It has been a long time since our last comment, 14 trading days to be precise.
The point being, that even with virtually 3-weeks gone, and an expiry in between, not a lot has changed.
Basically, back on the 8th July, in the July expiry, the market closed at 7549.27, which was right at the top end of our Y2 ratio bandwidth, which went from 7450 to 7550.
The FTSE then spent the next two weeks having a running battle with the R2 ratio that kicked in at 7550.
On the 22nd July we saw the start of the August expiry, and guess what.
In this expiry, the Y2 ratio bandwidth stretches from 7500 to 7550, which is where R2 resides again.
And, the coincidence doesn’t end there, as the market closed at 7549.06, essentially the same as three weeks ago.
Coincidence or not, but for us R2 has been the constant factor throughout.
Of course, last week was all about 7550 as well, or again the FTSE battling R2.
There is absolutely no doubt that this market wants to go better, it just has a lot of futures it has to absorb first, courtesy of the level of dynamic delta brought about by the R2 ratio.
The real aspect to be very aware of, is that the nearest R ratio going the other way is at 7350.
There is the zone in between of course, which will provide support, but with three weeks left on this expiry there is still ample opportunity for this market to experience a scare at some point.
Range: 7450 to 7550 or 7550 to 7600
Nb. Our comment on 08/05/19
When the R2 dam broke it certainly exploded, and the FTSE having been pent up and penned in for 4 entire weeks took full advantage.
Although, the official open on Monday 29th July was 7549.06, being Friday’s close, it was obvious to anyone with just a passing knowledge of markets, that it was in reality it was an awful lot higher.
The intraday high so far this expiry is 7727.49, which is a knee-jerk reaction, and sadly one that is quite common in 100 stock indices these days, as what with weightings being what they are, all it takes is one, or two, of the heavyweight sectors to go a bit ballistic and the market overall gets skewed.
But, above DR ratio and nearing B1, was just the proverbial accident waiting to happen, and those who were aware of the ratio levels should have, at the very least, bought some insurance, so as not to be caught out.
On Monday the intraday low was 7397.91, which makes this definitely strike one, the first test of the bottom boundary of the zone.
This makes 7400 of major importance, not just as a support level, but if the market closes below it then it is into bear territory, so the whole picture changes.
The good news, is that if it holds, then the upper boundary is the next target.
It all just depends on how much of a bloody nose the bulls have got.
If, the bottom boundary, doesn’t hold, and it’s only Y1 below there after all, then the next support is R1 at 7350.
With two weeks still to go in this expiry there is plenty of life left yet, and with these sorts of moves, it is more than capable of anything yet.