Nb. Our comment from the 06/08/20
It is worth reminding that on Friday 15th May, after the May series had expired, the FTSE went as low as 5741.54, which back then, in the June series, was a solid test of the level DR ratio at 5750, which is a big level.
(Nb. The May expiry zone was 5650-5750)
So, it is interesting that this level has now slipped to 5650, but this could just be academic now.
For the simple reason, and even we are a bit stunned by this, this index is inside its zone.
That is a truly massive 700-point, or 12.2%, jump, and all in just three weeks.
Generally, the FTSE doesn’t tend to move like this, so it really is a remarkable feat.
Today is going to be a massive day for this index, as there are still two weeks to go in this expiry, so what happens now will essentially decide the next fortnight.
It might be too much to hope for this market to quietly while away the time happy and safe in its zone.
After the Street’s performance Friday, we suspect the zone upper boundary will be the battleground, rather like last Monday, when it was all about 6150, and getting back above that. But, with the volatility inherent in these markets, it just takes one bit of bad news, and it could easily be the bottom boundary being the battleground.
Either way, R1 shouldn’t really scare the market that much, but it is given extra strength as it is also the upper boundary, but at the other end, where it has only just broken through, that might prove tougher to hold.
However, we feel the real problem may well be the SPX, as it is now deep into their R2 ratio, and if that level of dynamic delta futures selling upsets the apple cart over there, it may well have negative repercussions over here.
Range: 6450 to 6550
Type: On balance bullish
Nb. Our comment on 06/18/20
Well, at the end of the day, it was indeed the SPX that upset the apple cart over here.
It was a magnificent feat for this market to get back into its zone, but, again as we said, it was rather unlike this market to travel 12.2% in just a few weeks, so was naturally rather stretched.
Nevertheless, at the start of last week 6450, the bottom boundary of said zone, put up a tremendous fight, especially on the Monday, when it fought off a surprise attack late in the afternoon, having battled with the bears for the first hour or so that morning.
Once it cracked, and it did take a few go’s on Tuesday, the next support wasn’t until it got down to R2 at 6150.
This did put up bit of a fight on the Thursday, but with the Street so weak, it was always going to be a losing battle.
More important is the week ahead, which is the rollover and expiry.
It’s really difficult to tell, as if you read our comments on the SPX, then you would know we are looking for that zone to move to 2995-3005, so it is now where it wants to be.
The reason we point this out here, is because nobody can deny, that this market had a huge impact on the FTSE last week.
So, assuming no undue influence from there, the FTSE, left to its own devices, should be aiming for its zone for the rollover.
However, having had a sneaky peek at July, and seeing that expiries zone is 5950-6050, we can’t help but feel, for the current June expiry, it may be easier for the ratios to adjust than the market to go back up 350-points.
So, 6000 is one option for the zone, and 6150-6250 is another, it is just too early to tell.
However, Monday should see the market decide, as people now focus on the rollover.
Sorry, not very decisive from us, but that’s just the way the numbers calculate, so 6150 is now a very significant level.
Range: 5950 to 6150
Activity: Very very poor