The SPX has been tailgating R1 for the last two weeks and by that we mean the daily high has been on R1 and as it has receded the high has crept higher.
Back on the 2nd Oct R1 was at 2530 and the high was 2529.23, then high 2535.13 (R1 2535), 2540.53 (2540), on Thursday 5th it broke through but that Friday returned to normal with the high 2549.41 (R1 2550).
This week it only got as high as 2551.82 on Monday but R1 has held steady at 2555 and the highs on the next 2 days were 2555.23 and 2555.24.
However, what sets yesterday apart (apart from it coincidentally being Thursday) is it also closed right on R1.
This makes today’s open crucial and as we said this index wants to play and it has opened up for it but it may not be down to just them.
Range: 2505 to 2555
That was a very significant move in the NDX yesterday for two reasons.
Firstly, it hit Y2 again, low 6052.44, which was strike 3 and it held.
Secondly, it closed above 6075, and we always say if this index is in ratio it is uncomfortable with depending on the open it will trade in a range based on multiples of 25, and today with the move in Y2 it remains above it.
Albeit just and this makes today’s open even more critical, and also our comments below re the DJX also apply here.
Finally, and very odd but they added just a single strike, which is weird in itself (intended) but also there have hardly been many at all this expiry, so doubly strange.
Range: 5975 to 6075 or 6075 to 6225
Type: On balance only just bearish
Was that “crunch day” for the DJX or not is the $100 question?
There is no easy answer as the close was the high and that alone makes it suspect on top of which it is the first intermediary expiry in the 4th quarter so fair value couldn’t be more extreme.
Having said that it came within 28-points of the R ratio which is just 0.12% on such a large index.
The fact activity has returned suggests to us that some saw it, perhaps even recognised it, so we are going to call that strike 1.
Range: 22700 to 22900
Type: On balance bearish