certainly paints a better picture than when we looked at it back on the 15th
Jan for the rollover.
the Y ratio bandwidth is considerably thinner, it is still absolutely massive.
it stretches from 2495 all the way up to 2670, which is, naturally, where this
index came to rest last Friday, being closed Monday.
So, it is
still 175-points (6.6%), and this seems to be the way of it these days, as just
having a 1% to 2% Y ratio bandwidth is but a distant memory.
it will be a real test of this index today, whether it wants to take on the R
ratios from the off, or take advantage of this huge bandwidth.
Nice to see a start to a new expiry begin with it all to play for, and worth noting is the very decent level of activity, which means a respectable degree of engagement.
to 2670 or 2670
Type: On balance bearish
Sadly, we never did the rollover for the NDX.
This means our last coverage was way back on the 8th
Jan and considering Y2 then didn’t kick in until 7125 we are not really
surprised by what happened.
Although we have no idea how the tail end of the last expiry
developed, if indeed it did at all, but we do recognise that what we are seeing
here is exactly the same as what we saw this time last expiry.
So, don’t take those ice-skates off any time soon.
Perhaps worth noting that the intraday high on Friday was 6816.23, so they may well already have an inkling of where Y2 in Feb is.
In the Jan
expiry just gone the SPX got its way on the rollover Wednesday, which left the
DJX here, free rein for the actual expiry.
to say the zone in both Jan and Feb have not changed, and the settlement price
on Friday was 24574, so we would say spot on really.
have thought, that after all that trouble getting over 24100 and back into
their Y ratios, that they would eventually succeed come the expiry, so bravo
level of activity, sadly here the benchmark is so low anything looks good,
there has been little change in the ratios since we last looked.
In fact, the
ratios are so thin, the zone could actually stretch from 23900 all the way up
for this expiry, 24600 is a really key level.
Unless the ratios start getting populated this is going to be a real rollercoaster ride this expiry, so either hang on tight or sit back, enjoy, and wave those hands in the air.
For the DJX this expiry it was all about
23400, which we have covered at great length in previous articles, but once
over that hurdle and into its Y ratio bandwidth we mentioned two other hurdles
in its way.
“We call them “step-ups” and here there are two in this mammoth
Y ratio bandwidth, at 23800 and 24100”.
As yesterday’s intraday high was 24099
it is this second one that has caught our attention.
Today is the day of course, and the SPX
being anywhere in the vicinity of 2600 is job done to us, which leaves the DJX
quite a bit shy of theirs.
Now, the problem with getting over 23400
certainly held this index back, thereby increasing the disparity.
Furthermore, it is in Y ratio, so not
that painful, but 24100 is quite a hurdle, and once the SPX has had its way our
fear is that this index may look towards somewhere circa 23600 as the next
cheapest alternative to expire around come Friday.
As we have all expiry, we still feel the DJX is the kingmaker, so it will be the one to watch right to the end for sure.
to (24100) / 24400
To be fair this is now becoming bit of a
theme, the Feb DJX being like the FTSE and SPX with little or no ratio in situ
at this moment in time.
Intermediary to intermediary or not this
Pointless to speculate why, it may be
for different reasons in each market, or everyone could simply be heading for
the hills, and we don’t mean to go skiing, we just see the end result.
The fact that the Y1 ratio bandwidth
here stretches for 3700-points is bad enough, but this is not the entire story.
Basically, the zone (zero ratio) could
be from 23400 all the way up to 24600.
So huge potential for extreme volatility
This, for you, may be a good thing of
If the market blasts north no doubt the
politicians will take full advantage, but make no mistake, this index is very
vulnerable with no ratio to support it.
If it skids down to 23400, we rather doubt
the seriously minimal Y1 will have much, if any, impact, and if it then carries
on to 22900, will R1 be enough?
It’s not a
big change in the SPX, more of interest than significant as well.
The zone has
moved up to 2545-2555, and normally we would comment on this being like taking
a super tanker through a three-point turn in a country lane, but the phenomenon
of 290-points of minimal Y ratio makes this not the case, and in fact rather
perhaps worth noting, that this move up does put the market inside its zone, so
in neutral, rather than above it, and therefore in bullish territory.
with so little ratio about you can pretty much guarantee two things; firstly,
volatility, and secondly, a nomadic zone.
Please don’t forget this index has already tested R3 at 2345 this expiry, so is 8% up from its low, and with virtually two weeks to go, so the bears may not be squealing yet, but time is now not on their side, and the R ratios above the zone still don’t even appear until 2725, so the final battle for this expiry is still to come we suspect.
Activity Very poor
Type: On balance just bearish
For the NDX no change in its zone, but rather intriguingly no
further additions of any strikes.
Although activity has improved, it really isn’t worth writing
Especially, when one considers that it is very stunted overall,
so a little goes a very long way and yet this was the best it could do.
It did have fun around its zone, closing in it and bouncing off it, but at the end of the day the minimal Y ratio is actually very minimal, and what’s more, there are no step-ups, so it really is just one exceedingly vast ice-rink.
Type: On balance only just bearish
It is difficult
to emphasise strongly enough how significant a level 23400 is, and has been,
and not just for the DJX, but also for the other two US indices, and by default
the European exchanges as well.
encounter was on the 28th Dec with the intraday high of 23381, and
when it was R2, which turned a 250-point gain into a 76-point loss.
away from it on New Year’s Eve.
again on 2nd Jan with the intraday high of 23413.
The next day
saw that 660-point fall.
By the 4th
it was now R1 and the bulls were emboldened again, courtesy of the SPX and NDX,
and it made a good intrusion but finished right on it, despite this being
strike 3 and a lot weaker.
yesterday, it didn’t have it all its own way, but finished on the right side,
if you are a bull, so hopefully job done, but the heavy weather it made of it
does not inspire confidence for sure.
As we say
above in the SPX, we suspect there the deciding battle is still to come, so we
are certain that here there will be one here as well.
We call them “step-ups” and here there are two in this mammoth Y ratio bandwidth, at 23800 and 24100.
were listening in the FTSE as “obviously,
there is still considerable risk, but now we are into a new expiry, and if it
can get back above 6750, then it could become a very rapid ascent up through the
zero-ratio zone to 6900”.
high on the Wednesday and Thursday was 6753.29 and 6753.14 respectively, so
Friday would have been strike 3.
fact that the zone has changed, and the intraday high and low on Friday was
6850.37 and 6692.50, we suspect that this change happened on Friday.
ratios should be calculated daily, as that is almost the perfect zone bandwidth
test, 6700 to 6850.
almost, but really seven and a half points on a six-thousand-point index, that
traded 150-points in one day, is probably the closest you will get to perfect.
drawdown of 0.11%.
result in a breakout today, the only caveat is the DJX, which if you read our
note on Friday you will appreciate how significant 23400 really is, and the
close was above it, but only just, and that is a very large index, so 33-points
is only 0.14%, which is rather ironic considering the above.
FTSE, obviously 6850 is a poignant level, but if it gets above that then there
is still plenty of Y ratio above for it to play around in.
Although, due to the nervousness still embedded in this market, we rather doubt it will be the corresponding R3 ratio (intraday expiry low 6536.53 with R3 at 6550) so be rather wary circa 6950.
two things we said in our last comment on the DAX that are worth repeating, “this makes 10600 very significant” and “it was the level of activity that caught our
The very next
trading day the intraday high was 10612.
Also, as you
can see below, that despite all the closures here over the festive period they
have still maintained a very impressive level of activity.
not calculating the ratios daily coupled with a lot of closures makes any form
of continuity here rather difficult, but despite this it has been fascinating
to see their zone hold fast.
index was heading towards 10000 this looked misplaced, but after yesterday it
doesn’t look so awkward anymore.
broad brushstroke, the two pertinent levels over the last two weeks have been
10450 and 10250, and although the ratios may have fluctuated a little bit they
have stood out, and actually over the last two weeks been counted as well.
The Y ratio bandwidth may have shrunk a bit, but it is still a very impressive 650-points, so don’t expect any quiet days anytime soon.
can’t say you weren’t expecting a wild ride.
the ratios should be calculated daily, but nevertheless because of their
current alignment this is not so important in the SPX as it’s all about the Y
housekeeping, this index has already tested R3, back on the 26th Dec
when it was at 2345 and the intraday low was 2346.58, and very significantly,
on the very last trading day of 2018, the market closed at 2506.85, which in
these volatile markets is the closest you will get to hitting its zone.
significant, was in our last table R1 was at 2445, so is still a step-up, and
yesterday’s intraday low was 2443.96.
are as in the table above, but the truly unprecedented magnitude of the Y ratio
bandwidth remains virtually unchanged, at the colossal 305-points.
Type: On balance only just bullish
When we last commented on the NDX it had recovered all the way
back to its zone, which on the end of a 6.16% move was very impressive indeed.
However, this meant on the last trading day of 2018 it was
actually above its zone, and, in fact, the intraday low was 6273.94, which was
a bounce off the upper boundary of its zone.
When you appreciate this, and then read our comments regarding
the DJX, the significance of 23400 becomes even more meaningful.
Especially, as both here and the SPX, were above their zones, and
with so much Y ratio above them it could have been a very different story
indeed on Wednesday, which may in turn have given a far closer line of support
On which subject, the open here yesterday was 6274.76, which
should have a very familiar ring to it.
Otherwise, not a lot else has changed, apart from the addition of another vast swathe of strikes, which, as usual, hasn’t resulted in any activity, which in turns begs the question of why bother?
Type: On balance bearish
have some Y ratio in the DJX at last.
question is whether or not this means it is going to join the party?
moment it is definitely the “party-pooper” as at the end of 2018 it was the
only index we cover not to be anywhere near its zone.
In fact, it
went one better, as on the first day of trading in 2019 the intraday high was
23413, which was then R2, and which evidently brought an abrupt halt to any
hint of a recovery, moreover this malaise eventually affected the other two.
If it does
get its act together, and joins the other two on the same page, then we should
see the zone here drop, and it could drop to 23400-23600.
makes 23400 doubly more significant, as not only is it the last barrier before
this market gets into its Y ratios, it could also potentially be its zone
And, the good news is that there is still two more weeks to go.
two massive milestones for the FTSE last week.
bouncing off R3 which was then at 6550, with the intraday low of 6536.53, which
was at the end of 150-point fall, eventually ending down just 100-points.
was the close on Friday, being above 6700, which is back into the Y ratios.
last ratio table there have been two important developments as well.
drop in the ratios below the zone.
the zone itself being 150-points wide.
there is still considerable risk, but now we are into a new expiry, and if it
can get back above 6750, then it could become a very rapid ascent up through
the zero-ratio zone to 6900.
to 6750 or 6750
For the DAX
it was the level of activity that caught our eye, especially as they were
closed for three days last week.
end result is the ratios below the unchanged zone weakening considerably.
surprising aspect, especially considering the one-sided nature of said
activity, is the fact there has been precious little movement above the zone.
important, perhaps, is this index scraping a close just above R2.
10600 very significant, so watch any opening gaps, as 10550 is just as
significant, and therefore we suspect their next trading day may be a deciding
day for this index for the Jan expiry.
found fascinating is exactly where the DAX is now is exactly where is was when
the ECB announced its QE and literally inflated this index all the way up to
week, for us at least, may well reveal whether or not this index has at last
returned to normal.
And we say
this in full knowledge, and to repeat yet again, that because they don’t know
what they did, as they don’t see it, how on earth can they regulate it let
alone be in charge when they are the cause?
fascinating aspect about these ratios is that the potential for something new
and unseen is always present.
When we last
commented on the Jan expiry in the SPX our two main themes were the continued
abundance of Y ratio and the potential for a bear squeeze, and the two are not
unconnected of course.
Well, the Y
ratio bandwidth now stands at 310-points, truly amazing, and so a 120-point
move is totally in keeping.
the intraday low yesterday was 2346.58, just where our old friend R3 is
residing, the level that proved so effective on so many occasions in the Dec
Jan is but a couple of days old, but activity is already high, the number of strikes
is one of the largest ever, and in fact we would say it is the highest number
ever, so we rather doubt it is going to get quieter.
Activity Very good
Type: On balance only just bearish
Bizarrely it was the NDX that invented the addition of huge
swathes of strikes, not to mention abnormally large positions.
And lo and behold it hasn’t even arrived at the party let alone
make it to the kitchen.
And just to add to the weirdness here it is, after a colossal
6.16% leap, back in its zone.
It is not so much the fact that there are no R ratios at all
here, but rather the fact that we don’t even see Y2 until so far out, making
the Y1 ratio bandwidth a staggering 1475-points wide.
capacity for the ratios to surprise is in itself surprising, and for the DJX
this is in three main regards.
total lack of any Y ratio, in stark contrast to the SPX.
the SPX’s level of activity was “high” then here it is tremendous.
are back to just the 200-point zone, as this expiry also sees a very full range
of strikes, with a huge amount also added since our last look.