As we said the FTSE, “was just the proverbial accident waiting to happen, and those who were aware of the ratio levels should have, at the very least, bought some insurance, so as not to be caught out” way back on the 5^{th} August after the market had eventually breached R2 and went on to challenge DR and even B1 levels of ratio.

Mind you it has certainly been ably assisted by the US President lobbing more economic grenades into the mix.

Looking specifically at the FTSE the shoe is now on the other foot, and, probably because of the distances involved now, it seems that where once it used to do this in an expiry it now looks like it takes two.

So, from DR last expiry to very possibly DR this expiry.

The caveat is that this is a five-week triple expiry.

Also, the ratio alignment is very different, so R3 now kicks in at 7050, so from there on down the ratios are not to be sniffed at.

Assuming that is, a certain person, doesn’t switch from hand grenades to mortar rounds.

Anyway, at least you now know where and what the ratio levels are, and therefore a rough indication of how much futures buying will occur at those levels.

How the market reacts to this is another story entirely.

Range: 7050 to 7150

Activity: Very poor

Type: Bearish

Nb. Our comment on 09/03/19

Well you just won’t get a better example of the ratios in action than what happened last week, on Tuesday and Wednesday.

Don’t forget London was closed last Monday, so the Tuesday was the first opportunity to react to the previous Friday’s massive drop of 623-points on the DJX, despite the fact it finished the Monday up 270-points.

The FTSE hit R3 at 7050, which was a big jump up from R1, again, please remember these ratios are exponential, hitting the intraday low of 7044.73.

On the Wednesday, reacting to Wall Street’s overnight reversal, the FTSE’s intraday low was 7050.00.

You just can’t get more precise than that.

The only change in the ratios below the zone, is that Y2 drops to Y1.

The only change above the zone, is R2 moves up to R3, which now therefore starts at 7450.

Of course, the real change is the actual market, as that is now back within its zone.

That’s a very impressive leap up of 250-points, 3.55%, in just 4-days.

We would like to see it hold inside its zone, for at least a few days, but it will be a tough ask, especially with so much Y ratio still around in the US indices.

Also, there is still three weeks to run in this expiry, which is a biggie, so it will only get more volatile towards the end, so a quiet week now would be handy.

As we said the FTSE, “was just the proverbial accident waiting to happen, and those who were aware of the ratio levels should have, at the very least, bought some insurance, so as not to be caught out” way back on the 5^{th} August after the market had eventually breached R2 and went on to challenge DR and even B1 levels of ratio.

Mind you it has certainly been ably assisted by the US President lobbing more economic grenades into the mix.

Looking specifically at the FTSE the shoe is now on the other foot, and, probably because of the distances involved now, it seems that where once it used to do this in an expiry it now looks like it takes two.

So, from DR last expiry to very possibly DR this expiry.

The caveat is that this is a five-week triple expiry.

Also, the ratio alignment is very different, so R3 now kicks in at 7050, so from there on down the ratios are not to be sniffed at.

Assuming that is, a certain person, doesn’t switch from hand grenades to mortar rounds.

Anyway, at least you now know where and what the ratio levels are, and therefore a rough indication of how much futures buying will occur at those levels.

How the market reacts to this is another story entirely.

It has been a while since we covered the SPX, so first and foremost this is a five-week triple expiry, the third of the year and so, generally, the second biggest of the year.

Therefore, the second thing we must mention is that it isn’t, as even what should be the smallest “biggie”, March, was far bigger than this September expiry is at this stage.

This is readily apparent in the very unusual amount of Y ratio around, which in years gone by, in a triple witching expiry, it would be more usual to have none altogether.

This means, in a word, volatility, and to expect lots of it.

Basically a 160-point wide bandwidth of Y ratio in a triple witching expiry means it will be an absolute roller-coaster, so hang on tight, and the real market will only reveal itself once it starts interacting with the R ratios.

Once, we get some dynamic delta activity and see how the market reacts to having to deal with that resultant futures activity, then we will see what the true feeling is behind any move.

It has been a long time since our last comment, 14 trading days to be precise.

The point being, that even with virtually 3-weeks gone, and an expiry in between, not a lot has changed.

Basically, back on the 8^{th} July, in the July expiry, the market closed at 7549.27, which was right at the top end of our Y2 ratio bandwidth, which went from 7450 to 7550.

The FTSE then spent the next two weeks having a running battle with the R2 ratio that kicked in at 7550.

On the 22^{nd} July we saw the start of the August expiry, and guess what.

In this expiry, the Y2 ratio bandwidth stretches from 7500 to 7550, which is where R2 resides again.

And, the coincidence doesn’t end there, as the market closed at 7549.06, essentially the same as three weeks ago.

Coincidence or not, but for us R2 has been the constant factor throughout.

Of course, last week was all about 7550 as well, or again the FTSE battling R2.

There is absolutely no doubt that this market wants to go better, it just has a lot of futures it has to absorb first, courtesy of the level of dynamic delta brought about by the R2 ratio.

The real aspect to be very aware of, is that the nearest R ratio going the other way is at 7350.

There is the zone in between of course, which will provide support, but with three weeks left on this expiry there is still ample opportunity for this market to experience a scare at some point.

Range: 7450 to 7550 or 7550 to 7600

Activity: Average

Type: Neutral

Nb. Our comment on 08/05/19

When the R2 dam broke it certainly exploded, and the FTSE having been pent up and penned in for 4 entire weeks took full advantage.

Although, the official open on Monday 29^{th} July was 7549.06, being Friday’s close, it was obvious to anyone with just a passing knowledge of markets, that it was in reality it was an awful lot higher.

The intraday high so far this expiry is 7727.49, which is a knee-jerk reaction, and sadly one that is quite common in 100 stock indices these days, as what with weightings being what they are, all it takes is one, or two, of the heavyweight sectors to go a bit ballistic and the market overall gets skewed.

But, above DR ratio and nearing B1, was just the proverbial accident waiting to happen, and those who were aware of the ratio levels should have, at the very least, bought some insurance, so as not to be caught out.

On Monday the intraday low was 7397.91, which makes this definitely strike one, the first test of the bottom boundary of the zone.

This makes 7400 of major importance, not just as a support level, but if the market closes below it then it is into bear territory, so the whole picture changes.

The good news, is that if it holds, then the upper boundary is the next target.

It all just depends on how much of a bloody nose the bulls have got.

If, the bottom boundary, doesn’t hold, and it’s only Y1 below there after all, then the next support is R1 at 7350.

With two weeks still to go in this expiry there is plenty of life left yet, and with these sorts of moves, it is more than capable of anything yet.

It has been a long time since our last comment, 14 trading days to be precise.

The point being, that even with virtually 3-weeks gone, and an expiry in between, not a lot has changed.

Basically, back on the 8^{th} July, in the July expiry, the market closed at 7549.27, which was right at the top end of our Y2 ratio bandwidth, which went from 7450 to 7550.

The FTSE then spent the next two weeks having a running battle with the R2 ratio that kicked in at 7550.

On the 22^{nd} July we saw the start of the August expiry, and guess what.

In this expiry, the Y2 ratio bandwidth stretches from 7500 to 7550, which is where R2 resides again.

And, the coincidence doesn’t end there, as the market closed at 7549.06, essentially the same as three weeks ago.

Coincidence or not, but for us R2 has been the constant factor throughout.

Of course, last week was all about 7550 as well, or again the FTSE battling R2.

There is absolutely no doubt that this market wants to go better, it just has a lot of futures it has to absorb first, courtesy of the level of dynamic delta brought about by the R2 ratio.

The real aspect to be very aware of, is that the nearest R ratio going the other way is at 7350.

There is the zone in between of course, which will provide support, but with three weeks left on this expiry there is still ample opportunity for this market to experience a scare at some point.

Well, the “great unknown” has been answered as the intraday high here was 2977.93.

Back on the 25^{th} June R1 was standing at 2970, and today it is 2980, so on Monday the 1^{st} it was probably about half way between the two.

Therefore, we see that as a test of R1, not a breach.

Otherwise, it is looking good, as the zone looks set to move up to 2920-2930, obviously the ratio above the zone are moving out (hence the R1 drift), and as you can see in the table above, they coming in below the zone.

All three are bullish signs.

So, the only problem, is are the bulls that committed that they will buy all those futures forced onto the market through the dynamic delta at R1?

And, now R2 is back to 3005, it is less than 1% above R1, so two hurdles very close together.

The cynics might say, yet another record high on the 4^{th} July, and it happens more often than not, so it’s a tough one to judge, as historically, when so many are away from their desks, it can get a little out of kilter.

But, R2 was enough to stop the triple witching June expiry, both as support and as resistance, so we have to say it should prove too much for July.

And, despite the ratios coming in below the zone, the R ratios down there don’t even start until you hit 2820, and that’s a very long way away indeed.

Range: 2905 to 2980

Activity: Moderate

Type: On balance only just bearish

Nb. Our comment on 07/11/19

Well we got the move up in the zone, and a bit higher than expected as well.

Well, it is higher now, but it is extremely likely that 2925-2930 was a stepping stone, just between our publications.

So, all three bullish signs remain in place, upwardly mobile zone, strengthening ratios below the zone and weakening ones above it.

But, so does the fact that the nearest corresponding ratio below the zone doesn’t appear until 2845, almost 150-points away.

But compare the two tables above, and from a ratio stance, nothing at all has changed, as it has been the ratios that have shifted rather than the market itself being the aggressor.

Regarding the ratios it is worth pointing out that the type is very adamant, and because we can see the actual numbers, we can say it is all very one-sided indeed.

So, all we can say, is go with the flow, but keep your stops very tight, as when a market get fearless like now, and with the rollover next week, just the slightest scare could have enormous effect. Well, a 150-point effect anyway.

We have to mention the June expiry before we get on to July, and at the start it was all about the bottom of its zone, 7150.

In the middle, it was all about the top of its zone, 7250, and at the end it was the top of the first ratio bandwidth above their zone, or in other words, 7450.

The intraday highs on the last four days being 7469.19, 7454.93, 7460.83 and 7456.79, but always closing below.

Also, the isolated highs do not do justice to how much of a pitched battle it was at that level throughout those respective days.

More importantly, July’s zone has conveniently adapted, as naturally it would, after all, the ratios are a direct reflection of business done.

By comparing the two tables above you can discern in which direction the ratios are moving, which in turn, denotes increasing or decreasing levels of support and resistance.

The most blatantly obvious is the appearance of Y1 below the zone.

Further down from that the support ratios have actually increased, but you can’t miss the fact that these levels are a lot smaller and a lot further away than the resistance levels above the zone.

Obviously, in the meantime, we expect this index to be zone-bound for a while.

However, eventually, it is likely to breakout, and when it does the ratio levels above the zone ratchet up very quickly.

And for those who need clarification, then above the zone you hit R1 after 50-points, at 7500, whereas, below the zone, the corresponding R1 is 200-points below the zone.

So, as it stands, the downside risk is considerable, and the upside is limited.

Especially, with the jump from R1 straight to R3, remembering these ratios are exponential.

Therefore, don’t be fooled by this quiet start, as the potential for big moves is certainly there.

Range: 7350 to 7450

Activity: Average

Type: On balance just fractionally bearish

Nb. Our comment on 07/08/19

Well we certainly got our breakout, but even we were surprised by how aggressive the FTSE has been.

To recap, the first week of this expiry the FTSE was stuck in its zone.

This last week has been all about trying to get past the R ratios.

By comparing the two tables above you can see just how dramatic the moves in the ratios has been.

In a nutshell, there have risen below and fallen away above, both of which are bullish.

However, having been above 7600 this index has already beaten R2, and quite possibly even tested the retreating R3.

All far too aggressive for us, and therefore just an accident waiting to happen.

Obviously, 7550 is now critical.

Above it and its battling R2 all the way, but below and it is now all Y ratio back down to the top of the zone, at 7450.

So, all well and good if it can maintain this enthusiasm for buying futures, being generated by the dynamic delta, but if that evaporates, then it is in for a very sudden and bearish surprise.

It will be interesting to see if the July expiry will carry the same aggression as June’s did.

On which subject, we did get R2 ratio all the way up to the corresponding R2 ratio, with the intraday high of 2958.06 on Thursday, so that made it a perfectly balanced expiry.

Sadly, the only aspect missing was the finish in its zone.

Looking forward, into July, then a quick comparison between the two tables above will tell you that the ratio below the zone has come in considerably, whereas above it, this has been far more tentative.

This is backed up by, not only the high level of activity, but also by its type.

So, the only real question that remains is how aggressive the bulls will be able to be now it’s a new trip.

Historically, if the triple can only get up to R2, then an intermediate expiry should struggle with even R1.

Rather oddly, and against most other market commentators, we see these markets as behaving perfectly rationally.

In fact, were the index not to travel the length of their Y ratio bandwidth, then we would find this weird, no matter how wide it is.

In fact, in a triple, it is very rare that you even get a 20-point Y ratio bandwidth, let alone the 150-points we saw in June.

However, in intermediates, then such wide bandwidths are far more common.

Furthermore, coming up against the naturally occurring dynamic delta occasioned by hitting R2 and reversing, is, again, perfectly rational.

Pushing through, to DR or even the B ratios, is when the market is irrational, as it would be ignoring all that futures activity in the opposite direction.

To put all this into plain English, then for this expiry, we would fully expect a trading range of 2970 all the way down to 2795.

Hopefully, then back up to finish in the zone by the 17^{th} July.

The great unknown, is whether it will take R1, R2 or perhaps even higher.

But, at the end of the day, you at least know where those levels are currently.

Range: 2905 to 2955 / 2970

Activity: Strong

Type: On balance bearish

Nb. Our comment on 07/03/19

Well, the “great unknown” has been answered as the intraday high here was 2977.93.

Back on the 25^{th} June R1 was standing at 2970, and today it is 2980, so on Monday the 1^{st} it was probably about half way between the two.

Therefore, we see that as a test of R1, not a breach.

Otherwise, it is looking good, as the zone looks set to move up to 2920-2930, obviously the ratio above the zone are moving out (hence the R1 drift), and as you can see in the table above, they coming in below the zone.

All three are bullish signs.

So, the only problem, is are the bulls that committed that they will buy all those futures forced onto the market through the dynamic delta at R1?

And, now R2 is back to 3005, it is less than 1% above R1, so two hurdles very close together.

The cynics might say, yet another record high on the 4^{th} July, and it happens more often than not, so it’s a tough one to judge, as historically, when so many are away from their desks, it can get a little out of kilter.

But, R2 was enough to stop the triple witching June expiry, both as support and as resistance, so we have to say it should prove too much for July.

And, despite the ratios coming in below the zone, the R ratios down there don’t even start until you hit 2820, and that’s a very long way away indeed.

We have to mention the June expiry before we get on to July, and at the start it was all about the bottom of its zone, 7150.

In the middle, it was all about the top of its zone, 7250, and at the end it was the top of the first ratio bandwidth above their zone, or in other words, 7450.

The intraday highs on the last four days being 7469.19, 7454.93, 7460.83 and 7456.79, but always closing below.

Also, the isolated highs do not do justice to how much of a pitched battle it was at that level throughout those respective days.

More importantly, July’s zone has conveniently adapted, as naturally it would, after all, the ratios are a direct reflection of business done.

By comparing the two tables above you can discern in which direction the ratios are moving, which in turn, denotes increasing or decreasing levels of support and resistance.

The most blatantly obvious is the appearance of Y1 below the zone.

Further down from that the support ratios have actually increased, but you can’t miss the fact that these levels are a lot smaller and a lot further away than the resistance levels above the zone.

Obviously, in the meantime, we expect this index to be zone-bound for a while.

However, eventually, it is likely to breakout, and when it does the ratio levels above the zone ratchet up very quickly.

And for those who need clarification, then above the zone you hit R1 after 50-points, at 7500, whereas, below the zone, the corresponding R1 is 200-points below the zone.

So, as it stands, the downside risk is considerable, and the upside is limited.

Especially, with the jump from R1 straight to R3, remembering these ratios are exponential.

Therefore, don’t be fooled by this quiet start, as the potential for big moves is certainly there.

It will be interesting to see if the July expiry will carry the same aggression as June’s did.

On which subject, we did get R2 ratio all the way up to the corresponding R2 ratio, with the intraday high of 2958.06 on Thursday, so that made it a perfectly balanced expiry.

Sadly, the only aspect missing was the finish in its zone.

Looking forward, into July, then a quick comparison between the two tables above will tell you that the ratio below the zone has come in considerably, whereas above it, this has been far more tentative.

This is backed up by, not only the high level of activity, but also by its type.

So, the only real question that remains is how aggressive the bulls will be able to be now it’s a new trip.

Historically, if the triple can only get up to R2, then an intermediate expiry should struggle with even R1.

Rather oddly, and against most other market commentators, we see these markets as behaving perfectly rationally.

In fact, were the index not to travel the length of their Y ratio bandwidth, then we would find this weird, no matter how wide it is.

In fact, in a triple, it is very rare that you even get a 20-point Y ratio bandwidth, let lone the 150-points we saw in June.

However, in intermediates, then such wide bandwidths are far more common.

Furthermore, coming up against the naturally occurring dynamic delta occasioned by hitting R2 and reversing, is, again, perfectly rational.

Pushing through, to DR or even the B ratios, is when the market is irrational, as it would be ignoring all that futures activity in the opposite direction.

To put all this into plain English, then for this expiry, we would fully expect a trading range of 2970 all the way down to 2795.

Hopefully, then back up to finish in the zone by the 17^{th} July.

The great unknown, is whether it will take R1, R2 or perhaps even higher.

But, at the end of the day, you at least know where those levels are currently.