Category: Uncategorized

May 19th, 2020 by R1chard

 

 

Nb. Our comment from the 05/13/20

 

We did not publish a comment on the June expiry, only on the May one.

Which, for the record, settled at 2827.52, and, in the end, our zone had moved back down to 2845-2855.

Although, and as we said at the time, anywhere in the Y ratios would be fine.

And as it happened, the zone, which is zero, or no ratio at all, had gone from 2795-2805, up to 2895-2905, and then back down 2845-2855.

So, with the market finishing amid the range the zone was fluctuating in, which it couldn’t do unless the ratio levels were minimal, it better than we ever would have hoped to achieve at the start of this expiry.

 

 

 

Nb. Our comment for 05/19/20

 

We don’t think it is coincidence either, that as the June expiry zone remained throughout at 2795-2805, that the expiring May was pulled down back towards this level.

So, what about June, and, more importantly, what to expect.

Firstly, we have discounted Monday’s move, as we see this as just the direct result of June forcing the May expiry back down towards 2800’s, when it really wanted to be around the 2900’s.

Once this works its way out of the system, then there are a couple of formalities to point out.

One is that this is the second triple of 2020, and therefore prone to big moves.

Second, this is a five-week expiry, so a lot longer than usual.

Now, this is out of the way, looking at the overall level of ratio it is appalling, dire even, and especially so for a triple.

And, it’s far more than just a lack thereof, as it is the dispersal as much as anything, as there is hardly any increase going on as one moves away from the zone, in either direction.

For a triple, we should be seeing at least one, sometimes two, levels of B ratio.

However, what is more normal, is the lack of Y ratio below the zone, which used to be quite common in a triple.

However, this can’t be said for above the zone, where there is just over 200-points.

No prizes for guessing the path of least resistance for this market.

But, as triples used to, quite normally, travel between the high R, DR or even the B ratios, over the course of an expiry, there is really nothing here that should give it any undue cause for concern if it put its mind to it.

Basically, about 400-points either side of the zone should cover it, and whether or not your bullish or bearish, we personally don’t think this degree of potential range over a five-week period is a good thing.

Perhaps fundamental analysis will clear everything up, but we are not holding our breathe.

 

Range:            2805  to  3005         

Activity:          Poor 

Type:              Neutral

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May 13th, 2020 by R1chard

 

Nb. Our comment from the 05/06/20

 

Essentially, this index is just treading water, which is a good thing.

Especially in light of our comments above.

In the meantime, since we last commented, the market went back above 2900, but significantly seemed to struggle in the Y2 ratio.

Back on the 29th April don’t forget, Y2 started at 2905.

Today, it starts at 2955, and although we didn’t calculate the ratios between our comments, it seems remarkably coincidental that the intraday high in this period was 2954.86.

Whatever, the fact that Y2 is, or has, slipped, is bullish, as is the fact that the ratios below the zone are building.

The caveat to all this, is that the increase below the zone is hardly rampant, and, above it, although Y2 has slipped, all the other ratios have come in, in other words also increased.

Don’t also forget, that back on the 22nd and 23rd April, this index closed inside its zone (2799.31 & 2797.80).

And, on Monday this week, its intraday low was 2797.85, which we are happy to take as another test of its zones bottom boundary, especially considering it came at the end of a nigh on 50-point drop.

It has plenty of room for manoeuvre within its Y1 ratio bandwidth, and, at the end of the day, we are surprised to see it react so sensitively to the minimal Y2, but we just report what is, not speculate as to why.

So, don’t get fooled, as the way this market is acting is not particularly bullish, and it is running out of support at 2795, having tested it three times already, but what action there is, is keeping it in bullish territory, so this is its predilection at the moment.

 

Range:            2805  to  3165     

Activity:          Moderate     

Type:              On balance bearish

 

Nb. Our comment for 05/13/20

 

Look it’s not by design, and nor is it coincidence, that our last comment was when the market closed at 2868.44, and the one before that was 2863.39, and this is 2870.12.

Basically, it just highlights that this market is trying very hard to make it look, and more importantly feel, like it is exciting and going somewhere.

The most significant thing to re-mention, is how sensitive this market is (see above), and as it had already tested Y2 at 2955 with the intraday high of 2954.86, the fact that Monday and Tuesday fell a bit short is symptomatic of a market that doesn’t want to encounter even that minimal dynamic delta futures selling again.

Surprising, sure, but, yes, perfectly understandable.

Also, and again as mentioned above, its predilection was in bullish territory, so we are furthermore not surprised by it staying in the vicinity.

And, this is our oversight, as we should have mentioned in our last comment (so, not above) that there were two possible new zones developing, 2845-2855 and 2895-2905.

So, we are not surprised to see the zone move, and looking at the numbers it suggests that this was a few days ago now, but we can appreciate everyone else being caught out.

The interesting aspect, is that it doesn’t look as if the zone could flip back, as the depth of ratio there has filled in quite nicely.

Having just said that, although Y2 hasn’t changed at 2955 above the zone, the other ratios have, so they have strengthened on both sides, which is essentially a neutral signal.

But, with the rollover and expiry imminent, there is still an amazing 150-points of Y1 ratio bandwidth, so staying anywhere within that is an outstanding achievement in these times in our opinion.

 

Range:            2795  to  2895         

Activity:          Moderate 

Type:              On balance only just bearish

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May 11th, 2020 by R1chard

Nb. Our comment from the 05/04/20

 

What a fantastic week, or at least it should have been, if you knew where the ratio levels were.

It was a textbook set-up, to get above 5850, and after a hesitant start last Tuesday it blasted straight through.

Which is why we published two trading ranges, the second being on the assumption that the market would do just this.

What we didn’t expect, was for the market to use up virtually its entire 200-point trading range in the one day.

On the Wednesday it also went straight through R2, which was rather punchy at the time, especially under current conditions.

This left R3 as the next line of resistance, at 6150, and on Thursday the market hit it, with the intraday high of 6151.58.

This they couldn’t ignore, and the turnaround was as if it had hit the proverbial brick wall.

The ensuing 253.61-point capitulation was very impressive, to say the least.

Friday, saw the intraday low of 5746.06, which is the first test of the top boundary of the zone.

It would make sense for this market to try and stay inside its zone, where it is in neutral territory.

The problem, may well be if it tests the lower boundary, as hopefully it will hold, but if it doesn’t, this market will be back into bear territory, and that is an entirely different matter completely.

 

Range:            5650  to  5750        or        5750  to  5850         

Activity:          Moderate

Type:              Neutral

 

 

Nb. Our comment on 05/11/20

 

The only change to the ratios is R1 at 5850 has fallen to Y2.

We suspect this happened on Thursday, the last day this market was open, primarily because the way the index acted.

In our last comment on Monday 4th May this index had bounced all the way back from its test of R3 at 6050 (intraday high 30th April 6151.58) and was just above its zone.

That Monday saw it close at 5753.78, just above the upper boundary, so it had essentially made its choice.

Then Tuesday and Wednesday it was all about 5850, which is why we believe it was still R1 on those days, closing at 5849.42 and then 5853.76.

Quite the epic battle, and which revealed the market had developed a far greater degree of sensitivity.

As it stands, this market is now clear up to 6050, but don’t forget this week it is the rollover and expiry.

And, significantly, the next expiry is the second big triple of this year, and as such should bring its massive weight to bear sooner rather than later.

And our preliminary analysis of the June expiry is not a pretty picture, essentially because it is still reflecting things as they were, and not the post Caronavirus environment.

It should become a lot clearer once the rollover has taken place, but as it stands, it would certainly not be getting in the way of the May expiry finishing as high as possible.

 

Range:            5750  to  6050        

Activity:          Very poor

Type:              On balance only just bearish

 

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May 6th, 2020 by R1chard

 

Nb. Our comment from the 04/29/20

Sadly, this is just the scenario we are afraid of.

Basically, the market isn’t going up because everybody believes the crises is over, it’s going up because there is no ratio to oppose it.

Again, the regulators should be aware of market dynamics, and take great pains to avoid exactly this sort of situation, as it only leads to false, and therefore misleading, interpretations.

The fact of the matter is, R1, above the zone, still does not kick in until 3205.

Where this is a distinct improvement from 3305 (on the 24th), what it means in practice, is that this index could easily recover back up to the 3300’s.

And that, to us at least, is dangerous, as it will be as if nothing has happened, and even the most isolated person in the world, knows that this is just not the case.

Take into consideration that we were looking for a 10% contraction anyway, this being how overstretched it had become, means that if this is the case, then there has been no adjustment for the economic impact that we have witnessed in the last 6-weeks at all, which is madness.

The astute may want to take note of the fact the corresponding R1 ratio does not appear until 2595, so this could most easily become a two-way street.

However, this time, there is no B1 at 2195 to come to the rescue.

It may be worthwhile comparing this index to the FTSE, as at least that has some ratio, and is reacting to it, so, you know, that there is money, and therefore, belief, backing that move.

Contrast that to the activity registered here, and perhaps worth knowing that yesterday, it was “moderate”, so hardly representative of players falling over themselves to get involved.

Hopefully, we are wrong, but this is just the sort of move, that screams beware to us, as it should, but won’t, to the regulators.

  

Range:            2805  to  3205         

Activity:          Only just registered 

Type:              On balance bullish

 

Nb. Our comment for 06/06/20

Essentially, this index is just treading water, which is a good thing.

Especially in light of our comments above.

In the meantime, since we last commented, the market went back above 2900, but significantly seemed to struggle in the Y2 ratio.

Back on the 29th April don’t forget, Y2 started at 2905.

Today, it starts at 2955, and although we didn’t calculate the ratios between our comments, it seems remarkably coincidental that the intraday high in this period was 2954.86.

Whatever, the fact that Y2 is, or has, slipped, is bullish, as is the fact that the ratios below the zone are building.

The caveat to all this, is that the increase below the zone is hardly rampant, and, above it, although Y2 has slipped, all the other ratios have come in, in other words also increased.

Don’t also forget, that back on the 22nd and 23rd April, this index closed inside its zone (2799.31 & 2797.80).

And, on Monday this week, its intraday low was 2797.85, which we are happy to take as another test of its zones bottom boundary, especially considering it came at the end of a nigh on 50-point drop.

It has plenty of room for manoeuvre within its Y1 ratio bandwidth, and, at the end of the day, we are surprised to see it react so sensitively to the minimal Y2, but we just report what is, not speculate as to why.

So, don’t get fooled, as the way this market is acting is not particularly bullish, and it is running out of support at 2795, having tested it three times already, but what action there is, is keeping it in bullish territory, so this is its predilection at the moment.

 

Range:            2805  to  3165     

Activity:          Moderate     

Type:              On balance bearish

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May 4th, 2020 by R1chard

 

Nb. Our comment from the 04/28/20

 

Well it is a textbook market at the moment.

Three very solid attempts to breach R1 at 5850 throughout the day, each one lasting a good fifteen minutes, so not just spikes.

Obviously, didn’t quite have enough, and, as we said, we thought it would be a stern test.

Then, in the last quarter of an hour of real time trading, the market got back up to 5829.49.

And, our old friend, the auction, took it back up to within spitting distance for tomorrow.

Absolutely classic.

However, the most important aspect for us, is that the bulls are very evidently back, and, more to the point, willing to take on R1 without running away scared.

The only ratio to change, is R3 below the zone.

The implication of this, is not that it is static, but rather the zone could still easily be 5550 all the way up to 5750 (apologies for the typo on the 24th when we said 5650 to 5750).

So, make no mistake, there is still a considerable risk out there, but at least it is a far more balanced and rational market, at present at least.

 

Range:            5750  to  5850        or        5850  to  6050        

Activity:          Moderate

Type:              On balance only just bullish

 

 

Nb. Our comment on 05/04/20

 

What a fantastic week, or at least it should have been, if you knew where the ratio levels were.

It was a textbook set-up, to get above 5850, and after a hesitant start last Tuesday it blasted straight through.

Which is why we published two trading ranges, the second being on the assumption that the market would do just this.

What we didn’t expect, was for the market to use up virtually its entire 200-point trading range in the one day.

On the Wednesday it also went straight through R2, which was rather punchy at the time, especially under current conditions.

This left R3 as the next line of resistance, at 6150, and on Thursday the market hit it, with the intraday high of 6151.58.

This they couldn’t ignore, and the turn around was as if it had hit the proverbial brick wall.

The ensuing 253.61-point capitulation was very impressive, to say the least.

Friday, saw the intraday low of 5746.06, which is the first test of the top boundary of the zone.

It would make sense for this market to try and stay inside its zone, where it is in neutral territory.

The problem, may well be if it tests the lower boundary, as hopefully it will hold, but if it doesn’t, this market will be back into bear territory, and that is an entirely different matter completely.

 

Range:            5650  to  5750        or        5750  to  5850         

Activity:          Moderate

Type:              Neutral

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April 29th, 2020 by R1chard

Nb. Our comment from the 04/24/20

Actually, this is the first sensible thing this index has done in a while, and we don’t just mean closing inside its zone.

When we say sensible, we probably mean normal, as under “normal” conditions, if an index missed its zone for their expiry, the quite common trait is for it then to gravitate towards it immediately thereafter.

Which is what has just happened, as, let’s face it, with virtually no ratio around it to speak of, it could have easily pinged one or two hundred points in either direction.

And this remains the case, as under these current ratio conditions, we hardly think it is going to stay zone-bound, although, back in the day, we have seen this index stay inside its zone for an entire expiry.

On the 21st we mentioned the chance the zone may change to 2695-2705, which it obviously hasn’t, even when this index hit the intraday low of 2727.10.

It still could, very easily, but the fact it didn’t, would have helped to see this market recover over the last two days.

So, the risk is still there, albeit slightly mitigated, but as Y1 stretches all the way down to 2690, this has always been the case.

Overall, it is very disappointing to see so little change in the ratios, after all, they are so low, it’s not as if it would take very much.

However, perhaps every little helps, and so, for us, the most significant moves are in the R1 ratio levels, both above and below the zone, even if, this just goes towards narrowing a still gargantuan Y ratio bandwidth.

 

Range:            2795  to  2805     

Activity:          Poor      

Type:              On balance fractionally bearish


 

Nb. Our comment for 04/29/20

Sadly, this is just the scenario we are afraid of.

Basically, the market isn’t going up because everybody believes the crises is over, it’s going up because there is no ratio to oppose it.

Again, the regulators should be aware of market dynamics, and take great pains to avoid exactly this sort of situation, as it only leads to false, and therefore misleading, interpretations.

The fact of the matter is, R1, above the zone, still does not kick in until 3205.

Where this is a distinct improvement from 3305 (on the 24th), what it means in practice, is that this index could easily recover back up to the 3300’s.

And that, to us at least, is dangerous, as it will be as if nothing has happened, and even the most isolated person in the world, knows that this is just not the case.

Take into consideration that we were looking for a 10% contraction anyway, this being how overstretched it had become, means that if this is the case, then there has been no adjustment for the economic impact that we have witnessed in the last 6-weeks at all, which is madness.

The astute may want to take note of the fact the corresponding R1 ratio does not appear until 2595, so this could most easily become a two-way street.

However, this time, there is no B1 at 2195 to come to the rescue.

It may be worthwhile comparing this index to the FTSE, as at least that has some ratio, and is reacting to it, so, you know, that there is money, and therefore, belief, backing that move.

Contrast that to the activity registered here, and perhaps worth knowing that yesterday, it was “moderate”, so hardly representative of players falling over themselves to get involved.

Hopefully, we are wrong, but this is just the sort of move, that screams beware to us, as it should, but won’t, to the regulators.

  

Range:            2805  to  3205         

Activity:          Only just registered 

Type:              On balance bullish

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April 28th, 2020 by R1chard

Classic FTSE set-up to hurdle R1 today

 

Nb. Our comment from the 04/24/20

 

Three days later and we are right back to where we were.

Although this is technically strike three, it is really only strike two in this, the May, expiry.

So, we still think it will be a very stern test for this market, as there could still be a lot of nervous people out there, who could easily get spooked by some dynamic delta futures selling.

The zone has changed, and moved up, to 5650-5750, which normally would be a good thing.

However, we are rather sceptical of this move, as it is just within the minimal Y1 ratio, so hardly an onerous achievement.

In fact, it was a very close call, as to whether we made the zone to go from 5650 all the way up to 5750.

We have seen this before, and it makes for a very volatile market.

But, an outstanding trading one.

The big takeaway, is the fact that no other ratio has changed, so there is no corroborating evidence to back this zone move as directional, as opposed to technical.

Could be a big day today, or just a repeat of the last time we were here, sadly.

 

Range:            5500  to  5850         

Activity:          Average

Type:              Neutral

 

 

Nb. Our comment on 04/28/20

 

Well it is a textbook market at the moment.

Three very solid attempts to breach R1 at 5850 throughout the day, each one lasting a good fifteen minutes, so not just spikes.

Obviously, didn’t quite have enough, and, as we said, we thought it would be a stern test.

Then, in the last quarter of an hour of real time trading, the market got back up to 5829.49.

And, our old friend, the auction, took it back up to within spitting distance for tomorrow.

Absolutely classic.

However, the most important aspect for us, is that the bulls are very evidently back, and, more to the point, willing to take on R1 without running away scared.

The only ratio to change, is R3 below the zone.

The implication of this, is not that it is static, but rather the zone could still easily be 5550 all the way up to 5750 (apologies for the typo on the 24th when we said 5650 to 5750).

So, make no mistake, there is still a considerable risk out there, but at least it is a far more balanced and rational market, at present at least.

 

Range:            5750  to  5850        or        5850  to  6050        

Activity:          Moderate

Type:              On balance only just bullish

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April 24th, 2020 by R1chard

 

Nb. Our comment from the 04/21/20

 

We finished off the April expiry by saying this market was “whacky” and the “zone could move at the drop of a hat”.

Both are still as valid in this, the May expiry.

In fact, we are seeing a serious move in the ratio, that could signal the zone moving down to 2695-2705.

Although this is very early in the expiry, there are still some interesting points to take away.

First, is that the zone in May has started at the same level as the April zone ended.

The significance of this, is that the market was below this level for the two weeks prior to its expiry, so, one could argue, that the zone being here helped the market to recover.

And, if anyone is still in any doubt about derivatives affecting the underlying, then look no further than WTI dropping to minus $40, enough said.

There is still a ridiculously wide Y ratio bandwidth, currently 815-points, so don’t expect sanity returning anytime soon.

In fact, if it does, and the ratios haven’t filled in considerably, then don’t believe it.

There is only a day separating the two columns in the table above, but the fact not even the lowest ratios have been able to move, and activity is “poor”, means this is sufficient to show that nobody is taking a view, hopefully, yet.

This market could go anywhere within the Y ratio bandwidth, quickly and significantly, but a falling zone is not good, especially if it drops below the current market.

  

Range:            2805  to  3005         

Activity:          Poor 

Type:              On balance bearish

 

 

Nb. Our comment for 04/24/20

 

Actually, this is the first sensible thing this index has done in a while, and we don’t just mean closing inside its zone.

When we say sensible, we probably mean normal, as under “normal” conditions, if an index missed its zone for their expiry, the quite common trait is for it then to gravitate towards it immediately thereafter.

Which is what has just happened, as, lets face it, with virtually no ratio around it to speak of, it could have easily pinged one or two hundred points in either direction.

And this remains the case, as under these current ratio conditions, we hardly think it is going to stay zone-bound, although, back in the day, we have seen this index stay inside its zone for an entire expiry.

On the 21st we mentioned the chance the zone may change to 2695-2705, which it obviously hasn’t, even when this index hit the intraday low of 2727.10.

It still could, very easily, but the fact it didn’t, would have helped to see this market recover over the last two days.

So, the risk is still there, albeit slightly mitigated, but as Y1 stretches all the way down to 2690, this has always been the case.

Overall, it is very disappointing to see so little change in the ratios, after all, they are so low, its not as if it would take very much.

However, perhaps every little helps, and so, for us, the most significant moves are in the R1 ratio levels, both above and below the zone, even if, this just goes towards narrowing a still gargantuan Y ratio bandwidth.

 

Range:            2795  to  2805     

Activity:          Poor      

Type:              On balance fractionally bearish

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April 24th, 2020 by R1chard

 

Nb. Our comment from the 04/21/20

 

Getting that feeling of Deja vu again, greatly enhanced with a healthy dollop of coincidence.

As it was back on the 14th, please see above, that the market was at 5842.66, and facing R1 at 5850, albeit in the April expiry.

The first meaningful ratio it had run into now the market was back above its zone, and so therefore, the first futures selling brought about by the dynamic delta.

As history shows, it didn’t react well, dropping to 5575 by Wednesday 15th, with a repeat of this intraday low on the Thursday.

And so, here we are, in the May expiry now, and the market is again facing R1 at 5850.

The big difference this time, is now it is at the start of the expiry, rather than the end.

However, whether this will embolden people to push through the dynamic delta, remains to be seen.

Otherwise, since the 14th, the ratios for this expiry have filled out quite nicely.

So, there is a decent range and depth already in situ, now all we have to ascertain is the markets appetite.

One word of warning, is that the Y ratio bandwidth does stretch from 5850 all the way down to 5350, so if it turns out it’s not that hungry, then that’s a solid 10% potential pitfall.

 

Range:            5650  to  5850         

Activity:          Very good

Type:              Neutral

 

Nb. Our comment on 04/24/20

 

Three days later and we are right back to where we were.

Although this is technically strike three, it is really only strike two in this, the May, expiry.

So, we still think it will be a very stern test for this market, as there could still be a lot of nervous people out there, who could easily get spooked by some dynamic delta futures selling.

The zone has changed, and moved up, to 5650-5750, which normally would be a good thing.

However, we are rather sceptical of this move, as it is just within the minimal Y1 ratio, so hardly an onerous achievement.

In fact, it was a very close call, as to whether we made the zone to go from 5650 all the way up to 5750.

We have seen this before, and it makes for a very volatile market.

But, an outstanding trading one.

The big takeaway, is the fact that no other ratio has changed, so there is no corroborating evidence to back this zone move as directional, as opposed to technical.

Could be a big day today, or just a repeat of the last time we were here, sadly.

 

Range:            5500  to  5850         

Activity:          Average

Type:              Neutral

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April 21st, 2020 by R1chard

 

Nb. Our comment from the 04/15/20

 

Well we didn’t publish anything about the May expiry back on the 15th, however we did about the April expiry, so here is a few words about how April expired on the 17th.

 

And to be honest, we couldn’t really believe it ourselves, when the market closed at 2799.55 on the 16th April, the day before the expiry.

 

Despite being in what we described as a “frictionless market” we were stunned to see it get so close to the dead centre of its zone with the expiry imminent.

 

Sadly, in the very end, we didn’t get the expiry settlement price in the zone, but, especially under the conditions, it wasn’t at all a bad attempt.

 

Also, considering it was Y1 in that expiry, all the way up to 2855, which was a considerable improvement from our last published level of 3315 for sure, but still hardly expensive after all.

 

Rather coincidentally, the actual settlement price was 2855.70, for the record.

Range:            2595  to  3315 (from the 15th)      

Activity:          Poor      

Type:              Neutral

 

Nb. Our comment for 04/21/20

 

We finished off the April expiry by saying this market was “whacky” and the “zone could move at the drop of a hat”.

Both are still as valid in this, the May expiry.

In fact, we are seeing a serious move in the ratio, that could signal the zone moving down to 2695-2705.

Although this is very early in the expiry, there are still some interesting points to take away.

First, is that the zone in May has started at the same level as the April zone ended.

The significance of this, is that the market was below this level for the two weeks prior to its expiry, so, one could argue, that the zone being here helped the market to recover.

And, if anyone is still in any doubt about derivatives affecting the underlying, then look no further than WTI dropping to minus $40, enough said.

There is still a ridiculously wide Y ratio bandwidth, currently 815-points, so don’t expect sanity returning anytime soon.

In fact, if it does, and the ratios haven’t filled in considerably, then don’t believe it.

There is only a day separating the two columns in the table above, but the fact not even the lowest ratios have been able to move, and activity is “poor”, means this is sufficient to show that nobody is taking a view, hopefully, yet.

This market could go anywhere within the Y ratio bandwidth, quickly and significantly, but a falling zone is not good, especially if it drops below the current market.

  

Range:            2805  to  3005         

Activity:          Poor 

Type:              On balance bearish

 

Available to buy now

The story of the Big Bang, The Great Storm and the crash of ’87.

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