Sorry, been away, so what happened then? Anything exciting in the SPX?
Nb. Our comment from the 05/19/20
We don’t think it is coincidence either, that as the June expiry zone remained throughout at 2795-2805, that the expiring May was pulled down back towards this level.
So, what about June, and, more importantly, what to expect.
Firstly, we have discounted Monday’s move, as we see this as just the direct result of June forcing the May expiry back down towards 2800’s, when it really wanted to be around the 2900’s.
Once this works its way out of the system, then there are a couple of formalities to point out.
One is that this is the second triple of 2020, and therefore prone to big moves.
Second, this is a five-week expiry, so a lot longer than usual.
Now, this is out of the way, looking at the overall level of ratio it is appalling, dire even, and especially so for a triple.
And, it’s far more than just a lack thereof, as it is the dispersal as much as anything, as there is hardly any increase going on as one moves away from the zone, in either direction.
For a triple, we should be seeing at least one, sometimes two, levels of B ratio.
However, what is more normal, is the lack of Y ratio below the zone, which used to be quite common in a triple.
However, this can’t be said for above the zone, where there is just over 200-points.
No prizes for guessing the path of least resistance for this market.
But, as triples used to, quite normally, travel between the high R, DR or even the B ratios, over the course of an expiry, there is really nothing here that should give it any undue cause for concern if it put its mind to it.
Basically, about 400-points either side of the zone should cover it, and whether or not your bullish or bearish, we personally don’t think this degree of potential range over a five-week period is a good thing.
Perhaps fundamental analysis will clear everything up, but we are not holding our breathe.
Range: 2805 to 3005
Nb. Our comment for 05/26/20
With the potential to make big moves, the SPX has certainly had a quiet week.
Essentially ending up exactly where it started.
In the meantime, the ratios have developed, much more so than the “poor” activity level suggests.
In fact, it only missed being the next level up, “moderate” by a whisker, and as this is a triple, and it includes the Memorial Day holiday, this is actually a very acceptable level.
Also, don’t be fooled by the fact it is only the ratios above the zone that have had any meaningful moves.
As we said, there is no Y ratio below the zone, so already being in the R ratios, this means there is a lot further for these to climb to go up a level, especially as the ratios are exponential.
Whereas, above the zone, as R2 didn’t even start until it was 280-points above the zone, meant it is a lot easier for those to climb, and therefore move in towards the zone.
The fact that this index is clear all the way up to 3005 is very ironic to us, as those that remember the last months of 2019 and the first few of 2020 will know that we routinely said that this index could drop at least 8% in a blink of an eye.
Considering the all time high was 3390, that puts an 8% drop in the region of 3100.
In fact, back in early March R1 below the zone actually kicked in at 3145.
So, here we are, an entire pandemic (almost) later, and an economy decimated, and the market is back to where it should have been, albeit without the hyperbole.
Sheer madness, but then again, it’s not doing anything wrong, this time at least, against the ratios.
Range: 2805 to 3005
The story of the Big Bang, The Great Storm and the crash of ’87.