Category: Uncategorized

February 2nd, 2021 by Richard

The SPX is still extremely sensitive to low ratios.

 

Nb. Our comment from the 01/26/21

 

If it’s any consolation we are feeling a bit guilty for not mentioning the fact that the zone did indeed move yesterday.

However, in our defence, we did say to take note of the new “shoo-in” level, 3795-3805.

Those that did were hopefully well prepared when the market fell yesterday to its intraday low of 3797.16, as this was definitely a test of the new zones’ bottom boundary.

And for those more familiar with our analysis, then they would also appreciate that this is also the demarcation line between bullish and bearish territory.

As such it can prove to be a hotly contested area, as was the case yesterday.

Although, this index being in Y1 ratio yesterday, this was exactly what we would expect, being a 60-point move, 120-points if you count there and back.

So, lots of big moves, whipsaw and volatility.

This index is still in a gargantuan Y1 ratio bandwidth, 310-points, and, if possible, an even bigger overall Y ratio bandwidth, 485-points.

Furthermore, we still have virtually a full four more weeks to go.

And so far, although activity is there, it is not really making that big an inroad, so we don’t envisage these bandwidths decreasing significantly any time soon.

Therefore, we would not expect things quietening down soon, in fact probably the reverse.

All in all, this expiry is building up to be tremendously exciting, and if Y2 fails to influence proceedings, then it could even become a classic.

 

 

Range:            3805  to  3905           

Activity:          Average

Type:              On balance decently bearish

 

 

 

Nb. Our comment for 02/02/21

 

Well, the market most certainly has not quietened down, so all as normal and very much expected in our eyes.

Therefore, please do not read too much, in fact anything at all, into these moves, as they are simply a result of there being virtually no ratio around.

In fact, it is worth pointing out that the intraday low on Thursday 29th was 3694.12, which many may remember was the bottom boundary of the old zone, when it was 3695-3705 just a few days ago.

The point of mentioning this is that this level still represents a step-up in ratio, albeit a step-up within the Y1 ratio bandwidth means it is hardly big, it was still evidently sufficient, which means this index is still extremely sensitive.

Please don’t forget it was Y2, then at 3855, that caught this market with the intraday high of 3859.75, back on Wednesday 20th Jan.

Getting back to the present, and at last we have seen some decent activity, and on both sides, so at least the ratios are moving.

However, the zone is the all-important level, and the failure to reach it after last Thursday’s rally should have been a warning.

Interestingly we are seeing 3745-3755 make a move to being the next one, which would be bit of a game changer as it’s a bearish move, so we will keep a weather eye on developments here.

Although the respective Y ratio bandwidths have shrunk, there is still plenty of room there, with Y1 still being 275-points wide for example.

Furthermore, we still have almost a full three weeks to go in this expiry, so now we are seeing activity, as long as it continues, we should now start seeing things go up a notch or two as we enter the back nine.

Food for thought: Just imagine what might happen if this market became aggressive and now fancied taking on the R ratios?

 

Range:            3595  to  3795           

Activity:          Good

Type:              Neutral

 

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February 1st, 2021 by Richard

FTSE volatility to calm down.

 

Nb. Our comment from the 01/25/21

 

Well last week was most definitely all about R1 at 6700, and it took 3 strikes to break down below it, which was all very by-the-book (or should we say “numbers”).

The intraday lows of 6697.67 and 6697.46 on Tue and Wed respectively were only breached on Friday, when 6700 hardly proffered any resistance at all.

Although, those followed the FTSE closely, would have noticed the market bump its head at that level and retreat, late on in the afternoon.

However, before we get on to this week, we would like to point out that the intraday high on the FTSE on Friday was 6715.66, which is (we suppose) connected from, or to, the fact that the previous market close and next day open, are one and the same, in this case 6715.42.

The point being is that, in the real world, the market open was nearer 6700, so we are at a total loss to explain this statistic. And for all you algo traders out there today, back in 2001, when we were called “mechanical”, the first maxim was “crap-in = crap-out” when talking about data, which, after all, is what it is all about.

Anyway, there have been huge changes in the ratios, driven by the fact activity has registered as “good”, which is actually rather impressive for this expiry at this particular time.

The main point to note, is that 6700 doesn’t feature anymore, cue drumroll.

This means that this index is now in its Y ratio, which ironically was also the situation when it eventually ducked below 6700.

Worth noting that the intraday low on Friday was 6651.71.

So, in similarity with the SPX, it is in a huge Y ratio bandwidth now, overall standing at 450-points, but above the zone it is 250-points alone…enjoy.

 

Range:            6550  to  6800       

Activity:          Good

Type:              On balance just fractionally bearish

 

 

Nb. Our comment on 02/01/21

 

It seems an age ago we were saying how lop-sided this market was, and it was tangling with R1 all the way up there at 6700.

But it has only been a fortnight.

Probably worth your while going back and checking on our note of the 18th January.

Of course, the ratios are all about the dynamic delta, and as such they are dynamic in their own right, and so much so recently, all that “very scary” Y ratio we have been mentioning, has all but vanished.

All that now remains is just 100-points above the zone.

Hands up, we didn’t see that coming, or at least not so quickly.

But it does go a long way to explaining why this market was loitering around in the vicinity of its zone for so long.

And, moan, moan, moan, but this stupidity of the open being the previous days close, totally distorted Thursday 28th, as the open should have been circa 6515 and the intraday high 6549, not both being Wednesday’s 6567.37.

As the intraday low that day was 6439.55, then the high of 6549, made that a zone bandwidth test.

So, no great surprise to see a breakout on the Friday.

OK, so it’s no longer Y ratio below the zone, but the levels are the same, so 6350 is still the critical number.

In fact, it makes it very appropriate, as at the start of this expiry, the market started in R1, the only difference being that this was above the zone.

There are still three entire weeks to go, but with the disappearance of most of the Y ratio, hopefully everything will now calm down considerably.

 

Range:            6350  to  6450       

Activity:          Moderate

Type:              On balance just fractionally bearish

 

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Posted in Uncategorized

January 26th, 2021 by Richard

The SPX zone does move just as expected, and already a boundary test.

 

Nb. Our comment from the 01/22/21

 

Well, we couldn’t have guessed what might happen more closely, as we got our “huge moves” and Y2 did indeed “play quite a role”.

Interestingly on the same day as well, although the first day of this expiry, Tuesday 19th was a very decent 36-point move in itself.

But we are of course referring to the Wednesday, where it exploded out of the gate and managed a 60-point move, before it hit the roadblock of Y2 at 3855.

For those that knew where Y2 was, then they wouldn’t, or shouldn’t, have been surprised when it hit this level around their midday, and basically flatlined along it for the rest of the day.

The intraday high of 3859.75, was literally a 5-minute spike towards the very end of the day, so slightly misleading.

Yesterday was also interesting, as it gapped up at the open, and therefore started at 3857.46, so above Y2, but the fact it hardly made any further northerly progression is significant as well.

As is where it closed.

However, and as you can see in the above table, Y2 has today slipped to 3895, so the market has clear skies above it now, so the bulls have actually won, but, we fear, the damage may have already been done.

For the record, in the above table it appears as if R1 above the zone has come in (strengthened), but actually it was 3960 on Wednesday, so it had strengthened, but has now weakened today, just not quite back to where it started.

The fact that the ratios have strengthened below the zone is also bullish, but at the end of the day, the risk we identified at the outset still remains.

Which is, the Y1 ratio bandwidth is now even wider, at 300-points, and the overall Y ratio bandwidth is slightly narrower, but still a very scary 535-points.

Finally, quite how the zone hasn’t moved to 3795-3805 we don’t know, but it does look a shoo-in, so do please make a note of this level just in case.

 

Range:            3705  to  3895           

Activity:          Average

Type:              On balance just fractionally bearish

 

 

Nb. Our comment for 01/26/21

 

If it’s any consolation we are feeling a bit guilty for not mentioning the fact that the zone did indeed move yesterday.

However, in our defence, we did say to take note of the new “shoo-in” level, 3795-3805.

Those that did were hopefully well prepared when the market fell yesterday to its intraday low of 3797.16, as this was definitely a test of the new zones’ bottom boundary.

And for those more familiar with our analysis, then they would also appreciate that this is also the demarcation line between bullish and bearish territory.

As such it can prove to be a hotly contested area, as was the case yesterday.

Although, this index being in Y1 ratio yesterday, this was exactly what we would expect, being a 60-point move, 120-points if you count there and back.

So, lots of big moves, whipsaw and volatility.

This index is still in a gargantuan Y1 ratio bandwidth, 310-points, and, if possible, an even bigger overall Y ratio bandwidth, 485-points.

Furthermore, we still have virtually a full four more weeks to go.

And so far, although activity is there, it is not really making that big an inroad, so we don’t envisage these bandwidths decreasing significantly any time soon.

Therefore, we would not expect things quietening down soon, in fact probably the reverse.

All in all, this expiry is building up to be tremendously exciting, and if Y2 fails to influence proceedings, then it could even become a classic.

 

 

Range:            3805  to  3905           

Activity:          Average

Type:              On balance decently 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.

Posted in Uncategorized

January 25th, 2021 by Richard

Significant Ratio changes in the FTSE.

 

Nb. Our comment from the 01/18/21

 

We don’t normally include our last comment (from the Jan expiry) but this time we are making an exception, basically because it’s worth noting what we said “Guessing on how things might turn out, based on a lot of expiry end-games, getting this market below 6750 will be an impressive achievement for derivatives” and the fact that the EDSP was 6767.92.

Also, in another break from the norm, in the table above we have included last year’s Feb expiry ratio table.

Not for nostalgia purposes, for those that remember the market north of 7000, but to highlight how unusual today’s table is.

Although they both do have one striking similarity, which is that they are both top-heavy, or as we have been saying recently, lop-sided.

For those that remember how aggressive the last expiry was, with the FTSE taking on DR, and how critical 6850 became, then the big question is whether or not this attitude will persist in the Feb expiry.

It is always very difficult to strip out how much of Friday’s price action was down to the Jan expiry, so it is therefore virtually impossible to tell whether or not the bounce up from the intraday low of 6676.55 to a close that is above R1 in this expiry, is a continuation of this aggression.

This makes 6700 a very critical level in this expiry, as if the market is happy to trade within this R1 ratio bandwidth, then it has a lot of room to manoeuvre in.

But, take good note, that again 6850 is a big level, and this time it also jumps an entire ratio, leapfrogging R2 and going straight to R3, which will come as a very nasty surprise should the market go there again.

However, below 6700, lurks a very scary 500-point Y ratio bandwidth.

One thing for certain, is it is highly unlikely that this new trip will be dull.

 

Range:            6700  to  6850       

Activity:          Average

Type:              Bearish

 

Nb. Our comment on 01/25/21

 

Well last week was most definitely all about R1 at 6700, and it took 3 strikes to break down below it, which was all very by-the-book (or should we say “numbers”).

The intraday lows of 6697.67 and 6697.46 on Tue and Wed respectively were only breached on Friday, when 6700 hardly proffered any resistance at all.

Although, those followed the FTSE closely, would have noticed the market bump its head at that level and retreat, late on in the afternoon.

However, before we get on to this week, we would like to point out that the intraday high on the FTSE on Friday was 6715.66, which is (we suppose) connected from, or to, the fact that the previous market close and next day open, are one and the same, in this case 6715.42.

The point being is that, in the real world, the market open was nearer 6700, so we are at a total loss to explain this statistic. And for all you algo traders out there today, back in 2001, when we were called “mechanical”, the first maxim was “crap-in = crap-out” when talking about data, which, after all, is what it is all about.

Anyway, there have been huge changes in the ratios, driven by the fact activity has registered as “good”, which is actually rather impressive for this expiry at this particular time.

The main point to note, is that 6700 doesn’t feature anymore, cue drumroll.

This means that this index is now in its Y ratio, which ironically was also the situation when it eventually ducked below 6700.

Worth noting that the intraday low on Friday was 6651.71.

So, in similarity with the SPX, it is in a huge Y ratio bandwidth now, overall standing at 450-points, but above the zone it is 250-points alone…enjoy.

 

Range:            6550  to  6800       

Activity:          Good

Type:              On balance just fractionally 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.

Posted in Uncategorized

January 22nd, 2021 by Richard

The bulls have won, but has the Y2 damage already been done?

 

Nb. Our comment from the 01/19/21

 

After a flash of aggression in the Jan expiry, in the end, it was all a bit of a damp squib, having chosen the target of 3795-3805 from as early as the Monday.

Then you have the rollover from an intermediary to an intermediary expiry, which are always low, so probably a good thing they are the least usual.

Then, to compound it all, this expiry is a five-week one, which are themselves notorious for being slow out of the gate.

The holiday on Monday won’t have helped either.

So, having said all that, the way the pathetic amount of ratio, that is around currently, is aligned, then there is potential for some huge moves.

The Y1 ratio bandwidth it is in above the zone is a massive 150-points wide in itself, for example.

The entire Y1 ratio bandwidth is 285-points, and the overall Y ratio bandwidth is a difficult to imagine 585-points wide.

On top of which, literally and metaphorically, is R1, all alone and not really that imposing to a market with a decent breeze in its sails.

Don’t forget, in the January expiry, Y2 played quite a role.

However, we won’t know how potent it will be this trip until it gets tested.

In the meantime, there is so much scope here, it could easily ping around anywhere and everywhere.

We used to use the ice-rink analogy a lot where the NDX was concerned, but is just as equally appropriate here under these circumstances, as a just the smallest bit of momentum could go a very long way.

 

Range:            3705  to  3855           

Activity:          Good

Type:              On balance only just bearish

 

 

 Nb. Our comment for 01/22/21

 

Well, we couldn’t have guessed what might happen more closely, as we got our “huge moves” and Y2 did indeed “play quite a role”.

Interestingly on the same day as well, although the first day of this expiry, Tuesday 19th was a very decent 36-point move in itself.

But we are of course referring to the Wednesday, where it exploded out of the gate and managed a 60-point move, before it hit the roadblock of Y2 at 3855.

For those that knew where Y2 was, then they wouldn’t, or shouldn’t, have been surprised when it hit this level around their midday, and basically flatlined along it for the rest of the day.

The intraday high of 3859.75, was literally a 5-minute spike towards the very end of the day, so slightly misleading.

Yesterday was also interesting, as it gapped up at the open, and therefore started at 3857.46, so above Y2, but the fact it hardly made any further northerly progression is significant as well.

As is where it closed.

However, and as you can see in the above table, Y2 has today slipped to 3895, so the market has clear skies above it now, so the bulls have actually won, but, we fear, the damage may have already been done.

For the record, in the above table it appears as if R1 above the zone has come in (strengthened), but actually it was 3960 on Wednesday, so it had strengthened, but has now weakened today, just not quite back to where it started.

The fact that the ratios have strengthened below the zone is also bullish, but at the end of the day, the risk we identified at the outset still remains.

Which is, the Y1 ratio bandwidth is now even wider, at 300-points, and the overall Y ratio bandwidth is slightly narrower, but still a very scary 535-points.

Finally, quite how the zone hasn’t moved to 3795-3805 we don’t know, but it does look a shoo-in, so do please make a note of this level just in case.

 

Range:            3705  to  3895           

Activity:          Average

Type:              On balance just fractionally 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.

Posted in Uncategorized

January 19th, 2021 by Richard

Distinct lack of ratio in the SPX Feb expiry.

 

Nb. Our comment from the 01/15/21 (Not published)

 

Nb. Our comment for 01/19/21

 

After a flash of aggression in the Jan expiry, in the end, it was all a bit of a damp squib, having chosen the target of 3795-3805 from as early as the Monday.

Then you have the rollover from an intermediary to an intermediary expiry, which are always low, so probably a good thing they are the least usual.

Then, to compound it all, this expiry is a five-week one, which are themselves notorious for being slow out of the gate.

The holiday on Monday won’t have helped either.

So, having said all that, the way the pathetic amount of ratio, that is around currently, is aligned, then there is potential for some huge moves.

The Y1 ratio bandwidth it is in above the zone is a massive 150-points wide in itself, for example.

The entire Y1 ratio bandwidth is 285-points, and the overall Y ratio bandwidth is a difficult to imagine 585-points wide.

On top of which, literally and metaphorically, is R1, all alone and not really that imposing to a market with a decent breeze in its sails.

Don’t forget, in the January expiry, Y2 played quite a role.

However, we won’t know how potent it will be this trip until it gets tested.

In the meantime, there is so much scope here, it could easily ping around anywhere and everywhere.

We used to use the ice-rink analogy a lot where the NDX was concerned, but is just as equally appropriate here under these circumstances, as a just the smallest bit of momentum could go a very long way.

 

Range:            3705  to  3855           

Activity:          Good

Type:              On balance only just 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.

Posted in Uncategorized

January 18th, 2021 by Richard

Critical level v. early this expiry for the FTSE

 

Nb. Our comment from the 01/11/21 (Nb. The January Expiry comment)

 

Wowee, is about all we can say.

As you can see from our last comment (above) we fully expected, or perhaps suspected would be more appropriate, that the FTSE had R2 at 6650 in its sights, and this time wasn’t going to take no for an answer.

The momentum also took it straight past R3 at 6700, meaning DR was the next stop.

The intraday high of 6859.14, and the close at 6841.86, pretty much sums it up.

One of the peculiarities of the FTSE, and the NDX is similar, is that in a 100-constituent index certain stocks, or sectors, carry a disproportionate weighting, and if they get the wind in their sails, there is not much that can stand in the way.

However, this momentum tends to be relatively short-lived, and the expiry just carries on, at least to its expiry, which in this case, is this week.

We have seen the zone move, which we flagged back on the 21st and 31st Dec.

But more importantly, and continuing what we saw in our previous comment, activity has been high, coming in again at “good” on our scale, and significantly, has been “bearish”.

With no qualifier in front, as in “on balance”, this means that calls have been taken off the table while puts have been added.

This still leaves it lop-sided, but from 267.6% to now “just” 166.5%, is a huge improvement, but still top heavy nevertheless, so with the rollover and expiry this week it is going to have to go some to just hang on to these hard-fought gains.

Guessing on how things might turn out, based on a lot of expiry end-games, getting this market below 6750 will be an impressive achievement for derivatives.

Needless to say, this makes 6850 the new, or still, crucial level to watch out for.

 

Range:            6850  to  6950       

Activity:          Good

Type:              Bearish

 

Nb. Our comment on 01/18/21

 

We don’t normally include our last comment (from the Jan expiry) but this time we are making an exception, basically because it’s worth noting what we said “Guessing on how things might turn out, based on a lot of expiry end-games, getting this market below 6750 will be an impressive achievement for derivatives” and the fact that the EDSP was 6767.92.

Also, in another break from the norm, in the table above we have included last year’s Feb expiry ratio table.

Not for nostalgia purposes, for those that remember the market north of 7000, but to highlight how unusual today’s table is.

Although they both do have one striking similarity, which is that they are both top-heavy, or as we have been saying recently, lop-sided.

For those that remember how aggressive the last expiry was, with the FTSE taking on DR, and how critical 6850 became, then the big question is whether or not this attitude will persist in the Feb expiry.

It is always very difficult to strip out how much of Friday’s price action was down to the Jan expiry, so it is therefore virtually impossible to tell whether or not the bounce up from the intraday low of 6676.55 to a close that is above R1 in this expiry, is a continuation of this aggression.

This makes 6700 a very critical level in this expiry, as if the market is happy to trade within this R1 ratio bandwidth, then it has a lot of room to manoeuvre in.

But, take good note, that again 6850 is a big level, and this time it also jumps an entire ratio, leapfrogging R2 and going straight to R3, which will come as a very nasty surprise should the market go there again.

However, below 6700, lurks a very scary 500-point Y ratio bandwidth.

One thing for certain, is it is highly unlikely that this new trip will be dull.

 

Range:            6700  to  6850       

Activity:          Average

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.

Posted in Uncategorized

January 13th, 2021 by Richard

Quiet rollover for the SPX, so far at least.

 

Nb. Our comment from the 01/08/21

 

And there we have it, the first test of a R ratio this expiry.

Which is very surprising, as the SPX is seldom this timid.

It is therefore a good idea to remind everyone exactly how much difficulty this index had with coping with just Y2 ratio, first at 3705 in the first week, then 3730/3745 in the second, and until yesterday, the current level at 3755.

So, what wasn’t a surprise, was the fact that this index camped out just below where R1 was yesterday, 3805.

If you knew it was there, then you understood what was happening, namely the market reaction to the dynamic delta.

The fact it has slipped a bit today has been coming, as we have persistently mentioned that the ratios above the zone have been falling, albeit “pedantically”.

Furthermore, in our last comment (above) we said it had “zeroed the clock”, so when it closed that day above 3705, this should have told you the bulls were back in charge, and an attack on R1 was more than likely.

What happens now is the big question, and as you can see in the above table R1 has slipped to 3815.

By Monday this in all likelihood will become 3830.

But, for a market that struggled against the lowly Y2, from 3805 up to 3830 is what we would now refer to as a step-up, so could easily still cause some reluctance among the bulls.

On top of this, we are already about to enter the rollover and expiry, so the zone should start to exert a gravitational pull, which is not to say it can’t or won’t move again, but we can’t see it get higher than 3745-3755 as things stand.

It wouldn’t be the first time this index just kept battering away on a retreating R ratio door, tediously repetitive in fact, but please don’t lose sight of that ginormous Y ratio bandwidth below this market, as that should scare even the most hardened bull.

 

Range:            3705  to  3815           

Activity:          Moderate

Type:              On balance bearish

 

Nb. Our comment for 01/13/21

 

Well, it hasn’t exactly been a case of the “tediously repetitive” as it hasn’t really been battering away at anything.

It started aggressively, last Friday, with the open of 3815.05, which was bang on our R1 level.

Again, no surprise at the coincidence.

And, as we said above, the R ratios were slipping, so we were anticipating R1 to be 3830 come the Monday.

As it happens, on the 11th, R1 was in fact 3840, so it could have been a lot more aggressive, successfully so for the bulls, than it was.

Our mistake was in not identifying that Y2 was going to slip, thereby opening up a potential move in the zone above the 3745-3755 we had been expecting.

In our defence, we suspect it has been a combination of the ratios eventually adjusting either side of the existing zone, and, probably more pertinently, the market deciding, amazingly early for an expiry, on Monday, that 3795-3805 would be a nice place to end this trip at.

Of course, we don’t know why, but the lack of any enthusiasm from the bulls to push home their advantage is a major contributing factor.

As would be the apparent lack of any bears.

So, bit of a default expiry from what we can make out.

This is borne out by the fact, that despite the R ratio rising below, the fact it has slipped above, means that the Y ratio bandwidth remains exactly the same, at 410-points.

All bit of an anti-climax really, but don’t drop your guard just yet, as normally, with so much minimal Y ratio around, volatility isn’t far behind, so the potential still very much exists for 3% moves, that may or may not include whipsaws.

 

Range:            3705  to  3855           

Activity:          Poor

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.

Posted in Uncategorized

January 11th, 2021 by Richard

6850 is the new level towatch in the FTSE.

 

Nb. Our comment from the 01/06/21

 

The closing auction yesterday was, or could turn out to be, a very significant point in this expiry.

But before we get into that we must mention Monday, as it was only the previous trading day that we commented that the only difference now was that this market now knew where R2 was hiding (please see above).

And, post Brexit agreement, it didn’t disappoint, and blasted out of the starting blocks, jumping just over 200-points.

The trouble was, this took it straight back to R2, with the intraday high of 6662.66.

Obviously, it hadn’t got used to the dynamic delta created by R2, but also, it was not really ready to capitulate either, which resulted in the FTSE trading just below 6650 for about the next 7 hours, until it eventually gave up in the final hour of trading.

Fast forward to yesterday’s closing auction, when the market managed to add about 13-points onto the real time close of 6599.60.

Now, the significance is that the ratios have changed, and 6600 is now the demarcation line between Y1 and the R ratios, so staying above it could prove crucial.

Below it is minimal ratio, and the zone (zero ratio), or to look at it another way, 250-points or almost 4%.

Dead ahead is R2, again, but this time it would be strike three, so if it goes there again, it should go “packing”, so there is a glimmer for the bulls, and after the effort of the auction, very possibly the desire.

But, and so typical of markets, any susceptibility to a scare, and if that forces it below 6600, then that’s an awful lot of emptiness waiting for it.

Great trading possibilities though…

 

Range:            6450  to  6600        or        6600  to  6650 (6700)       

Activity:          Good

Type:              Bearish

 

 

Nb. Our comment on 01/11/21

 

Wowee, is about all we can say.

As you can see from our last comment (above) we fully expected, or perhaps suspected would be more appropriate, that the FTSE had R2 at 6650 in its sights, and this time wasn’t going to take no for an answer.

The momentum also took it straight past R3 at 6700, meaning DR was the next stop.

The intraday high of 6859.14, and the close at 6841.86, pretty much sums it up.

One of the peculiarities of the FTSE, and the NDX is similar, is that in a 100-constituent index certain stocks, or sectors, carry a disproportionate weighting, and if they get the wind in their sails, there is not much that can stand in the way.

However, this momentum tends to be relatively short-lived, and the expiry just carries on, at least to its expiry, which in this case, is this week.

We have seen the zone move, which we flagged back on the 21st and 31st Dec.

But more importantly, and continuing what we saw in our previous comment, activity has been high, coming in again at “good” on our scale, and significantly, has been “bearish”.

With no qualifier in front, as in “on balance”, this means that calls have been taken off the table while puts have been added.

This still leaves it lop-sided, but from 267.6% to now “just” 166.5%, is a huge improvement, but still top heavy nevertheless, so with the rollover and expiry this week it is going to have to go some to just hang on to these hard-fought gains.

Guessing on how things might turn out, based on a lot of expiry end-games, getting this market below 6750 will be an impressive achievement for derivatives.

Needless to say, this makes 6850 the new, or still, crucial level to watch out for.

 

Range:            6850  to  6950       

Activity:          Good

Type:              Bearish

 

 

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January 8th, 2021 by Richard

R1 stops the SPX dead.

 

Nb. Our comment from the 01/05/21

 

It is a shame we can’t also include what we said the time before above, as our comment from the 23rd December may well be as pertinent today as they were back then.

Essentially, we have got the move in the zone, as anticipated.

And, yet again, in one of those coincidences that happen far too often, the market finishes as close to the middle of it as is practically possible.

Which actually means, a new year and now, a fresh start.

As in, it moved into its zone just as its zone moved there, so it has zeroed the clock to all intents and purposes.

Which brings us round to our comment before last, which basically pointed out that should the zone move before the market rose, the market could find itself by default in bear territory, or in our definition, below its zone.

This is a serious position, as the entire dynamic changes when the bears rather than the bulls are in charge, and for any market participants this should be worth knowing.

Now being in its zone, this index has a totally free choice now. Bulls equals above 3705, bears in charge, below 3695, simple stuff.

But worth bearing in mind, very few will have known the zone has moved (or perhaps the significance of this) so over the next day or so it will be a journey of discovery, not design.

But before you get all gloom and doom, don’t forget a rising zone is bullish (although this is now just where the Dec expiry ended), as is rising ratios below, which is perhaps not so evident in the tables, but there is definitely a groundswell going on.

Also bullish is falling ratios above, which is true, but very pedantically, so certainly not convincing.

Finally, and although this index has been surprisingly sensitive to just Y2 ratio so far this expiry, even this bandwidth stretches for 260-points, and, so far, the only tests of it have been above the zone.

 

Range:            3695  to  3705        nb.Y2 to Y2 is 3495  to  3755           

Activity:          Very poor

Type:              Bearish

 

 

Nb. Our comment for 01/08/21

 

And there we have it, the first test of a R ratio this expiry.

Which is very surprising, as the SPX is seldom this timid.

It is therefore a good idea to remind everyone exactly how much difficulty this index had with coping with just Y2 ratio, first at 3705 in the first week, then 3730/3745 in the second, and until yesterday, the current level at 3755.

So, what wasn’t a surprise, was the fact that this index camped out just below where R1 was yesterday, 3805.

If you knew it was there, then you understood what was happening, namely the market reaction to the dynamic delta.

The fact it has slipped a bit today has been coming, as we have persistently mentioned that the ratios above the zone have been falling, albeit “pedantically”.

Furthermore, in our last comment (above) we said it had “zeroed the clock”, so when it closed that day above 3705, this should have told you the bulls were back in charge, and an attack on R1 was more than likely.

What happens now is the big question, and as you can see in the above table R1 has slipped to 3815.

By Monday this in all likelihood will become 3830.

But, for a market that struggled against the lowly Y2, from 3805 up to 3830 is what we would now refer to as a step-up, so could easily still cause some reluctance among the bulls.

On top of this, we are already about to enter the rollover and expiry, so the zone should start to exert a gravitational pull, which is not to say it can’t or won’t move again, but we can’t see it get higher than 3745-3755 as things stand.

It wouldn’t be the first time this index just kept battering away on a retreating R ratio door, tediously repetitive in fact, but please don’t lose sight of that ginormous Y ratio bandwidth below this market, as that should scare even the most hardened bull.

 

Range:            3705  to  3815           

Activity:          Moderate

Type:              On balance bearish

 

Available to buy now

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