then it should really be dropping down to meet the market, and its failure to do so, means that everything is not quite back to normal, which is a grave concern.