Well we couldn’t have published, on Sat 21st March, our last comment (see above) at a more opportune time, as the very next trading day, Monday 23rd saw the SPX hit an intraday low of 2191.86.
The fact it had closed the previous Friday at 2304.92, meant that B1 was the next line of ratio support.
And, significantly, it was B1.
Let us hope it has done the trick, as a quick glance at the table above, will show you that B1 has now slipped to 2070, which is really not good news, unless you’re a bear that is.
However, the main takeaway from this bounce for us, is that rationality has returned.
This is no minor facet, as last expiry there was no rhyme or reason, just panic, whereas now, it seems that the market is once again taking heed of the dynamic delta.
And the amount of futures buying produced by the dynamic delta of ratio the magnitude of B1, should really stop an express train, unless, like last trip, it is runaway mode.
Anyway, the market is now in a massive R2 ratio bandwidth, that stretches for 365-points, so volatility should remain, but hopefully this level of dynamic delta will take everything down a notch, or two.
Although, do not get complacent, as not only are the ratios falling below the zone, they haven’t really increased above it.
And, pointedly, the zone itself has not moved at all, and remains entrenched up there in the ozone layer.
Considering the dearth of ratio still surrounding it, then it should really be dropping down to meet the market, and its failure to do so, means that everything is not quite back to normal, which is a grave concern.
Range: 2380 to 2745
Type: On balance bullish
Nb. Our comment on 04/01/20
All we can say is that we hope B1 when it was at 2195 and the market hit the intraday low of 2191.86 is going to be enough.
If so, it means this market will need a good memory, something in fast markets it’s not exactly renowned for.
The reason we say this is because the ratios below the zone continue to tumble.
Last time the ratio range was 2380 (R3) to 2745 (R2), so the big moves we have seen in the last few days were only to be expected.
Although, we were going to get big moves no matter where the ratios were.
As the market has recovered a bit, and don’t forget end of quarter rebalancing, we have put today’s trading range at 2545 to 2795, but we are not daft enough to think this market is going to open above 2545, so this is just protocol.
Basically, R3 is now 2305, and for us that is a finger crossing and hope support level, with the top end of the range 2545, being where R2 has fallen to.
In effect, this is the market staying within the same bandwidth.
We say, we hope, because B1 has collapsed to 1995, so we sincerely hope we don’t have to call on that again.
The zone will move, but really it should have done so by now already, again a concern, as is the very low levels of activity.
The ratios are what they are in the table above, but please remember, they are changing all the time.