Nb. Our comment from the 06/24/20
And July is picking up exactly where June left off, with it being all about the zone.
Now, first and foremost, the surprise is that the zone is an astonishing 60-points wide.
Not unheard of, but still, very rare and unusual for it to deviate from the standard 10-points.
There are two reasons for this we believe, firstly that it is taking an age to actually make the transition from where it was back on the 18th, to where we flagged it was going to go, 3095-3105.
Secondly, it is symptomatic and just highlights the fact that there is an absolute dearth of ratio around in this, the July expiry, at this point in time.
The good news, is that the zone continues to climb, or at least, good news in the sense this is bullish.
Perhaps bad news for those bulls, is that the Y ratio bandwidth, stretches from 2820 all the way up to 3305, which is practically 500-points.
For those that remember “normal” markets, the amount of times this index went up, or down, to the nearest R levels, then traversed the entire Y ratio bandwidth, to eventually reverse again to end near its zone, what we used to call “a roundtrip”, was very common indeed.
Normally, this would result in 5% to 10% over the course of an expiry.
But were this to happen today, then just the 500-point leg alone is equivalent to 16% almost, and that is madness.
Basically, the last two days have been amazingly timid, as 100-point moves, minimum, here, should really now be expected.
Range: 3105 to 3305
Type: On balance just bearish
Nb. Our comment for 06/30/20
Actually, you just couldn’t make this up even if you wanted to, as the very day we published, after two very nondescript days, we got a 100-point move.
Furthermore, in the meantime, it has still been all about the ultra-wide zone.
We did notice yesterday however, that, for the first time, the zone begun to resemble the normal width it is today.
Although, the last couple of days of last week, 3000 came into the picture, so the zone could easily have stretched from 2995 all the way up to 3105, and that, most definitely, would have been the widest zone in the SPX ever.
We don’t want to come across as labouring the point, but as this expiry moves forward, it would be well worth remember how very little ratio there was, and, more significantly, where it wasn’t.
But, at least now, a third of the way through, it seems to have made up its mind.
Therefore, there is absolutely no coincidence, that the close yesterday was where it was, right in its zone.
Also, just to underline this, the ratios either side of the zone, have begun to act as if this is where it now wants to be.
The fact that the ratios have now decided, should not lull you into any false sense of security, as this market still has a ginormous Y ratio bandwidth.
And, today, it may well decide upon which side of the zone it wants to be in.
Which is no trivial matter, as below the bears are in control, whereas above, you’ve guessed it, the bulls are in charge.
Whichever wins, it still has a Y ratio bandwidth of 335-points, so really, the fun is just getting going.
Range: 2895 to 3230