Nb. Our comment from the 09/22/20
We do not normally add our last comment of the previous expiry to the new one, but as we did comment, last Friday, on how things stood in October, we couldn’t help but blow our own trumpet.
Two things; Firstly, the zone back then, and on Monday, was 3345-3355, which is significant.
As, and secondly, when the market expired at 3353.60, right in its zone, all was well and good, but, the second it went below this zone the first warning bell should have been sounding.
And, when it closed at 3319.47, below the zone, and therefore in bear territory, it should have been more of a siren than a bell.
Volatility and whipsaw, right from the off, and only to be expected with so much of the minimal Y ratio present.
Which also ties in with the drop today in the zone, and, although not published, this is actually where the October zone in September was.
It only recently moved up to join September’s, almost certainly due to the rollover and expiry, so it has hardly had any time at all to cement this move.
Furthermore, with so much of the minimal Y1 ratio around, the zone could almost be anywhere from 3300 all the way up to 3400.
So, rather surprisingly, the fact that the SPX has recovered, and is looking to hover around its zone, is actually a good thing, despite yesterday’s 90-point move.
Although we appreciate you can’t tell from the table above, but, although the zone flipped back, Y2 and R1 either side of the zone, at either zone level, are static.
As is R2 below it, but R2 above has actually come in a bit.
Overall, though, the Y ratio bandwidth may have improved to 460-points from 510 on Friday, but this still represents 14%, so don’t go getting complacent just because the first couple of days are gravitating near the zone, as this expiry is probably only just getting going.
Range: 3095 to 3295
Type: On balance only just bearish
Nb. Our comment for 09/25/20
Volatility and whipsaw, as we say, are still the name of the game.
However, and we must hold our hand up here, these ridiculously wide Y ratio bandwidths are a new phenomenon, so we don’t have much, if any, precedents to draw from.
In the past we have had wide bandwidths, but generally only for one, or even part of one, expiry, and almost always due to a lack of involvement.
This lack of involvement, or fence-sitting, could always be traced to all the market participants essentially not knowing what to do, for a particular reason, and, rather ironically, quite often because of a looming election.
So, under the current circumstances, there is an element of this, but there is also something new now in the mix.
And that is the crash-down, and as we warned, the crash-up.
Make no mistake, because there was no ratio, or no resistance, then the market essentially vacuumed itself skyward, leading to new all-time highs.
There is a large element of this being a direct result of all the money injected, and we did see this in Germany, when they last announced their huge QE programme a few years back, the DAX rocketed up, through very high levels of ratio as the wall of money was just so vast.
Was that a natural market move, of course not.
Is this a natural market move, of course not.
What this means is the $100 question, and looking at the way the ratios are aligned, this market could/should easily trade from 3100 up to 3500, in the next three weeks.
The problem is, if it does, will the momentum be stopped by just R1? Rather unlikely in our opinion.
Is this proper market regulation and supervision? Possibly, if they get away with it, but just like back in March, the risk is there, and plain to see, so no excuse.
Don’t forget the new recent all-time high was a titanic struggle against R2.
Range: 3095 (3195) to 3295