It was a truly awful end to 2018 and at
this very point in the Dec expiry we were using the analogy of it escaping from
under the pile-driver it was trapped beneath.

The net result was the Jan expiry opened
with an unprecedented bandwidth of Y ratio, a truly astonishing 350-points
wide.

It still didn’t stop the SPX from
testing R3 at 2345 with the intraday low of 2346.58, which, so far, is the
expiry low as well.

The fact the market responded, and quite
emphatically, finishing up 117-points that day at 2467.70, revealed it had
broken free from the pile-driver, courtesy of the new expiry no doubt.

Rather intriguingly the Y ratio
bandwidth has stayed incredibly broad, so it has the opportunity to cut loose,
but the DJX was quite a limiting factor.

The fact that their zone is hovering
near the market, or vice versa, we suspect means they want a quiet expiry.

Good luck, is all we can say, as the Y ratio bandwidth still stretches from 2470 all the way up to 2685, so from our perspective anything can happen under these circumstances.

Range: 2570
to 2580 or 2580
to 2605

Activity: Poor

Type: On balance only just bullish

Don’t forget we do not make the rules,
just report the numbers.

This is, in fact, the essence of the
problem, as there are no numbers.

It may well be that one of the other two
step up and take charge, but as things stand here in the SPX it certainly won’t
be this index doing that.

Intermediary expiries to intermediary,
apart from being the least common, tend to be noticeably underrepresented, but
this is going way past that.

The fact is that the zone is a little
bit higher, but the minimal Y1 ratio is so minimal that it could be the zone in
its entirety.

The Y ratio bandwidth “is only”
290-points wide, so less than Jan at this stage, but this is still ridiculously
wide, and, more to the point, there is no depth.

On both sides the ratio only goes as
high as R2, at least last expiry we saw some DR.

Still a few days to go, but skittish doesn’t go anywhere near enough to describing how this index may be in the Feb expiry, and that’s in either direction.

Well it certainly has been a nomadic
zone for the Jan expiry in the FTSE.

In fact, it has changed every time we
have commented, which is actually a reflection on how very low the already minimal
Y level of ratio really is.

This then has led to the fact the zone
could be anywhere from 6650 to 6900.

Of course, this expiry we have already
plumbed the depths of 6536.53 where it took a colossal effort by R3, then at
6550, to turn the tide.

We did mention, that on the flip side,
resistance may be more sensitive, and we have already seen this market test R1
at 6950.

Now, this index is tantalisingly close to its zone, and with just two days to go to the rollover it will be a very nervy time.

Range: 6900
to 6950

Activity: Poor

Type: Neutral

We look at the calendar every day but
still the fact it’s the rollover already comes as a surprise.

Doubly so as it has been a very hectic
start to the year already.

Therefore, we suspect, a bit like us,
many participants have been blindsided as this must be the poorest
representation of ratio we have ever seen in the FTSE.

Of course, with March just around the
corner, then it will not be helped with many sitting on their hands as well.

When you couple this with the fact this
is the first, of only four, intermediary to intermediary expiries, then this
just compounds the lack of ratio.

So, what we say above, about a nomadic
zone, then this expiry is not going to be any different.

In fact, if, and that is a very big if,
this index suddenly develops a degree of sensitivity, then it might just trade
within the Y ratio bandwidth.

However, when one realises that this
bandwidth is 650-points wide then one will also realise that R1 will be very
hard pushed to reverse a market that has that much momentum behind it.

And so far, that is pretty much as high
as it goes, scarily.

Seems like the Jan expiry was just the warm-up act for this the Feb expiry.

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
mundane.

It is
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.

However,
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.

Range: 2545
to 2555

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
home about.

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.

Range: 6275
to 7125

Activity: Moderate

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.

The first
encounter was on the 28^{th} Dec with the intraday high of 23381, and
when it was R2, which turned a 250-point gain into a 76-point loss.

It shied
away from it on New Year’s Eve.

But attacked
again on 2^{nd} Jan with the intraday high of 23413.

The next day
saw that 660-point fall.

By the 4^{th}
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.

And,
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.

Hope you
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”.

The intraday
high on the Wednesday and Thursday was 6753.29 and 6753.14 respectively, so
Friday would have been strike 3.

However, the
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.

Again, these
ratios should be calculated daily, as that is almost the perfect zone bandwidth
test, 6700 to 6850.

We say,
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.

Basically, a
drawdown of 0.11%.

This should
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.

For the
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.

Range: 6700
to 6850

Activity: Poor

Type: Bullish

There were
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
eye”.

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.

Of course,
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.

When this
index was heading towards 10000 this looked misplaced, but after yesterday it
doesn’t look so awkward anymore.

Using a
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.

Well, you
can’t say you weren’t expecting a wild ride.

Of course,
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
ratio bandwidth.

For good
housekeeping, this index has already tested R3, back on the 26^{th} 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.

Also,
significant, was in our last table R1 was at 2445, so is still a step-up, and
yesterday’s intraday low was 2443.96.

The ratios
are as in the table above, but the truly unprecedented magnitude of the Y ratio
bandwidth remains virtually unchanged, at the colossal 305-points.

Buckle-up.

Range: 2420
to 2495

Activity Poor

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
yesterday.

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?

Range: 5650
to 6225

Activity: Poor

Type: On balance bearish

Hooray, we
have some Y ratio in the DJX at last.

The big
question is whether or not this means it is going to join the party?

At the
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.

This now
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
bottom boundary.

And, the good news is that there is still two more weeks to go.

There were
two massive milestones for the FTSE last week.

Firstly,
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.

Secondly,
was the close on Friday, being above 6700, which is back into the Y ratios.

Since our
last ratio table there have been two important developments as well.

Firstly, the
drop in the ratios below the zone.

Secondly,
the zone itself being 150-points wide.

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.

Range: 6700
to 6750 or 6750
to 6900

Activity: Average

Type: Neutral

For the DAX
it was the level of activity that caught our eye, especially as they were
closed for three days last week.

However, the
end result is the ratios below the unchanged zone weakening considerably.

But, the
surprising aspect, especially considering the one-sided nature of said
activity, is the fact there has been precious little movement above the zone.

Most
important, perhaps, is this index scraping a close just above R2.

This makes
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.

What we
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
13500.

So, next
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?

The
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.

Very interestingly
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
expiry.

Of course,
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.

Range: 2345
to 2495

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.

Range: 6225
to 6275

Activity: Average

Type: Neutral

Again, the
capacity for the ratios to surprise is in itself surprising, and for the DJX
this is in three main regards.

Firstly, the
total lack of any Y ratio, in stark contrast to the SPX.

Secondly, if
the SPX’s level of activity was “high” then here it is tremendous.

Finally, we
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.

No doubt the
Dec expiry in the FTSE was a miss, but considering the pressure it was under
from the collapsing US it did rather well in the end we thought.

To put it
into perspective London lost 135.54-points last week, 1.98%, whereas the DJIA
gave up 1655-points, or 6.87%.

Nevertheless,
that will have hurt.

Looking
forward into Jan, and no surprise here but all eyes will be on the other side
of the pond.

But, if they
manage to sort themselves out, the FTSE has 400-points of Y ratio bandwidth to
go banana’s in this trip.

That is, on the assumption that the R ratios will be enough to hold the tide.

Range: 6650
to 6700 or 6700
to 6800

Activity: Moderate

Type: Neutral

For the DAX
most of what we said for London holds just as true, but here the last week’s
fall was 232-points, or just 2.14%.

When we last
looked at this expiry, and we didn’t actually publish, but suffice it to say
activity has been very high, even though if you were looking at the resultant
ratios you wouldn’t have thought so.

The big
changes are the appearance of some Y ratio below the zone and R1 above it.

And, this is
really the crux of the matter, as the Y ratio bandwidth here is a massive
800-points.

When you
also add in the fact that the ratio only goes as high as R1 above the zone,
then that is not a high hurdle really, more of a speed bump.

Again, the issue is with the Street, and if they sort themselves out, and the higher ratios here below the zone prove effective, then there is enormous upside potential here.

In a break
with our normal rollover charts at this point in the expiry we have reverted
back to the more usual three together.

Why? Because
we were intrigued to see just how expensive this expiry was going to be.

The answer.
Exceedingly.

Interestingly
the intraday low yesterday in the SPX was 2441.18 and 2445 is still DR, and
pretty much the only level not to change.

Not much
point in any comment, but what is noteworthy is the activity has been very
impressive even for an expiry, and the end result is the “biggest of the big”
expiries most certainly gets the record as the biggest on record.

And in a
further twist, the ratios, rather than falling off below the zone, as we would
expect in these circumstances, have actually come in, or strengthened,
bizarrely.

Also, it is
alone as the only one still to be inside a ratio bandwidth, the others being
below the hindmost.

Range:

Activity Moderate

Type: On balance only just bullish

We haven’t actually calculated the rollover in the NDX, but as
we said previously, and on many other occasions; “Boy, we bet they are glad they chose the biggest of the big expiries
to implement this “overhaul”, not.

Nevertheless, it still
hasn’t stopped them adding countless more unnecessary strikes”.

This view on the overhaul holds true across all three btw.

The NDX, just like the SPX above, has also seen its ratios below
the zone come in, or strengthen, which just adds to the pain really.

Range:

Activity: Moderate

Type: Neutral

For the DJX
the most noteworthy aspect is that the zone was just a smidgen away from being 23900-24100.

This doesn’t
change anything really, but suffice it to say the intraday high on Thursday was
24057, so it wasn’t for want of trying.

Nevertheless,
and as we said, 23600 was the critical level, so the warning signs were
definitely there.

Although,
here, the ratios have reacted as we would expect, but again this doesn’t change
anything.

Jack-hammer or pile-driver it doesn’t really matter as long as the point is, or has been, clear.

For the DJX Monday was the really big day and which just goes to prove that really the ratio calculations need to be done daily, especially at the tail end of an expiry.

Anyway, the previous Monday, 10^{th}Dec, 23900 was R3 and the DJX had just fallen 1000-points in two days to the intraday low of 23881, hitting R3 and rallying 542-points to actually finish the day in positive territory.

Today, 23900 is R2, and we just don’t know when it changed, but the new level and 23700 are R3 by the smallest possible margin, leaving DR as the far more solid level.

This makes 23600 a very critical level for the DJX, as no matter how much gloom and doom there is about the expiry the fact this market isn’t even in the Y ratios will have a major impact.

For any index players to want to sell that many futures that the amount of DR ratio dynamic delta will be buying is an extremely committed market indeed.

Range: 23600
to 23900

Activity: Moderate

Type: Bullish

Well the 200-point “normal” zone didn’t do anyone much good in Dec, so here we are again with the “new normal” 1000-point one in Jan.

To be honest, a trading range of just 1000-points will seem positively dull after the last two expiries, but that is a distinct possibility.

Mind you, it has to get back into it first, which is no given, but it will make for an entertaining end to the Dec expiry, and start to this.