Nb. Our comment from the 05/10/21
London has definitely taken a leaf out of the SPX book, and we have seen the ratios tumble above a rising zone here as well.
Although, being fair, R3 at 7050 on the Tuesday and Wednesday certainly had a very significant role to play, pretty much nailing the intraday highs on both days.
Again, where we fall flat is no longer calculating this index’s ratios daily, because this means we are not sure when the capitulation set in, but we reckon it was during the Thursday, as on that particular day 7050 was the level that saw all the action throughout the day, apart from literally the last ten minutes.
Nevertheless, to see the FTSE willingly and deliberately take on that amount of ratio was a very pleasing sight.
However, the fact it has now fallen two entire levels, to R1, shows just how much derivatives have conceded in the face of such an onslaught.
And, having been so willing to fight it out with R3, it is no surprise that R2 at 7100 didn’t hold the market back at all, if indeed the capitulation happened on Thursday.
So, with R3 now at 7150, and Friday’s intraday high of 7143.46, it will be fascinating to see just how much more they have got, in ammunition and willingness, in taking on this level again once more this week.
And with two weeks still to go, they have plenty of time, and on top of this, we are fully expecting to see the zone move up again, this time to 6950-7050.
Unlike the SPX, at least here you know the bulls are buying those futures forced out by the dynamic delta, unlike over there, where there is no ratio at all in its way.
But, at the end of the day, any further forward momentum in the FTSE now relies on the ratios continuing to capitulate, and all the while the clock is now ticking and the gravitational of the zone will increasingly make its presence felt.
Range: 7100 to 7150
Nb. Our comment on 05/17/21
Wowee, that was certainly quite some ride, and best of all, it should not have come as a surprise at all.
Literally on the day we published the FTSE went up to take on R3 once again at 7150.
Fascinating battle it was too, and quite a robust one with the market even achieving an intraday high of 7164.18.
Tuesday saw the capitulation, and the battle at the other end, this time with the top boundary of its zone was actually a touch and go affair really.
The fact the market closed just inside its zone, at 6947.99, was not a good sign for the bulls, but they persisted, and managed to have a fairly decent Wednesday.
However, the damage had been done, and so it really didn’t need much of an excuse to test the boundary at the other end of its zone, 6850.
Here, on the Thursday, it had a deeper incursion into bearish territory, by 27-points, which is far more than we would have liked, but in the end, it held, although it needed a decent helping hand from across the pond, which also just goes to show how close it was to being as bad here as it was over there.
Now we are in the rollover and expiry week, we are back to our old friend 7050, although this time it is R1.
Essentially, a lot of money has been taken off the table, on both sides mind, so there have been meaningful changes to the ratios.
The zones move to 6950-7050 is looking rather unlikely now, although 6900-7000 is a possibility, we think the real battle will be between the equity bulls and the gravitational force of the zone for the rollover/expiry which will dictate this week.
Also, next up, is the mighty June, our second “biggie” of the year, and this will have a role to play this week, if only because of its size weighing, in every sense of the word, on proceedings.
Range: 6950 to 7050
Type: On balance not bullish