SPX , NDX & DJX Ratio Table 23rd August 2018
We do say that this first “extra” week in a 5-week expiry can be a bit tedious, but here in the SPX it has been far from it.
OK, on the surface, the market has gone nowhere, but if you are aware of the ratio levels you would also be aware of the titanic battle it is currently fighting.
On Monday R1 was at 2855, then as we revealed pre-market on the Tuesday via twitter it had slipped to 2865, which has proved to be the battleground for the last two days.
Now the interesting side effect of all this was yesterday there was no fear, or no put activity to speak of, and yet there was a lot of call money coming off the table, which is ridiculous this early in an expiry.
Then, today, we have seen about half return, but it is the put activity that is most surprising, as this is almost entirely responsible for “activity” below being “good”, and this in a triple would translate into a “very strong” in an intermediary, to put it into perspective.
No real change in the ratios above the zone, but R1 has taken a right battering and is on strike 3 anyway, but below they are very much stronger, which is in fact bullish, so we suspect it won’t be long before we start talking about the zone moving up.
But the question is whether or not this will be before all those nerves get the upper hand?
Range: 2805 to 2865 or 2865 to 2880
Type: On balance bearish
As we said on Monday “The NDX in Sept could be the deciding factor, and it has been a very long time since we have seen this potential here just by normal everyday activity”.
There has been an impressive increase in the ratios below the zone, but right from the rollover last week the start of the Sept expiry was always going to be about the ratios north of the zone.
Today R1 is 7425, although it could have changed yesterday of course, but there is no coincidence that the market finished right on it.
How brave are they going to be?
It has been a very long time since this market took on a R ratio and won, even longer without the big players wading in first as well.
Nothing is impossible, especially in markets, and fundamentals can sometimes outweigh derivatives for sure.
However, as a general rule of thumb, fundamental (or technical) inspired movement tends to last but a day or so, and unless the ratios capitulate, the dynamic delta, or futures selling in this instance, will eventually erode that emotion.
Range: 7325 to 7425 or 7425 to 7525
Type: On balance just fractionally bearish
Unfortunately, the jury is still out on the DJX, as the problem we identified on Monday still persists.
Then we said “Will Y2 prove to be a problem, we just don’t know until it is tested, for the simple reason that they feel emboldened by eventually breeching 25500, so is that job done to them, or now game on?”
Monday didn’t really give us a clue as it traded in a 100-point range, from 25716 up to 25790, which is a bandwidth and a sign to us that they were not happy even in just Y1 ratio.
Altogether, hardly surprising, as for the last two expiries they have been in stupidly wide zones where there is no ratio to contend with.
Tuesday saw the high of 25888, undoubtedly a test of Y2, which was then at 25900.
So, its reaction since that test has been a natural enough recoil, but it has hardly been very far.
The reason for this is very likely the SPX continuing its battle to break through R1.
So, what needs to happen is for them both to start reading from the same page, the problem is which page will they join together on?
Please note Y2 has slipped to 26100.
Range: 25100 to 26100