FTSE battle lines already drawn for the Feb expiry.

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

 

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January 18th, 2021 by