Firstly, we must say what a perfect expiry September was, despite it being a triple, as on the rollover Wednesday it hardly deviated from around the 3000 level.
Which is exactly where we had the zone.
In fact, that entire expiry week, was very much centred around our zone of 2995-3005.
So, no real surprise to see October’s zone in exactly the same spot.
The really pertinent day was on Tuesday 24th September when the intraday high was 3007.98, a test of the zone’s upper boundary.
And the fact, the market, finished so far below the bottom boundary was equally significant.
Of course, all week now, it has been in bear territory, namely below the zone.
The other really important fact is how much Y ratio there is in this expiry.
Admittedly, it has narrowed significantly, but below the zone the Y ratio bandwidth still goes all the way down to 2895, an absolutely whopping 100-points.
We are back to the more normal 4-week expiry, but if you think it has been volatile, then it most certainly has the capacity, with all this Y ratio about, to really go up a gear, or even several.
In fact, we think these small 25-point, or 1% moves, are the abnormal ones, and fully expect to see 2% to 3% daily moves before long.
Range: 2895 to 2995
Type: On balance bearish
Nb. Our comment on 10/10/19
Well you have no excuse whatsoever to claim surprise at the recent market gyrations, as it is exactly as we forecast back on the 27th September (please see above).
In fact, and contrary to popular opinion, we see this as very normal, as the market has done exactly as expected.
Had it not transversed it’s Y ratio bandwidth, then that, would be weird.
The only question, at the time, was whether R1 or R2 would be needed to stem the tide.
As it turned out it needed R2, which interestingly hasn’t budged, so having been at 2845, the expiry intraday low is 2855.94, on the 3rd Oct, which was most definitely a test.
We are more than happy to claim this, simply because the market had fallen from 2990, or 4.42% in just three days, which caused a vega spike, but even without this, a fall of 140-points over this timescale means a fast market, so the ratios will always pre-empt contact under these conditions.
Anyway, having stated this exact point, a week in advance, only a certain person would quibble about a mere 10-points under these conditions.
More importantly, looking forward, and it is basically more of the same as the Y ratio bandwidth below the zone expands, which in itself will very probably move down to 2945-2955.
With the expiry next week this market still has a Y ratio bandwidth stretching from 2870 all the way up to 3035, so anything remains possible, just don’t believe what story the papers may attribute any move to, as move and whipsaw violently it will continue to do.