Nb. Our comment from the 09/18/20 for the Sept Expiry
Well it is humble pie time for us, and really, we should know better than to assume something is going to happen before it actually does.
We are, of course, referring to the fact we just assumed the zone was going to revert back to 3395-3405.
Evidently, it hasn’t.
In our defence, all the signs we there, and if it wasn’t literally the last few hours of the expiry, we believe we would have been correct.
What is impressive though, is the strength in the ratios, both above and below the zone, in these final hours, and, sorry, there is no way anyone can foresee that amount of activity suddenly manifesting itself.
For the record, the settlement price for the Sept SPX was 3353.60.
We haven’t produced a table for the October expiry, but while we are here, this is a good opportunity to let you know how it stands at the moment.
This is a snapshot of how it is, before it becomes the front month, so please bear this in mind, as it means it is not quite fully developed.
Furthermore, we are returning to an intermediary expiry, from a triple, so, if history is anything to go by, everything scales down very significantly, and, therefore, sensitivity should increase.
The zone is the same as September’s.
Ironically, 3395-3405 as the potential new zone is quite probable.
But R1 below the zone, does not kick-in until 3070, whereas above it, until 3580.
Obviously, we expect these to change significantly by next week, but as it stands, we are back to a 510-point Y ratio bandwidth.
So, if you are hoping for a quiet market, then, on this evidence, we suspect you will be disappointed.
Range: 3355 to 3405
Type: On balance bearish
Nb. Our comment for 09/22/20
We do not normally add our last comment of the previous expiry to the new one, but as we did comment, last Friday, on how things stood in October, we couldn’t help but blow our own trumpet.
Two things; Firstly, the zone back then, and on Monday, was 3345-3355, which is significant.
As, and secondly, when the market expired at 3353.60, right in its zone, all was well and good, but, the second it went below this zone the first warning bell should have been sounding.
And, when it closed at 3319.47, below the zone, and therefore in bear territory, it should have been more of a siren than a bell.
Volatility and whipsaw, right from the off, and only to be expected with so much of the minimal Y ratio present.
Which also ties in with the drop today in the zone, and, although not published, this is actually where the October zone in September was.
It only recently moved up to join September’s, almost certainly due to the rollover and expiry, so it has hardly had any time at all to cement this move.
Furthermore, with so much of the minimal Y1 ratio around, the zone could almost be anywhere from 3300 all the way up to 3400.
So, rather surprisingly, the fact that the SPX has recovered, and is looking to hover around its zone, is actually a good thing, despite yesterday’s 90-point move.
Although we appreciate you can’t tell from the table above, but, although the zone flipped back, Y2 and R1 either side of the zone, at either zone level, are static.
As is R2 below it, but R2 above has actually come in a bit.
Overall, though, the Y ratio bandwidth may have improved to 460-points from 510 on Friday, but this still represents 14%, so don’t go getting complacent just because the first couple of days are gravitating near the zone, as this expiry is probably only just getting going.
Range: 3095 to 3295
Type: On balance only just bearish