We don’t know for certain, but experience, and the facts, suggest that R1 at 2980 capitulated yesterday.
The facts being, quite simply, that the close on Friday (our last comment and table) was 2978.71, and then on Monday it was 2978.43 and again on Tuesday it was 2979.39.
Or it could just be coincidence.
Experience tells us that the market has been knocking on a retreating R1 ratio door, until it gave way, and although we did not calculate the ratios on those days, the price action alone tells us all we need to know.
The problem is that it hasn’t retreated very far, and now R2 is backing it up, at 3010.
Of course, the market could suddenly develop an appetite for all those futures forced out through the dynamic delta, but the last few days suggests something fundamental needs to change for this to happen.
Looking ahead, and pure speculation, but we have seen this set-up on many occasions, where the market wants to move ahead, but just lacks a sufficient amount of commitment, all the while chasing a new high, and so, by the expiry next week, we strongly suspect the zone will be 2995-3005.
It will have a dynamic delta fight on its hands, and so will be susceptible to any scares, but there is no doubting its desire, just its commitment.
Either way, there is still a lot of life left in this triple for sure.
Range: 2930 to 3005
Type: On balance definitely bearish
Nb. Our comment on 09/17/19
Since our last comment, see above, it is interesting that R1 hasn’t moved.
However, R2 has, from 3010 on the 12th to 3055 today, and it seems the market has needed this level of dynamic delta to thwart the bulls.
Of course, now the rollover and expiry start to gain traction, and we haven’t yet seen the move in the zone to 2995-3005 as we mentioned back on the 12th.
We still think it is very much on the cards, especially so, now that it is all Y1 from 2930 up to 3005.
Although, this does highlight, that although the bulls are in command, and battering on the R2 door, there is a vacuum beneath them, so if they waver for one instant, the whole pack of cards could come tumbling down.
That is the real problem, when the bulls forge ahead, but the ratios don’t fill in behind them.
As it is plain to see by comparing the two tables above, that there has been some movement below the zone, but by no means nearly enough.
In fact, it’s not even close.
Great, if they maintain their momentum and commitment, but please be very aware of the inherent risks over the last few days of this expiry.