Is the FTSE getting frustrated being zone-bound this entire expiry so far?
Nb. Our comment from the 06/28/21
Prophetic words, as indeed our trading range mentioned in our last comment (please see above) did prove key. In fact, we started including our previous comment just for ease of reference, and to make it unnecessary for us to quote it.
Last Monday, the first day of this expiry, the intraday low of the FTSE was 6948.63, or to us, R1 at 6950.
It then went on to have an afternoon long embrace with the bottom of its zone, or 7050 to us, before managing to finish just above it.
Essentially, once the June expiry was over, the bulls took charge again.
For the remainder of last week, the FTSE just meandered around in its zone, which was quite a feat in itself, especially considering how much ground the US indices were making.
Ironically, they both gained almost the same number of points, but due to the overall index numerical size, this equates to the SPX adding almost an entire 1% more gain.
However, getting to the far more important present, it is worth noting that the ratios have changed considerably in a week.
Both sides have shown very good gains, below the zone being the more uniform.
But, above the zone, we now see R2 appear and B1, otherwise it is just a slight improvement in DR.
Obviously, the market being in its zone is the big thing, and was the intraday high of 7139.08 on Friday the first test of the upper boundary? We think not, but in the first instance the zone, and therefore our trading range is key.
One major point to note is R1 turned the market below the zone, and that’s what awaits it at 7050, and if it does break through, it is then in a world of exponentially increasing ratios every fifty-points, so extremely hard works for the bulls, work we find hard to believe they will expect let alone succeed at.
Range: 7050 to 7150
Type: On balance only just bearish
Nb. Our comment on 07/05/21
This now makes week two that the FTSE has meandered around inside its zone.
The only difference this last week has over the previous week, is that there is no confusion over the boundary tests.
Friday saw an intraday high of 7162.16, so definitely a test, a test which it held for perhaps 15/20 minutes, so there is no doubt it was certainly trying hard.
But for the rest of the day, it hovered just below the upper boundary, and with no further attempts at it for the rest of the day this means a sad lack of conviction.
Wednesday was the odd one, as in real time the market closed at 7052.62, so the bottom boundary did hold, having been tested quite severely during the day.
It was the auction that took the market to 7037.47 and below the boundary, which always makes for a difficult call, it not being representative of an open market.
Under these circumstances it could have gone either way, as the motivations are always rather obscure, so it wasn’t a great surprise that the next day the market opened up strongly.
The official open was 7037.47, but we all know by now how bogus that is, and we put the real open at about 15-points above the bottom boundary.
The inescapable truth is that now the market has tested both boundaries, it certainly knows what is where now, and by which we mean it knows where the dynamic delta is hiding, and has a rough idea of its magnitude.
It could just stay zone-bound, and it has done so previously, but also quite often it can get frustrated about now, having been caged for a fortnight.
Obviously, the easier path is southwards, but, judging by Thursday’s recovery, the bulls are still out there.
However, as things stand, we have to go with zone-bound, as neither team has given us enough of an indication of conviction for us to see either boundary cracking.
Range: 7050 to 7150
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.