SPX , NDX & DJX Ratio Table 30th August 2018
Really very impressively aggressive from the SPX, and good to see it taking the lead for once.
We did mention a few bullish signs, one of which was that 2845-2855 may leapfrog 2820-2830 to becoming the next zone, and today it has done so, and although it hasn’t changed yet we don’t think it will be that much longer.
Also, in our last comment, we said we hadn’t seen any evidence of it being committed enough to take on the futures shaken out by the level of dynamic delta at R2, but we did on Tuesday.
The intraday high then was 2903.77, and it obviously couldn’t handle the futures then, but on Wednesday it blasted past them, so they have certainly upped the stakes.
Staying here is now going to be the difficult bit, as now it’s in the R2 ratio bandwidth it has to fight the same level of dynamic delta for every inch not just to get past it, so now comes the real test of the strength of their commitment.
Range: 2905 to 2930
Type: On balance just fractionally bullish
However, the prize for outright aggressiveness without a shadow of doubt goes to the NDX.
We didn’t particularly notice any hesitation at 7625 where R2 was lurking, and anyway it has gone so far past it is a somewhat moot point anyway.
Rather ironically none of the ratios have changed, so it is all down to the market, and whereas last time all we saw was money coming off the table, on both sides, today it is just one way.
The end result is we see R3 reappear, but what that may bring to the party when the market is in this mood it is impossible to say.
We have no idea what the news was, or is, but this is fundamentals taking over, especially as derivatives had left the door ajar, so there is very little these ratios can do under these circumstances.
Although, once the emotion drains away then the dynamic delta will remain, unless of course the ratios do start to collapse, and being in a R2 ratio bandwidth will come as a very unpleasant awakening.
Previously, under these similar conditions, we often see this index stuck in a 25-point corridor and depending on where it opens the top and bottom should be a multiple of 25.
Range: 7625 to 7750
For all the aggressiveness coming from the SPX here in the DJX we are seeing more passiveness, which is a bit odd as it is normally exactly the other way around at this stage of an expiry.
In our last comment on the 28th August Y2 in the DJX was standing at 26100.
This is important as on Monday the intraday high was 26067, and on the Tuesday 26122.
This was the same Tuesday that the SPX hit R2 at 2905.
Both capitulated then, but it was the Wednesday that these two diverged, with the DJX going above 26100, and it did close marginally above it, but as you can see from the table above Y2 is now at 26400, so yesterday 26100 should not have been that much of an issue.
Whereas R2 in the SPX hasn’t changed and yet it blasted past it, ending up 0.57% compared to the DJX’s 0.23%.
Unless the DJX joins the SPX’s party, both are going to struggle to hold it up at these levels, as one faces a constant stream of futures of R2 magnitude coming onto their market, whereas here they obviously don’t feel comfortable with even Y2.
Range: 25100 to 26400