Opening gap up at the open propels the SPX back above R1, ballsy sure, but wise?
Nb. Our comment from 01/29/20
As we said in our last comment, please do not read anything into the zone move, this is not because of directional forces, but rather because it is so ridiculously thin out there.
Anyway, it is just back to where it started.
The really important ratio to watch is R1 below the zone, which has risen 25-points to 3045.
Pathetic, in a word, even more so considering how far and how fast the market has fallen.
Doubly so, when one factors in the fact the “type” of activity is bearish, which, to us, means an awful lot more puts traded than calls.
In fact, our Delta Ratio level is standing at just 40.7%, which is very bullish, but, under these conditions, not so much, because of where the market is already, and the colossal amount of Y ratio around.
Admittedly, R1 above the zone has conceded some ground, but the enormous risk is still the 245-points on minimal Y ratio bandwidth.
R1 above the zone was 3280, so, for us at least, it was no coincidence that yesterday the SPX spent a lot of time trying to break back up through it.
For the record the intraday high was 3285.78 yesterday.
Obviously, 3290 is now a critical level, as above it is back into the R1 ratio bandwidth.
If it remains below it, the next support level is the nomadic zone.
But, more to the point, if this index remains in the Y ratio bandwidth then the recent volatility will soon appear as if it was just the hors d’oeuvres.
Range: 3205 to 3290
Type: On balance bearish
Nb. Our comment on 02/04/20
The writing was on the wall when the intraday high on the day of our last comment was 3293.47, and, more importantly, the close was below R1 at 3290.
Very interestingly, today, R1 has moved back to 3280, so definitely a level to watch.
However, hopefully you have not been too disappointed with the level of volatility, as you should have been expecting it.
Although a 43.11-point whipsaw on Thursday 30th was quite extreme.
Our only disappointment is that, so far at least, the expiry low is 3214.68, so less than 10-points away from the zone.
This is however tempered by the fact it is just 9.68-points, hardly anything on a three-thousand-point index, and, especially so, after a fall of 123.09-points.
Furthermore, as we have continuously pointed out, that there is still a stupid amount of Y ratio around, and even Y1 ratio, so there is actually a case for arguing the zone itself could be 3150 all the way up to 3230.
With just over two and a half weeks still to go this trip, there is still plenty of life left in the Feb expiry.
And, although, it is good to see the ratios building below the zone, they have also done so above it, so both bullish and bearish.
But, at the end of the day, there is still just over 200-points of Y ratio bandwidth, which is colossal.
So, for us at least, volatility is still the name of the game, as is the risk, as please don’t forget the corresponding R ratios below the zone don’t kick in until 3070, so the main course could still be to come.