R2 at 7550 proving more resilient in the FTSE than we thought.
Nb. Our comment from the 12/30/19
There are going to be quite a few nursing a sore wallet after the Dec expiry for sure.
The good news is that it hasn’t stopped them from playing in the Jan expiry.
However, that’s where the good news ends, as this expiry is rather messed up, and half days and closed days are not exactly helping get it sorted.
Bizarrely the zone has actually fallen, which is bearish, but at least this has put some Y ratio either side now.
The problem was the FTSE opened up on Monday at 7582.48, which meant it was above 7550, then around R3, but now R2.
On top of which 7650 has remained at DR, and this index’s intraday high on Friday was 7665.40, having basically traded the entire day up until the Street opened, in the narrowest of margins, between 7650 and 7660.
Conservative majority, Brexit, or whatever, in the Jan expiry this index should just not be taking on DR ratio.
In fact, it is in a remarkably similar situation to the SPX, in that all’s well as long as the bulls remain committed and willing to keep knocking on the ratio door until it gives way.
But, if there is a scare, then there is virtually no ratio support until you get down to 7150, a very scary 500-points away.
So, for us at least, the risk profile is very high, and 7550 is a massive level now, with huge implications.
Range: 7550 to 7650
Nb. Our comment on 01/06/20
As we said last week, “7550 is a massive level now”, and on Friday the intraday low was 7551.00.
But on the Tue and Thu either side of the New Year break the intraday low was 7532.38 and 7542.44 respectively.
So, Fri made that strike 3, and we wouldn’t expect it to hold out again.
Even more so as the ratios have slipped there, and so, as 7550 stands, it only just makes the threshold of R2, so it might be better to think of it as R1 as the day goes on.
In perspective, this means R1 is going up against the dynamic delta that goes with DR ratio, and really there should only ever be one winner in that fight.
Although, finishing up 18-points on Fri was bit of a surprise, no matter that 7550 was R2.
So, for us, this is still a very scary situation, with now only R1 standing in the way of this market racing down to its zone, 200-points away.
Of course, we can’t ignore its resilience, but at the same time we can’t ignore that this expiry remains in a very precarious position.
How the new geopolitical scenario will play out, who knows, but to us, this has only just increased the potential of “a scare”, as the risks are still the same as they were.
In fact, the only ratio to actually change, is B1 which slips out a fraction.
Perhaps worth remembering is that this expiry is only just at the half way stage, so you have two more weeks of this.