Category: Uncategorized

January 23rd, 2020 by R1chard

Nb. Our comment from 01/14/20 (Not published)

 

Nb. Our comment on 01/23/20

 

Well if we thought the Jan expiry was thin, then this Feb one has got even thinner.

In fact, it’s virtually opaque.

Please don’t read too much into the fact the zone has moved down to 3145-3155, as rather than being a bullish or bearish signal (down is bearish btw), this movement is really as a result of it being so thin.

Or, to put it another way, devoid of any ratio.

More significant, is the fact that R1 below the zone has not moved at all, which is highly unusual in the first week of a new expiry.

Furthermore, above the zone, R1 has moved in, but only by 20-points, which is nothing considering.

Another very unusual fact, is this expiry is the first of two back-to-back 5-week expiries. One is unusual enough, but we would need a historian to tell us the last time we got two together.

At the end of the day, the really important factor is the immense amount of Y Ratio present, a staggering 260-point bandwidth worth.

So, same as last expiry, it may not happen, but don’t be complacent as the risk of a massive move is there.

In fact, the risk is heightened, and 3% moves are extremely possible, which in cold numbers, is 100-points, so be very aware.

Obviously 3320 and 3280 are the crucial levels.

 

Range:            3320  to  ….          

Activity:          Good      

Type:              On balance bearish

Posted in Uncategorized

January 17th, 2020 by R1chard

Nb. Our comment from 01/14/19

 

The zone has indeed moved up again, and to exactly where we expected it to.

Likewise, the market has just “continued to knock on the retreating ratio door”.

However, now there are different factors added to the mix, being the rollover and expiry.

Therefore, we must point out that the upward move in the zone may not be over, as there is a distinct possibility of it moving to 3220-3230.

There is also an outside chance of seeing 3245-3255.

Either way, for us to see a conventional expiry, we need to see a pullback of at least 30-points, and quite possibly 50-points by the end of this week.

But, apart from the fact it’s the end game for this expiry, it’s all rather bullish, what with the rising zone and the ratios rising and falling either side of it.

Nevertheless, it has hardly been emphatic, and the risks remain, as that Y ratio bandwidth is still a staggering 180-points wide, so still very susceptible to a scare in our view.

It has done exceptionally well to avoid, or nullify, any bears out there, but it is never good when any market has blinkers on, and therefore only sees and hears what it wants to.

Needless to say, 3280 is now the critical level.

 

Range:            3280  to  3305         

Activity:          Average     

Type:              On balance bearish

 

 

Nb. Our comment on 01/17/20

 

The bulls never even glanced back.

In fact, on the day of our last comment the markets intraday low was 3277.19, a direct challenge of the bottom boundary of the R1 ratio bandwidth it was in, and so, naturally, the bottom of our trading range.

So, when the close was 3283.18 the writing was on the wall.

The ratios have continued to build below the zone, and retreat above it, so much so it has created a vacuum into which the zone has risen.

The end result is the zone finishing at 3270-3280, still quite some way behind the settlement price of 3326.19.

This means it stayed in its R1 ratio bandwidth right to the very end.

So, a miss, and a costly one, but being R1 not too punitive, but certainly enough to smart.

However, it is the nature of the miss, as it never visited its zone once during the entire expiry, and that is bad news.

In fact, we would go as far as to say, unnatural.

When markets get this blinkered, and this one-sided, there is only ever one outcome.

The only question is when?

As, this sense of invulnerability can last for quite a while, it may well take a triple witching expiry to force some sense back into it, and the next biggie is not until March.

 

Range:            3310  to  3335          

Activity:          Average      

Type:              On balance bearish

Posted in Uncategorized

January 14th, 2020 by R1chard

Nb. Our comment from 01/07/19

 

We probably should have said in our last comment that the zone was looking likely to move to where it has, so, to avoid the same mistake, it is also very likely to move to 3195-3205 before the end of this expiry.

This is bullish, as is the fact the ratios have built below the zone and weakened above it.

However, this has to be the case for the zone to move.

What is more important is the manner, in that if the ratio declines from say R1 to allow the zone to move in to that vacated space, then that is far more impressive than it just triumphing over the minimal Y1.

In fact, moving up into Y1 is almost more like osmosis rather than an aggressive takeover.

But credit where it is due, as at least its upwards.

And it is all well and good as things stand, but don’t ignore the fact that this index is extremely vulnerable to a shock, as there is still an absolutely massive Y Ratio bandwidth of 185-points.

Even more if you go from R2, which it has been challenging, down to the corresponding R2, which is 260-points.

As ever, it may not happen, and it could turn out to be one of those that continue to just knock on the retreating ratio door, but that doesn’t mean the risk is not there.

The question perhaps should be, is why there is no ratio building up to support this market?

 

Range:            3230  to  3255         

Activity:          Moderate     

Type:              On balance only jut bearish

 

 

 

Nb. Our comment on 01/14/20

 

The zone has indeed moved up again, and to exactly where we expected it to.

Likewise, the market has just “continued to knock on the retreating ratio door”.

However, now there are different factors added to the mix, being the rollover and expiry.

Therefore, we must point out that the upward move in the zone may not be over, as there is a distinct possibility of it moving to 3220-3230.

There is also an outside chance of seeing 3245-3255.

Either way, for us to see a conventional expiry, we need to see a pullback of at least 30-points, and quite possibly 50-points by the end of this week.

But, apart from the fact it’s the end game for this expiry, it’s all rather bullish, what with the rising zone and the ratios rising and falling either side of it.

Nevertheless, it has hardly been emphatic, and the risks remain, as that Y ratio bandwidth is still a staggering 180-points wide, so still very susceptible to a scare in our view.

It has done exceptionally well to avoid, or nullify, any bears out there, but it is never good when any market has blinkers on, and therefore only sees and hears what it wants to.

Needless to say, 3280 is now the critical level.

 

Range:            3280  to  3305          

Activity:          Average      

Type:              On balance bearish

Posted in Uncategorized

January 13th, 2020 by R1chard

Nb. Our comment from the 01/06/20

 

As we said last week, “7550 is a massive level now”, and on Friday the intraday low was 7551.00.

But on the Tue and Thu either side of the New Year break the intraday low was 7532.38 and 7542.44 respectively.

So, Fri made that strike 3, and we wouldn’t expect it to hold out again.

Even more so as the ratios have slipped there, and so, as 7550 stands, it only just makes the threshold of R2, so it might be better to think of it as R1 as the day goes on.

In perspective, this means R1 is going up against the dynamic delta that goes with DR ratio, and really there should only ever be one winner in that fight.

Although, finishing up 18-points on Fri was bit of a surprise, no matter that 7550 was R2.

So, for us, this is still a very scary situation, with now only R1 standing in the way of this market racing down to its zone, 200-points away.

Of course, we can’t ignore its resilience, but at the same time we can’t ignore that this expiry remains in a very precarious position.

How the new geopolitical scenario will play out, who knows, but to us, this has only just increased the potential of “a scare”, as the risks are still the same as they were.

In fact, the only ratio to actually change, is B1 which slips out a fraction.

Perhaps worth remembering is that this expiry is only just at the half way stage, so you have two more weeks of this.

 

Range:            7550  to  7650         

Activity:          Very poor

Type:              On balance bullish        

 

 

Nb. Our comment on 01/13/20

 

So, 7550 remains “a massive level”.

However, for slightly different reasons as the ratios have evolved around it.

Nevertheless, we should point out that since that test of 7650, or what was DR ratio, way back on the 27th December, the FTSE has been frightened to go back there again.

And, lets face it, what with constant record highs Stateside, it’s not as if it hasn’t had ample opportunity.

In fact, a fortnight worth of opportunity, which in market terms is an eternity.

In our last comment, 7550 was the demarcation line between the R ratios and Y ratio, now it is the upper boundary of the zone, which has conveniently moved.

This means rather than 7550 sitting on top of an abyss of Y ratio, that went all the way down to 7350, it is now just the gateway to the zone.

Rather handy considering this is rollover, with the expiry on Friday.

It will get very fruity next week, it always does over the expiry, but with the added geopolitical situation it’s a given.

Therefore, the real new demarcation line may well now prove to be 7450.

This being the bottom boundary of the new zone, and if that capitulates, then there is an awful lot of Y ratio beneath that.

At the end of the day, considering the circumstances, to even be in with a shout of a normal expiry is a result.

But it will be a long week, and after the Dec expiry, Wed will be very significant.

 

Range:            7550  to  7650         

Activity:          Very poor

Type:              On balance bullish 

Posted in Uncategorized

January 7th, 2020 by R1chard

Nb. Our comment from 12/27/19

 

It is always tricky at this time of year, what with half days and Europe being closed for 2 days but the US for only one.

So, thin markets, which are vulnerable to the Santa rally, or what we refer to as the “Bonus Rally”, but there are aspects already apparent for the Jan expiry, now just a few days old.

The first is how very thin it is, with the highest level of ratio being just R3.

Secondly, how much Y ratio there is around.

Thirdly, where the market is currently in relation to the ratio and zone levels.

However, comparing the 18th to the 27th (right to left in the above table) it is plainly obvious the ratios are building below the zone, and retreating above it, both bullish.

As is the fact the zone should soon start moving upwards.

In opposition, is the fact the index is already in the R2 ratio bandwidth with only R3 above, just over 1% away.

What should be a sobering thought, is that the corresponding R ratios do not even start until 3045, an impressive 200-points away.

It may not get a scare, and like Dec, just keep knocking on that ratio door until it gives way, but you should at least be aware that should the bulls commitment waver there is next to nothing below this market to give it any support, which gets our alarm bells ringing at least.

 

Range:            3230  to  3280          

Activity:          Average      

Type:              Bearish

 

Nb. Our comment on 01/07/20

 

We probably should have said in our last comment that the zone was looking likely to move to where it has, so, to avoid the same mistake, it is also very likely to move to 3195-3205 before the end of this expiry.

This is bullish, as is the fact the ratios have built below the zone and weakened above it.

However, this has to be the case for the zone to move.

What is more important is the manner, in that if the ratio declines from say R1 to allow the zone to move in to that vacated space, then that is far more impressive than it just triumphing over the minimal Y1.

In fact, moving up into Y1 is almost more like osmosis rather than an aggressive takeover.

But credit where it is due, as at least its upwards.

And it is all well and good as things stand, but don’t ignore the fact that this index is extremely vulnerable to a shock, as there is still an absolutely massive Y Ratio bandwidth of 185-points.

Even more if you go from R2, which it has been challenging, down to the corresponding R2, which is 260-points.

As ever, it may not happen, and it could turn out to be one of those that continue to just knock on the retreating ratio door, but that doesn’t mean the risk is not there.

The question perhaps should be, is why there is no ratio building up to support this market?

 

Range:            3230  to  3255          

Activity:          Moderate      

Type:              On balance only just bearish

Posted in Uncategorized

January 6th, 2020 by R1chard

Nb. Our comment from the 12/30/19

 

There are going to be quite a few nursing a sore wallet after the Dec expiry for sure.

The good news is that it hasn’t stopped them from playing in the Jan expiry.

However, that’s where the good news ends, as this expiry is rather messed up, and half days and closed days are not exactly helping get it sorted.

Bizarrely the zone has actually fallen, which is bearish, but at least this has put some Y ratio either side now.

The problem was the FTSE opened up on Monday at 7582.48, which meant it was above 7550, then around R3, but now R2.

On top of which 7650 has remained at DR, and this index’s intraday high on Friday was 7665.40, having basically traded the entire day up until the Street opened, in the narrowest of margins, between 7650 and 7660.

Conservative majority, Brexit, or whatever, in the Jan expiry this index should just not be taking on DR ratio.

In fact, it is in a remarkably similar situation to the SPX, in that all’s well as long as the bulls remain committed and willing to keep knocking on the ratio door until it gives way.

But, if there is a scare, then there is virtually no ratio support until you get down to 7150, a very scary 500-points away.

So, for us at least, the risk profile is very high, and 7550 is a massive level now, with huge implications.

 

Range:            7550  to  7650         

Activity:          Good

Type:              Neutral         

 

 

 

 

Nb. Our comment on 01/06/20

 

As we said last week, “7550 is a massive level now”, and on Friday the intraday low was 7551.00.

But on the Tue and Thu either side of the New Year break the intraday low was 7532.38 and 7542.44 respectively.

So, Fri made that strike 3, and we wouldn’t expect it to hold out again.

Even more so as the ratios have slipped there, and so, as 7550 stands, it only just makes the threshold of R2, so it might be better to think of it as R1 as the day goes on.

In perspective, this means R1 is going up against the dynamic delta that goes with DR ratio, and really there should only ever be one winner in that fight.

Although, finishing up 18-points on Fri was bit of a surprise, no matter that 7550 was R2.

So, for us, this is still a very scary situation, with now only R1 standing in the way of this market racing down to its zone, 200-points away.

Of course, we can’t ignore its resilience, but at the same time we can’t ignore that this expiry remains in a very precarious position.

How the new geopolitical scenario will play out, who knows, but to us, this has only just increased the potential of “a scare”, as the risks are still the same as they were.

In fact, the only ratio to actually change, is B1 which slips out a fraction.

Perhaps worth remembering is that this expiry is only just at the half way stage, so you have two more weeks of this.

 

Range:            7550  to  7650         

Activity:          Very poor

Type:              On balance bullish        

Posted in Uncategorized

December 30th, 2019 by R1chard

Nb. Our comment from the 12/19/19 (Not Published)

 

Nb. Our comment on 12/30/19

 

There are going to be quite a few nursing a sore wallet after the Dec expiry for sure.

The good news is that it hasn’t stopped them from playing in the Jan expiry.

However, that’s where the good news ends, as this expiry is rather messed up, and half days and closed days are not exactly helping get it sorted.

Bizarrely the zone has actually fallen, which is bearish, but at least this has put some Y ratio either side now.

The problem was the FTSE opened up on Monday at 7582.48, which meant it was above 7550, then around R3, but now R2.

On top of which 7650 has remained at DR, and this index’s intraday high on Friday was 7665.40, having basically traded the entire day up until the Street opened, in the narrowest of margins, between 7650 and 7660.

Conservative majority, Brexit, or whatever, in the Jan expiry this index should just not be taking on DR ratio.

In fact, it is in a remarkably similar situation to the SPX, in that all’s well as long as the bulls remain committed and willing to keep knocking on the ratio door until it gives way.

But, if there is a scare, then there is virtually no ratio support until you get down to 7150, a very scary 500-points away.

So, for us at least, the risk profile is very high, and 7550 is a massive level now, with huge implications.

 

Range:            7550  to  7650         

Activity:          Good

Type:              Neutral         

Posted in Uncategorized

December 27th, 2019 by R1chard

Nb. Our comment from 12/18/19 (Not published)

 

Nb. Our comment on 12/27/19

 

It is always tricky at this time of year, what with half days and Europe being closed for 2 days but the US for only one.

So, thin markets, which are vulnerable to the Santa rally, or what we refer to as the “Bonus Rally”, but there are aspects already apparent for the Jan expiry, now just a few days old.

The first is how very thin it is, with the highest level of ratio being just R3.

Secondly, how much Y ratio there is around.

Thirdly, where the market is currently in relation to the ratio and zone levels.

However, comparing the 18th to the 27th (right to left in the above table) it is plainly obvious the ratios are building below the zone, and retreating above it, both bullish.

As is the fact the zone should soon start moving upwards.

In opposition, is the fact the index is already in the R2 ratio bandwidth with only R3 above, just over 1% away.

What should be a sobering thought, is that the corresponding R ratios do not even start until 3045, an impressive 200-points away.

It may not get a scare, and like Dec, just keep knocking on that ratio door until it gives way, but you should at least be aware that should the bulls commitment waver there is next to nothing below this market to give it any support, which gets our alarm bells ringing at least.

 

Range:            3230  to  3280          

Activity:          Average      

Type:              Bearish

Posted in Uncategorized

December 19th, 2019 by R1chard

Nb. Our comment from the 12/12/19

 

The FTSE has definitely been stuck in our trading range since we last posted, namely 7100 to 7250.

Although the support does tend to kick in a bit more above 7100 than we would like, specifically around 7135, but it is after all a very serious level.

And probably why over the last 7 days 5 of them have tested this low.

If 7100 was to give way then 7000 would be the next stop.

On a more positive note, the zone is again very likely to move to 7150-7250, which also explains why the half way (7125) between the current support at 7100 may well be receiving a bit of unintentional assistance from 7150, the bottom of the new zone.

However, it is the other end of the trading range, 7250, that is of more interest at present.

Essentially, because the last 4 days have seen intraday highs of 7241.50, 7255.73, 7234.40 and 7250.67.

Again, but this time, R1 at 7250, may well be receiving a bit of unintentional assistance from 7250, the top of the new zone, when, or if, it does move.

It is a bit of a grey area, the point at which it becomes likely to move and when it actually does, made worse by this being the biggest of the big expiries, which means it doesn’t do anything quickly.

But, it better sort itself out soon, as next week it’s the rollover and expiry, and Decembers are very rarely dull affairs.

 

Range:            7100  to  7250          

Activity:          Very poor

Type:              Bearish

 

Nb. Our comment on 12/19/19

 

Considering the last December election was in 1923 one can excuse derivatives for getting caught out, especially as they were not even around then.

They were around back in 1987, when we last saw this degree of Tory majority, but it is fair to say that then the derivative market was a very far cry indeed from today’s incarnation.

To be fair it was always going to be tough, as this expiry is the culmination of the entire year, and this election, with everything riding on it, was only called but a month or so ago.

Having tangled with 7450 before, it was interesting to see the market shy away from another go at it on the actual day, the 12th, the intraday high being 7429.04.

It was the Monday, when the full extent of what had happened and its ramifications had sunk in, that did the damage, although 7450 did put up bit of a fight.

However, the sharp eyed would have noticed the intraday high that day was 7552.65.

The market didn’t go there again on Tuesday, but on Wednesday it did everything it possibly could to break through, with numerous tests.

So, no doubt where equities and fundamentals want to take this market, the only problem is the expiry.

Also, no doubt, derivatives have been swept along and aside by the landslide, and so are currently trying desperately to adjust. There is no better example of this than 7450, which was DR, but is now just R2, an enormous fall in just a few days.

The only question now, for us at least, is will they do so in time for Friday?

Sometimes equities do win, for sure, but this is already a massively expensive expiry for the option boys, and likely to get more so, which is going to really hurt.

 

Range:            7450  to  7550         

Activity:          Moderate

Type:              Bearish     

Posted in Uncategorized

December 18th, 2019 by R1chard

Nb. Our comment from 12/12/19

 

The static zone is but a minor concern, as with so much Y ratio around it will move, it is really just a matter of when.

As we have mentioned the Dec expiry is the biggest of the big, and considering the volumes we are seeing this year, it could actually beat last year, making it one of the biggest ever.

However, one of the drawbacks of this gargantuan volume, is that it doesn’t move very quickly, hence the static zone.

Furthermore, it is just as well it keeps knocking on the R3 door, as if it got a shock, as things stand, the zone at 2995-3005 is a very long way away indeed, and nothing but Y ratio in-between, and for a triple, that is tantamount to no ratio, which means no support.

Again, and as we mentioned last time, that this market has been to 3155 before (3154.26 on 27th Nov), and despite it remaining at R3, you know the market knows what to expect should it go there again.

Additionally, you also know, that with R2 slipping 25-points, and DR 10-points, either side of it, that the ratios above the zone are in full retreat mode, so don’t expect it to hold for much longer.

Therefore, it might be worth knowing that 3175 is what we call a “step-up”, so that will soon become the next R3 level.

Past experience suggests to us, that in, or by, next week’s rollover and expiry, the zone will settle at 3095-3105, which is still a way below the current market, so please bear this in mind, especially as the rollover is now but 4 trading days away.

 

Range:            3130  to  3155

Activity:          Moderate       

Type:              Bearish

 

Nb. Our comment on 12/18/19

 

It is exactly this sort of expiry that should make the regulators very nervous indeed, but pound to a penny they are totally ignorant of the inherent risk over the remainder of this week.

Of course, they should be, and by not being, makes it seem all the worse should anything happen.

It is not the zone, well not entirely, as it will move to 3095-3105, even though this is still 100-points below the market.

However, 4% is not really that big an issue.

It is more to do with why, or how, this expiry has evolved, as it never really retrenched.

But, at the same time, the ratio below the zone hasn’t built up sufficiently to get the zone moving upwards.

Rather, it has been the capitulating ratio, where the market has been knocking on the “ratio door” all the way up, almost sucking this market higher.

Also, it hasn’t quite made the biggest expiry ever by volume, basically because a lot of call activity has been cashing in (hence the capitulating ratio), but going the other way, where it has been very decent activity, just not enough to shift the zone.

This means only one thing, lots of short sellers of way OTM puts thinking its easy money.

This is why they should be very nervous, irrespective of the fact the corresponding R3 doesn’t appear until 2895, and that is a percent that would scare most.

May well pass unnoticed, but that doesn’t mean one should ignore the risk.

 

Range:            3155  to  3195          

Activity:          Moderate      

Type:              Bearish

Posted in Uncategorized