Nb. Our comment from the 10/26/20
As the title says, was that R1 or R2 that turned this index around, sending it sharply higher.
This was on Thursday 22nd, when the intraday low hit 5716.40, representing a drop of about 60-points.
The sharply higher bit came with the close of 5785.65, actually up 9.15 on the day, with it actually having peaked about 10-points above that.
However, our confusion comes with the manner the FTSE established its low, which on the vanilla O, H, L, C data is there for all to see.
But what this doesn’t show, and is a huge bugbear of ours, it that the open is always the same as the previous day’s close, which is not only bizarre, but misleading, and a fact that anyone with a brain, or experience of prices, knows can’t be true.
So, the open that day is officially 5775.50, but by our reckoning, which takes into account pre-market estimates and the opening price of the futures, the real open for the FTSE was in fact nearer to 5733.
Quite some difference.
More importantly, for us, that means the real open was below R1 at 5750 right from the very start.
Therefore, and such was the nature of the very abrupt volte-face, we believe it was the immediate onset of the dynamic delta futures buying released by R1 that was the reason, although it did come tantalisingly close to R2.
We must also point out, that the FTSE also spent about 45 minutes attacking the bottom boundary of its zone, 5950, on Monday 19th, so it has already covered the breadth of our trading range.
But this also means, the market now knows where the futures buying and selling is, so the next engagement will be by choice.
Range: 5750 to 5950
Type: On balance bullish
Nb. Our comment on 11/02/20
Well last week had it all in the FTSE, and perhaps we should have calculated the ratios during it, as the changes in the above ratio table are significant, and now we will never know when they occurred.
We left this index with a decent cushion above R1 at 5750, with R2 at 5700 backing it up.
Monday was OK, even hinting at getting back to its zone, but Tuesday was another matter entirely.
It had a solid test of R1 with the intraday low (at that time) of 5755.96, rallied back above 5800, but then, and don’t forget Wall St. had lost 650.19 that Mon, so in this context the rally was impressive, it then went back for strike 3 at R1.
This time 5750 didn’t hold out, no real surprise, but at least it held above R2.
Then, exactly the same as the week before, this madness that the open is the previous day’s close, meant that officially the market opened at 5728.99, but in reality, it was more like 5662.
So, the next ratio level was R3 at 5600, which the market hit very early on, then rallied back up to 5655, followed by a steady decline back down to 5600, when the Street again cast its black shadow, Wednesday being the day it lost 943.24.
Actually, it proved quite remarkable that the FTSE has even managed to stay in touch with 5600, considering, which held true for the remainder of the week too.
Furthermore, if the market was clear and transparent, and allowed to fall or rise towards the ratio levels, rather than leapfrogging them courtesy of the opening or closing auction, then would these falls have been so severe?
Probably not we believe, as R2 would have provided a decent support level had it been allowed to, and therefore might have helped alleviate the 100-points between it and R3, rather than see it freefall in one day, down to this, the next support level.
Although, this perhaps may be by design, who knows?
Nevertheless, the ratio levels have now changed, and the FTSE is now stuck in its R2 ratio bandwidth.
The top of this is now 5700, while the bottom is 5450.
5600 should now only be influential by way of remembrance of what it once was.
But, moving around in R2 ratio, should not be a comfortable experience, so, despite there being three weeks left, getting out of here should be the markets immediate goal.
In another significant change, above R2 it is now all Y ratio, which makes 5700 a very significant level.
And the way its going, this could easily drop to 5650.
The final significant change, is the zone, which has moved down, never good, to 5900-6000.
However, this could have happened anytime last week, so probably already discounted, and anyway, it does actually mean it is a slightly easier target to achieve for the expiry.
The problem is, that this market is now stuck in a bandwidth that is 250-points wide, with the only saving grace being, that the ratio above it are lower than those below it despite them all being R2.
The good news is, that if it can get above 5700 (potentially 5650) then it is plain sailing all the way back up to 6000.
Either way, it’s going to continue to be fascinating.
As a final dig, in Friday’s closing auction, the market hit a high of 5600, so, why, if this is the “official” close, does not the high (or low) in this period be counted as the “official” level for that day’s data? Shouldn’t be allowed to have it all ways we humbly suggest.
Range: 5450 to 5700