The SPX mirrors our sentiment from
London, as we wished we had published last week, although it was perhaps not
quite so compelling here.
Although, when one gets to see all three
US indices together, then the argument becomes more convincing.
The pertinent bit is that R1 back on the
20th was at 2845, and that very day, after we had published mind,
the intraday high was 2843.54.
Today, R1 is at 2855, but as the
intraday highs on Thursday and Friday last week were 2860.31 and 2846.16
respectively, so we suspect that change has happened this week.
Worth noting that R2 has been at 2865
No harm in the bulls being aggressive,
but ultimately, they will have their limit as to how many futures they can buy
that have been forced out due to the dynamic delta.
This trip, this looks like R2.
So, what else can the ratios tell us?
The upside is what you can see, but
below the zone there is another story altogether.
If there was a strong bullish upswell we
would expect the ratios down here to strengthen (come in), so we are nervously
watching Y2 weaken (move out) to 2720.
R1 has held its own at 2695, but if the
bulls were in total control, as we say, that should be rising.
This, also, throws up the intriguing
possibility of the zone moving down to 2770-2780, which would be bearish of
So, to us, it is not all bullish here,
and with 150-points of Y ratio still, the risks are plain for everyone to see.
But, as always, in the US, it best to check if the DJX has an agenda first, as you can’t escape the correlation naturally.
Type: On balance just bearish
Nb. Our comment on 04/04/19
The SPX is still all about R2.
At the start of this week the intraday
high on Monday was 2869.40, so we suspect the hitherto unchanged R2 was still
However, that day the market closed at
2867.19, which is a fairly blatant sign that either the market had breached R2,
or, and more likely, that it had slipped.
Today, it is at 2885, and as yesterday’s
intraday high was 2885.25, it’s a fair assumption that it was here then.
Obviously, it is slipping, and this index
just keeps banging on that door until it opens and move back to the next line
It will probably hold in the morning,
but we would be rather more circumspect later on.
2895 is the next R2 line of resistance,
but 2905 is where it takes a big step-up.
But, don’t forget, next week is the
rollover and expiry AND it is a 4-day week.
And, more importantly, the zone is still
way down at 2795-2805, and is sandwiched in a sea of Y ratio, so if someone
says “boo” to this market, there is no support underneath for a very long way
However, as always, best to keep an eye on the DJX as they seem to be the ones happy to force the pace.
Again, we wish the table above for the
NDX had been published back on the 20th, as just like the SPX and
the DJX there were significant ratio levels that had to be contended with.
For the NDX it was right from the very
start, as on that very first day this index closed right on Y2 at 7325.
And 7325 has been the constant theme for
the past two weeks, and if you knew it was where Y2 was, and hence all that
futures activity, then the last two weeks would have made a lot more sense.
Monday 18th the close was
7326.28, next day’s intraday low was 7321.93 having opened nearer 7360.
Wednesday’s intraday low was another
test, being 7318.42, then it tried to break free, but as you can see the ratios
were just not shifting, so by Friday it was back to Y2 with the close at
Of course, that was the day it dumped
167.21-points, so it probably would have been nice to know, that just like
London, it was an accident waiting to happen.
Although, having fought through the hard
yards, it is worth pointing out, and please see our previous commentary on this
subject, that the Thursday immediately before this big dump, the DJX was
hitting the top of their zone, intraday high 26009, and the SPX was meddling
with R2, with their intraday high of 2860.31.
This week, 7325, has been significantly
involved as well, suffice it to say Monday’s close was 7316.96 and yesterday’s
Nevertheless, at the end of the day,
here we are at the midpoint of this expiry, which incidentally, closes a day
early, and the ratios are still seriously underdeveloped.
So, just like the DJX, if this index
gets a head of steam up, which is very possible in the run up to the rollover
and expiry, it really could motor.
However, with R1 lurking up at 7600, and Y2 now in-between, it will find life a lot easier going south than it will north, but the bulls have already set out their stall, getting it as high as 7505.41, so they will have to be taken out first, and with the lack of ratio meaning a general lack of interest, that may not be so easy in itself.
Well for the DJX it certainly is back to
basics and we are seeing again a typical post triple type expiry.
Or, to be more exact, with nothing
And, more to the point, by comparing the
20th to the 28th you can see how very little has changed.
And the most important constant was
evidently the top of the zone here, 26000, as, so far at least, it has caught
the intraday high as well as the expiry high, of 26109.
Worth noting, is on that day this index
closed at 25887, and that two days later it went back for another bite, with
the intraday high of 26009, before again capitulating.
However, the most important aspect is
that the zone is still a massive 1000-points wide.
So, all well and good when it is all
relatively peaceful and calm, but in the build up and into the rollover and
expiry, if this doesn’t change, then volatility could come storming back with a
So, all you traders out there, start
sharpening your knives.
On top of which, and this also relies on the other US indices, that if it does gain traction and momentum, then that is a wickedly wide Y Ratio bandwidth, so it really could cut loose, in either direction or just whipsaw very violently.
The real test was on Thursday 14th
Feb when the intraday low was 25308, but more importantly, the close was 25439,
so the fact it was fought over and the bulls won tells its own story.
The first point to address is the fact
that last time the zone was 24400-24600, but at that very same time, the Feb
expiries zone was 25100-25400, so March just basically joined Feb’s, so no
surprise or drama there.
Fast forward to the current, and
although R1 is at 26200, it is plainly obvious to us this has been fighting a
tactical retreat, and at least from 26100.
26100 was where R2 was back in the
rollover, so has always been a significant level.
Anyway, seeing this means we now
perfectly understand why the DJX’s intraday highs since Friday have been 26052,
26241, 26155 and 26039.
Also, why the close on those days have
been 26031, 26091, 26057 and 25985.
We don’t see the move up in the zone
here as bullish, more like a correction, but the receding R ratios are,
although the failure of this index to surmount the futures selling generated by
the dynamic delta isn’t.
On top of which, the Y ratio bandwidth
is now 2800-points wide, so the ratios certainly are not filling in underneath.
So, just like the SPX, we are exceedingly nervous….and still two weeks to go.
Type: On balance bearish
Nb. Comment from 03/08/19
The most pleasing aspect about our
comment back on the 28th February was our trading range of 25300 to
Since then, the intraday high has been
26155, and the intraday low from yesterday was 25352, and you can’t say fairer
Actually, you can, as back when this
index was persistently trying to get above R1 our zone was lurking down at
25100-25300 (hence the bottom of the range of course) and not many would have thought
that just before the rollover this index would be even close.
Anyway, we are not counting our
proverbial chickens yet, as the observant will have noticed that in today’s
ratio table above, R1 has gone, leaving R2 at 26600 as the new first line of
This will bring a whole new level of
significance to the zone, and perhaps 25100.
First up, of course, it has to get back
into its zone, and it might even be willing to relax in it until the rollover
If not, then, in one of those
potentially seminal moments, whether it breaks out above (bullish territory),
or below and into bear territory.
We are not going to guess what will happen, but you now know the significance of 25300 and also 25100, so you can react accordingly.
The fact there has been no change in the
ratios is not a surprise, it is a triple after all, so it takes a lot to shift
Furthermore, this is more representative
of a triple, with no Y ratio, which just highlights how strange the US indices
are at present.
Nevertheless, it is a fantastic way to
highlight the impact of the ratios and the corresponding dynamic delta, as, so
far, it is just all about the price action at or around the unchanged ratio
First up, day one, 18th Feb,
and the FTSE intraday high was 7242.09.
Significantly, it hasn’t gone there
again, so, expiry high so far as well.
The top of the zone at 7150 was the next
significant level, for the remainder of last week, with three intraday day lows
finding support there.
Tuesday this week, 26th, the
close was 7151.12, or strike 5 by now.
Yesterday, 28th, the intraday
low was 7041.03 (bottom boundary).
So, just take a note of where the ratios are and watch the market interact upon encounter, simple.
Range: 7050 to
Activity: Very very poor
Nb. Our comment on 03/08/19
Well, it still is all about the upper
boundary of the zone in the FTSE.
As you know how significant 7150 is, then
just by watching the market around it you can readily see that there are some
who really want it above it.
Case in point was yesterday’s real time
close, which was 7147.12, or back inside the zone, but the closing auction
(when the futures are closed of course) managed to add just over 10-points,
conveniently taking the market back above the boundary.
All in all, it is certainly going to
make for a very interesting rollover next week.
With the expiry on Friday 15th,
and normally in these big triple witching expiries, at this particular time, it
is virtually impossible to keep things calm.
Don’t forget this expiry started with
this market at 7236.68, so in almost three weeks it has fallen 79.13-points.
It will be very interesting if it ever
goes back up there to challenge R3 again, or for just the second time.
The desperation to keep it above the
zone suggests this is the intention.
We suspect the real problem has been
since the DJX hit their R ratios at 26200 at the same time the SPX hit theirs
just above 2800 the FTSE has been trying to swim against the tide.
Still plenty of life in March yet, and the most exciting week could easily be yet to come.
Obviously, the zone has exceeded
expectations, albeit had we published in the last ten trading days this further
move would have been apparent, it now being at 2745-2755.
Needless to add, with the zone moving,
the R ratios had to recede.
The real question is looking forward,
and it is all about R1 now, as it held yesterday (intraday high 2803.12) but
was severely tested on Monday with the intraday high of 2813.49.
So, it has held, but under huge
pressure, and next visit would be strike 3.
Furthermore, don’t forget this is a
triple, and in these biggie’s R1 doesn’t normally carry too much weight.
Having said that, the fact that this is
a triple and we only go as high as R3, on both sides, is very alarming, as
historically, if this index gets trending, it takes at least DR to act as
moderator, and again, this holds true for both directions.
The fact that the R ratios are receding
and the zone is climbing is bullish, but what we would really like to see is
the ratios below the zone climbing, which they have, a bit, but the Y ratio
bandwidth is still 185-points.
This is what it was back on the 13th
The fact this expiry is so underdeveloped
coupled with such a ludicrously wide Y ratio bandwidth means we are exceedingly
The trading range below reflects the
zone, as that should offer support.
Our only surprise is that this index isn’t whipsawing around by 2% or 3% on a daily basis, which makes us suspect that one of the other two must be interacting with their ratios.
Type: On balance only just bearish
As it turned out both the other two were
interacting with their ratios, but probably most notable was the DJX with R1 at
Also, as it turned out, a 50-point
whipsaw on Monday neatly summed up our last comment.
The reversal on Monday was attributed to
trade talks, but we see this so often that logically the common denominator
over the last 10 years has been the ratios, as the market opened up
10.68-points, inched a bit higher, then fell 50-points.
Now, was it the futures selling
generated by the dynamic delta as this index hit R1 (nb. Exactly the same
applies to the DJX and 26200) that caused the market to come off and the story
was added after as the explanation, or really, did the trade talks contain that
much new news or a surprise, and at that precise moment when it turned?
You will find, every time, the answer is
People need to have a reason for the
futures selling, it really is as simple as that.
Eventually, hopefully, they will realise
these ratios and dynamic delta exist.
Back to the matter in hand, and the Y
Ratio bandwidth is now 160-points, so the risk remains.
The appearance of Y1 above the zone
means it may move up again.
So, bullish, but not very committed, and
the downside risk is eye-watering.
To add a little bit more spice to it all, it’s the rollover next week as well.
As mentioned previously this would be
where our last comment of the NDX would be, but as we haven’t covered it for so
long this is irrelevant.
Also, why the first column in the above table is blank.
One of the main reasons we stopped
covering this index was because nobody was playing in it.
One glance at the above table will show
you that hasn’t changed at all, and don’t forget this is a triple, so meant to
be a “biggie”, ha ha.
All last week the intraday high was
either 7125 or 7150, so for us it has been banging its head on Y2 for quite a
few days now, and, interestingly, it was only on Friday that this index managed
to close above 7125 for the first time this expiry.
So, to fight back yesterday, from a drop
of 132.54-points, to finish virtually unchanged, shows there is some commitment
left in the bulls.
And, to be fair, we can hardly claim
derivative dominance, especially considering the only R ratio in existence
doesn’t appear until 7300, so it’s not as if they have to fight particularly
hard, in fact, a gentle shove would be about enough.
At least, there are people playing in
the other two, but strikingly all three are very similar in that they are
trying to push ahead, but struggling against what is fairly minimal ratio
resistance, and all the while standing at the top of a chasm.
So, all are very susceptible to anyone saying “boo”.