Obviously, the zone has exceeded
expectations, albeit had we published in the last ten trading days this further
move would have been apparent, it now being at 2745-2755.
Needless to add, with the zone moving,
the R ratios had to recede.
The real question is looking forward,
and it is all about R1 now, as it held yesterday (intraday high 2803.12) but
was severely tested on Monday with the intraday high of 2813.49.
So, it has held, but under huge
pressure, and next visit would be strike 3.
Furthermore, don’t forget this is a
triple, and in these biggie’s R1 doesn’t normally carry too much weight.
Having said that, the fact that this is
a triple and we only go as high as R3, on both sides, is very alarming, as
historically, if this index gets trending, it takes at least DR to act as
moderator, and again, this holds true for both directions.
The fact that the R ratios are receding
and the zone is climbing is bullish, but what we would really like to see is
the ratios below the zone climbing, which they have, a bit, but the Y ratio
bandwidth is still 185-points.
This is what it was back on the 13th
The fact this expiry is so underdeveloped
coupled with such a ludicrously wide Y ratio bandwidth means we are exceedingly
The trading range below reflects the
zone, as that should offer support.
Our only surprise is that this index isn’t whipsawing around by 2% or 3% on a daily basis, which makes us suspect that one of the other two must be interacting with their ratios.
Type: On balance only just bearish
As it turned out both the other two were
interacting with their ratios, but probably most notable was the DJX with R1 at
Also, as it turned out, a 50-point
whipsaw on Monday neatly summed up our last comment.
The reversal on Monday was attributed to
trade talks, but we see this so often that logically the common denominator
over the last 10 years has been the ratios, as the market opened up
10.68-points, inched a bit higher, then fell 50-points.
Now, was it the futures selling
generated by the dynamic delta as this index hit R1 (nb. Exactly the same
applies to the DJX and 26200) that caused the market to come off and the story
was added after as the explanation, or really, did the trade talks contain that
much new news or a surprise, and at that precise moment when it turned?
You will find, every time, the answer is
People need to have a reason for the
futures selling, it really is as simple as that.
Eventually, hopefully, they will realise
these ratios and dynamic delta exist.
Back to the matter in hand, and the Y
Ratio bandwidth is now 160-points, so the risk remains.
The appearance of Y1 above the zone
means it may move up again.
So, bullish, but not very committed, and
the downside risk is eye-watering.
To add a little bit more spice to it all, it’s the rollover next week as well.