Category: Uncategorized

December 1st, 2020 by Richard

Now the real work starts for the SPX.

 

Nb. Our comment from the 11/24/20

 

For those that read our comment on the 17th then they would know what some of the ratios for the Dec expiry were back then.

Then, in the above table, we have todays referenced against the 19th.

Hopefully, this will give you a far better idea of how they have developed to this stage.

The cross-over point was on Monday, as when the market closed on Friday at 3557.54, R1 was standing at 3555, but on the 23rd, R1 had slipped further, to 3605, meaning this index actually managed to start this expiry in their Y ratios. Which is important.

Back on the 21st October, and please do check, we said;” Even though it has an extra week, please note the expiry is on the 20th, so just before Thanksgiving. We mention this, as it would be so unusual (not) for the American indices to have a rally, even hitting highs, in the run up to this holiday.”

Admittedly we didn’t suspect the vaccine as the catalyst, but then again, we never even bother trying to work out what that might be, but rather where the actual market will be and when.

Historically, this week is a nightmare to call, as many are away, and as they say about missing cats, but, anyway, it will all depend how aggressive it becomes when it starts knocking on the R ratios doors, and, of course, how many are around to care.

Next week, from about Tuesday on, a bit of rationality generally returns.

However, there are a few points to note, and a big one is that the Y ratio bandwidth is 310-points, basically unheard-of in the biggest of the big expiries (nb. normally zilch).

The zone will move up, 3495-3505 in all likelihood.

The highest ratio, within range at least, is just R3, truly pathetic for this gargantuan expiry, where we would normally see B (and above) ratios.

The big question is always going to be how will this index react to any futures activity generated by the dynamic delta, and until it starts hitting the R ratios we just don’t know, but this week has not been a good yardstick, at least in the past that is.

Fantastic trading range though, just a shame its at this time of year.

 

Range:            3405  to  3605         

Activity:          Poor

Type:              On balance only just bearish

 

 

 

Nb. Our comment for 12/01/20

 

Just like clockwork we got our record high.

So, if it follows the usual playbook, rationality starts to return from today, it’s just a question of how quickly.

Currently, the market tends to bask in the new high, probably totally ignorant of why it actually happened, which tends to get blamed on record sales over the holiday period.

On which subject, activity has naturally been light over the last week, but we should now see it improve, and therefore some development in the ratios.

Although they look very static in the above table, there is a groundswell going on below the zone, its just as yet it hasn’t resulted in any move above a threshold.

Therefore, we fully expect to see the zone move up to 3495-3505, and before long.

So, its just a question of whether or not it fancies tracking any higher.

The first hurdle will be R2 at 3655, probably today, which will provide an enormous insight into the strength and depth of the bulls’ commitment.

Then there is a significant step-up at 3705, before it reaches R3.

It’s not unheard of for this index to just keep battering away at a retreating R ratio door, especially at this time of year.

But, should their commitment falter, it would be a wise man who appreciated one, where the zone is, and also where it may be, and, two, that the Y ratio bandwidth is still an absolutely massive 310-points wide.

It might also perhaps be worth noting where the FTSE is in relation to their ratios, as this can sometimes cross the pond.

The remainder of this week should offer up some clues, and we still have almost a full three weeks of this expiry to go.

 

Range:            3605  to  3655         

Activity:          Poor

Type:              Neutral

 

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November 30th, 2020 by Richard

It is still all about 6350 for the FTSE.

 

Nb. Our comment from the 11/23/20

 

Well the mighty Dec did bring its weight to bear on the Nov expiry so much so it was down to the expiry auction for the last-gasp attempt to get it back to around 6400.

One of London’s peculiarities is what we refer to as the “amber gambler(s)”.

Nothing to do with a red light, but rather with the expiry looming, London quite often sees a big spike in activity in a particular pair of strikes.

This time round it was the 6400 and 6450 that saw all the activity, which led us to suspect an expiry somewhere between the two might be rather welcome.

As it happens, the EDSP was 6390.08, arrived at by another of London’s peculiarities, an auction held at 10:10.

This is highlighted by the fact the official intraday high on Friday was 6386.70.

Yeah, we can’t understand, let alone justify it either.

Where the mighty Dec came to weigh in, was the fact that 6350 was where DR started, and this index had trouble at this level all week.

Which brings us round to the next peculiarity, the closing auction, and just like the expiry auction, we can’t understand or justify this either.

Anyway, the real time close was 6346.74, and it was the auction that took it 1.45-points above DR.

How will this affect the FTSE today, we just don’t know.

DR is a massive bandwidth, and obviously 6350 is the critical demarcation line.

But whether Friday’s closing auction was an attempt to leapfrog it, so an intentional gambit, will dictate whether or not the plan is to stay above it, or, perhaps, it was just as a result of the Nov expiry hangover, just don’t know, sorry, but guess we will find out soon enough though.

 

Range:            6250  to  6350        or        6350  to  6750        

Activity:          Poor

Type:              On balance bullish

 

 

Nb. Our comment on 11/30/20

 

The FTSE was desperate to go higher, that was plain for all to see, so it was perhaps very confusing for it to keep encountering all those futures forced out by the dynamic delta.

Having closed on the 20th with its fingertips above the critical level, courtesy of the auction, then being DR at 6350, it benefitted from the vaccine news from AstraZeneca.

But, peaking at just 6392.08, and then finishing down 17.61-points at 6333.84, below DR, really just went to show the markets surprise and reaction to those futures that were being sold.

Tuesday saw it again try to break free, but for the rest of last week it was obvious to all who knew it was trying to wade through DR ratio why it was struggling so much, as it kept gravitating back towards that critical 6350 level.

So, after what was an exciting week, the net result is just a move of a mere 16-points.

Looking ahead, despite the ratios changing above the zone, 6350 is still the critical level, even though it is now R3.

This means the title of DR has now passed to 6450, making for a nice and tight bandwidth, or trading range.

The only question, is whether or not this index has now grown comfortable being in DR ratio, and the only way we would know is to have calculated the ratios daily, and therefore know exactly when 6350 changed, and thereby be able to gauge how the market reacted at that time.

Obviously, the ratios are falling above the zone, so, unless the test is immediate, then we feel far more confident in calling 6550 as the next level that could surprise this market with a bit of dynamic delta hedging.

Also, by expiry, we would expect to see the zone here move to 6150-6250.

 

Range:            6350  to  6450 (6550)       

Activity:          Very poor

Type:              On balance bullish

 

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November 24th, 2020 by Richard

Amazingly the SPX Dec expiry did start in their Y Ratio.

 

Nb. Our comment from the 11/19/20 (Not published)

 

Nb. Our comment for 11/24/20

 

For those that read our comment on the 17th then they would know what some of the ratios for the Dec expiry were back then.

Then, in the above table, we have todays referenced against the 19th.

Hopefully, this will give you a far better idea of how they have developed to this stage.

The cross-over point was on Monday, as when the market closed on Friday at 3557.54, R1 was standing at 3555, but on the 23rd, R1 had slipped further, to 3605, meaning this index actually managed to start this expiry in their Y ratios. Which is important.

Back on the 21st October, and please do check, we said;” Even though it has an extra week, please note the expiry is on the 20th, so just before Thanksgiving. We mention this, as it would be so unusual (not) for the American indices to have a rally, even hitting highs, in the run up to this holiday.”

Admittedly we didn’t suspect the vaccine as the catalyst, but then again, we never even bother trying to work out what that might be, but rather where the actual market will be and when.

Historically, this week is a nightmare to call, as many are away, and as they say about missing cats, but, anyway, it will all depend how aggressive it becomes when it starts knocking on the R ratios doors, and, of course, how many are around to care.

Next week, from about Tuesday on, a bit of rationality generally returns.

However, there are a few points to note, and a big one is that the Y ratio bandwidth is 310-points, basically unheard-of in the biggest of the big expiries (nb. normally zilch).

The zone will move up, 3495-3505 in all likelihood.

The highest ratio, within range at least, is just R3, truly pathetic for this gargantuan expiry, where we would normally see B (and above) ratios.

The big question is always going to be how will this index react to any futures activity generated by the dynamic delta, and until it starts hitting the R ratios we just don’t know, but this week has not been a good yardstick, at least in the past that is.

Fantastic trading range though, just a shame its at this time of year.

 

Range:            3405  to  3605         

Activity:          Poor

Type:              On balance only just bearish

 

Available to buy now

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November 23rd, 2020 by Richard

FTSE is simply all about the auctions.

 

Nb. Our comment from the 11/16/20 (Not published)

 

Nb. Our comment on 11/23/20

 

Well the mighty Dec did bring its weight to bear on the Nov expiry so much so it was down to the expiry auction for the last-gasp attempt to get it back to around 6400.

One of London’s peculiarities is what we refer to as the “amber gambler(s)”.

Nothing to do with a red light, but rather with the expiry looming, London quite often sees a big spike in activity in a particular pair of strikes.

This time round it was the 6400 and 6450 that saw all the activity, which led us to suspect an expiry somewhere between the two might be rather welcome.

As it happens, the EDSP was 6390.08, arrived at by another of London’s peculiarities, an auction held at 10:10.

This is highlighted by the fact the official intraday high on Friday was 6386.70.

Yeah, we can’t understand, let alone justify it either.

Where the mighty Dec came to weigh in, was the fact that 6350 was where DR started, and this index had trouble at this level all week.

Which brings us round to the next peculiarity, the closing auction, and just like the expiry auction, we can’t understand or justify this either.

Anyway, the real time close was 6346.74, and it was the auction that took it 1.45-points above DR.

How will this affect the FTSE today, we just don’t know.

DR is a massive bandwidth, and obviously 6350 is the critical demarcation line.

But whether Friday’s closing auction was an attempt to leapfrog it, so an intentional gambit, will dictate whether or not the plan is to stay above it, or, perhaps, it was just as a result of the Nov expiry hangover, just don’t know, sorry, but guess we will find out soon enough though.

 

Range:            6250  to  6350        or        6350  to  6750        

Activity:          Poor

Type:              On balance bullish

 

 

Available to buy now

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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November 17th, 2020 by Richard

The story may change when the Dec expiry starts to weigh on the SPX

 

Nb. Our comment from the 11/10/20

 

Indeed, it certainly wasn’t gentle.

More to the point, who knew Pfizer was developing a vaccine? You did! Why didn’t you say? Sorry, what do you mean they have been shouting about it from the rooftops for several months now? And, what, how many others? At least a dozen more vaccines, really! Who knew? …Everyone it seems.

This is not meant to be facetious, but deadly serious.

As please refer to our first comment on this expiry, back on the 21st October, when we alluded to the similarities with the previous expiry, and on the 28th we actually said; “Don’t forget the last expiry, which went down to Y2 before reversing all the way back up to its R ratios, in a 10% or 350-point recovery. Nb. The purists would note if you caught the down leg at the start, that adds another 3% on to the 4-week total round-trip ride. Nice.”

Now, we have already seen the test of Y2, way down there at 3245, and courtesy of the “surprise” announcement yesterday, we have seen this index test R2, with the intraday high of 3645.99.

Please note, and as in the table above, R2 today is now at 3705.

So, down to 3245, which was from 3500 at the start of this expiry, is 255-points, then up to 3645 is 400-points, making a grand total of 655-points, or a massive 18.7%.

This is the way things are now, and as we have said many times in the past, the regulator needs to get a grip, as this is just not natural or beneficial, except, perhaps, to traders.

There is still a week and a half to go this expiry, and the ratios have returned to strengthening below the zone and weakening above it.

The zone itself could easily resume its upward trajectory, and all in good time for Thanksgiving.

For the record, the all-time high here was 3588.11, so it has achieved this already.

So, for us, the only thing that remains, would be to see this index in or around its zone, wherever that may end up, this time next week.

 

Range:            3405  to  3605         

Activity:          Moderate

Type:              Bearish

 

 

Nb. Our comment for 11/17/20

 

Pretty much standard stuff for the SPX these days.

Of course, there is no way of you knowing, unless we go back to publishing the ratios daily, how far the R ratios above the zone are retreating, but interestingly the market hasn’t even been back to test R1.

R1 was 3605 this time last week, then it went to 3620, 3630, 3630, 3655, and as you can see above, today it is the same as Monday.

The main reason for labouring this point, is that despite the general feeling, this market is not as bullish as it may seem, as it could easily have gone 30 or 40-points higher any day over the last 5 trading days.

Also, worth noting, is that although the R ratios are retreating above the zone, and increasing below it, the Y ratio bandwidth is still 400-points wide, so, to use an American football phrase, they are just moving the chains, not displaying any great bullishness.

And, exactly as we suspected last week, who knows where this zone is going to end up this week.

It is already up 100-points, and without really trying as well, it must be said.

So, perhaps the answer may be to take a peek at the Dec expiry, and how that is shaping up.

Dec is the biggest of the big, the big ones being the triple/quadruple witching ones, and don’t forget as the front month one is just ending while the other just beginning their journey.

Nevertheless, Dec is already almost three times larger, and you just can’t do anything about this, but the equity related activity generated by this always gets misinterpreted by all the forms of media.

The Y ratio bandwidth is “only” 285-points, and we say only, because normally we don’t see any Y ratio at all.

Above the zone, which let’s face it, is what everyone wants/needs to know, R1 starts at 3530, R2 at 3605 and R3 at 3705.

As yet, nothing higher, in yet another abnormal twist. Good luck.

 

Range:            3505  to  3655         

Activity:          Average

Type:              On balance bearish

 

Available to buy now

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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November 16th, 2020 by Richard

As the lengthy Nov expiry comes to a close up next the mighty Dec

 

Nb. Our comment from the 11/09/20

 

Like a scalded cat no less.

As we said, meandering around in R2 would not be a comfortable experience, and its immediate goal should be to get out of it.

It didn’t quite make it last Monday, but the FTSE did however close just above the other level we mentioned, 5650.

Tuesday saw it explode back above 5700, and right back into the Y ratios.

Once back into the Y ratio we did also say their zone should be “plain sailing”, so we were glad to see it close just above the bottom boundary on Thursday.

The one surprise we had was, especially after all the hard work getting there, was how easily this bottom boundary conceded on Friday.

And then, the absolute meal the market made of getting back above it, only succeeding after many attempts, and then not until the early afternoon.

Obviously, we would now expect it to push on and have a go at its upper boundary.

However, the caveat here, is keep a wary eye on the US, as the SPX is now battling Y2, with the R ratios now not far ahead, so it may not get a helping hand as much as it has from across the pond.

But there is still two weeks to go, so although we would be more than happy to see this index remain zone-bound for the remainder of this expiry, we don’t think this will be rather likely.

So, just watch for the relevant ratio levels, while noting where the SPX is in relation to theirs, and act accordingly.

Also, please remember, that it is the mighty Dec expiry up next, and it is already a beast.

 

Range:            5900  to  6000        

Activity:          Moderate

Type:              On balance bearish

 

Nb. Our comment on 11/16/20

 

Well to be honest we were not expecting Monday’s news, although we did fully anticipate the FTSE’s interaction with the top boundary of their zone, 6000, which was like watching waves on the beach.

The market being the waves, lapping at the 6000 level, aka the beach, the entire morning.

And for those that have read our note on the SPX, from down to Y2 then all the way up to their R ratios, it was all as expected, indeed forecast, the only difference was the catalyst (it’s always something btw) and the speed it happened, otherwise same old.

Which is the same, here in the FTSE, as we never expected the upper boundary to hold, especially not for a fortnight, we were just surprised by the timing.

And don’t forget, this market had already plumbed the depths of R3 at 5600, so, if it was a conventional expiry, it would then go on to test R3 at the other end, in this case above the zone, before returning to expire in the zone.

Last time we looked, R3 here was standing at 6300, so you can tick that box. As the intraday high was 6307.00 and the close 6296.85, so we suspect this was still the case that Tuesday, and the change reflected above happened subsequently.

The suddenness obviously shook things up, and the result is there for all to see in the table above.

So, for us, the only question that now remains, is whether it will expire, or rollover, in its zone, which as you can see has returned to its original expiry position.

Way back when, we mentioned that next up is the mighty Dec expiry, which is bigger and meaner than we have seen for many a year.

So, rather than talk about Nov, as an early Christmas present, here are the Dec levels, as we suspect they will bring more influence to bear as this week progresses.

Zone is 6050-6150, with Y2 up to 6250, below DR kicks in at 5800, whereas above DR is currently at 6350, with B1 at 6850, but from 6450 DR starts getting closer to B1 than R3. Have fun.

 

Range:            6100  to  6450        

Activity:          Moderate

Type:              Bullish

 

Available to buy now

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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November 10th, 2020 by Richard

Yup, as suspected, SPX Nov expiry a rerun of Oct's

 

Nb. Our comment from the 11/04/20

 

Well we sincerely hope that you did read our last note, premarket on the Wednesday 28th October, as the market has pretty much played out exactly as we guessed.

In fact, this is really the reason why we always repeat our previous comment, as it is so much easier doing this than using up space having to reference it.

The real battleground was last Friday, and despite the intraday low coming in at 3233.94, we actually lost count of how many times the SPX bounced off 3245, or just below it, meaning this was the real, or pragmatic, intraday low.

Will this expiry play out exactly the same way as October’s?

Nobody really knows, and, of course, there is an election issue to consider this trip.

We would like to think so, but we have noticed that the zone could easily reverse its recent gain, and that is not good.

Unfortunately, the table above is slightly misleading in this respect, as it shows R1 slipping 25-points, but R2 gaining 15.

The fact is actually different, as R1 has been marginally lower, and not recovered much, whereas R2 actually dropped to 3045, and has recovered up to and beyond its previously published level.

Above the zone it is more accurate, as in the last week the ratios have continued in one direction throughout.

However, the overriding issue, has always been the gargantuan Y ratio bandwidth, which has only slightly improved but is still 395-points wide.

The problem, for us at least, is that if the zone flips back to 3345-3355, or even worse.

But, as there is still two and a half weeks to go, and, importantly, activity has kicked in, we suspect that this expiry is only just getting going.

Don’t forget, next up is Thanksgiving, but until the ratios and zone, become a bit clearer in what way they are going, we have to say we are pretty much back to square one this expiry, especially as the market is now right between the original zone and the new one.

But whichever way it decides, it won’t be gentle.

 

Range:            3245  to  3395         

Activity:          Very good

Type:              On balance bullish

 

 

Nb. Our comment for 11/10/20

 

Indeed, it certainly wasn’t gentle.

More to the point, who knew Pfizer was developing a vaccine? You did! Why didn’t you say? Sorry, what do you mean they have been shouting about it from the rooftops for several months now? And, what, how many others? At least a dozen more vaccines, really! Who knew? …Everyone it seems.

This is not meant to be facetious, but deadly serious.

As please refer to our first comment on this expiry, back on the 21st October, when we alluded to the similarities with the previous expiry, and on the 28th we actually said; “Don’t forget the last expiry, which went down to Y2 before reversing all the way back up to its R ratios, in a 10% or 350-point recovery. Nb. The purists would note if you caught the down leg at the start, that adds another 3% on to the 4-week total round-trip ride. Nice.”

Now, we have already seen the test of Y2, way down there at 3245, and courtesy of the “surprise” announcement yesterday, we have seen this index test R2, with the intraday high of 3645.99.

Please note, and as in the table above, R2 today is now at 3705.

So, down to 3245, which was from 3500 at the start of this expiry, is 255-points, then up to 3645 is 400-points, making a grand total of 655-points, or a massive 18.7%.

This is the way things are now, and as we have said many times in the past, the regulator needs to get a grip, as this is just not natural or beneficial, except, perhaps, to traders.

There is still a week and a half to go this expiry, and the ratios have returned to strengthening below the zone and weakening above it.

The zone itself could easily resume its upward trajectory, and all in good time for Thanksgiving.

For the record, the all time high here was 3588.11, so it has achieved this already.

So, for us, the only thing that remains, would be to see this index in or around its zone, wherever that may end up, this time next week.

 

Range:            3405  to  3605         

Activity:          Moderate

Type:              Bearish

 

Available to buy now

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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November 9th, 2020 by Richard

Like it was scalded the FTSE explodes out of R2 and right back into its zone.

 

 

Nb. Our comment from the 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.

Below R2.

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 it’s 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        

Activity:          Moderate

Type:              Neutral

 

 
Nb. Our comment on 11/09/20

 

Like a scalded cat no less.

As we said, meandering around in R2 would not be a comfortable experience, and its immediate goal should be to get out of it.

It didn’t quite make it last Monday, but the FTSE did however close just above the other level we mentioned, 5650.

Tuesday saw it explode back above 5700, and right back into the Y ratios.

Once back into the Y ratio we did also say their zone should be “plain sailing”, so we were glad to see it close just above the bottom boundary on Thursday.

The one surprise we had was, especially after all the hard work getting there, was how easily this bottom boundary conceded on Friday.

And then, the absolute meal the market made of getting back above it, only succeeding after many attempts, and then not until the early afternoon.

Obviously, we would now expect it to push on and have a go at its upper boundary.

However, the caveat here, is keep a wary eye on the US, as the SPX is now battling Y2, with the R ratios now not far ahead, so it may not get a helping hand as much as it has from across the pond.

But there is still two weeks to go, so although we would be more than happy to see this index remain zone-bound for the remainder of this expiry, we don’t think this will be rather likely.

So, just watch for the relevant ratio levels, while noting where the SPX is in relation to theirs, and act accordingly.

Also, please remember, that it is the mighty Dec expiry up next, and it is already a beast.

 

Range:            5900  to  6000        

Activity:          Moderate

Type:              On balance bearish

 

 

Available to buy now

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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November 4th, 2020 by Richard

is Nov going to be a re-run of Oct for the SPX?

 

Nb. Our comment from the 10/28/20

 

It possibly doesn’t feel like it, but rest assured, those that don’t like volatility should be exceedingly pleased this market remains as sensitive as it is, and as we mentioned above.

The first point to note, is that we have indeed seen the zone move up, and it now resides at 3395-3405.

Again, those fearful of volatility should be very pleased with this, as despite the fact it has been a bit scary coming back down to this level, the fact the market hasn’t gone past it, is a good measure of its sensitivity.

It is also a good measure, that is at least for now, that this market is clinging on to bullish territory.

Having just said that, this now puts the spotlight firmly on yesterday’s close, as it didn’t quite make it back to its zone, meaning it is going to be a rather significant battle between the bulls and the bears today, despite their best efforts.

The other good news, is although both ratio levels have firmed either side of the zone, above it is akin to a tentative creep, whilst below, it is more like a purposeful march.

However, the problem, as it has been from the very start, has been the ginormous Y ratio bandwidth.

Admittedly, it has shrunk considerably, from 535 to 410-points, but this is still huge.

And, if you hang your hat on the market’s sensitivity remaining, then currently Y2 below the zone is at 3245, and above it at 3515.

In either scenario, this represents a serious move, which brings us neatly back round to our opening paragraph, as for those that don’t like, or want, volatility, then best keep those fingers crossed that the zone continues to exert, for as long as it already has, its unlikely and surprising influence.

Don’t forget the last expiry, which went down to Y2 before reversing all the way back up to its R ratios, in a 10% or 350-point recovery. Nb. The purists would note if you caught the down leg at the start, that adds another 3% on to the 4-week total round-trip ride. Nice.

 

Range:            3245  to  3395         

Activity:          Poor

Type:              On balance definitely bearish

 

 

 

Nb. Our comment for 11/04/20

 

Well we sincerely hope that you did read our last note, premarket on the Wednesday 28th October, as the market has pretty much played out exactly as we guessed.

In fact, this is really the reason why we always repeat our previous comment, as it is so much easier doing this than using up space having to reference it.

The real battleground was last Friday, and despite the intraday low coming in at 3233.94, we actually lost count of how many times the SPX bounced off 3245, or just below it, meaning this was the real, or pragmatic, intraday low.

Will this expiry play out exactly the same way as October’s?

Nobody really knows, and, of course, there is an election issue to consider this trip.

We would like to think so, but we have noticed that the zone could easily reverse its recent gain, and that is not good.

Unfortunately, the table above is slightly misleading in this respect, as it shows R1 slipping 25-points, but R2 gaining 15.

The fact is actually different, as R1 has been marginally lower, and not recovered much, whereas R2 actually dropped to 3045, and has recovered up to and beyond its previously published level.

Above the zone it is more accurate, as in the last week the ratios have continued in one direction throughout.

However, the overriding issue, has always been the gargantuan Y ratio bandwidth, which has only slightly improved but is still 395-points wide.

The problem, for us at least, is that if the zone flips back to 3345-3355, or even worse.

But, as there is still two and a half weeks to go, and, importantly, activity has kicked in, we suspect that this expiry is only just getting going.

Don’t forget, next up is Thanksgiving, but until the ratios and zone, become a bit clearer in what way they are going, we have to say we are pretty much back to square one this expiry, especially as the market is now right between the original zone and the new one.

But whichever way it decides, it won’t be gentle.

 

Range:            3245  to  3395         

Activity:          Very good

Type:              On balance bullish

 

 

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November 2nd, 2020 by Richard

Big changes in the FTSE, but the bizarre opening level remains.

 

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        

Activity:          Average

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.

Below R2.

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        

Activity:          Moderate

Type:              Neutral

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