That is some heavy duty ratio levels the SPX keeps taking on, which is punchy.
Nb. Our comment from 03/03/20
Well, really, you should not have been surprised by this move, or the timing of it, being at the dawn of a new expiry.
As you know we were expecting a big move, but this went over and above even what we anticipated.
However, in days of yore, well a couple of years ago anyway, when it came to a triple, then everything just ratcheted up several notches.
So, where we would see the R ratios as pivotal, in a biggie, this would up to DR or B1.
As it hasn’t happened for a while, we haven’t mentioned it, but that doesn’t mean to say this, what we are seeing now, is abnormal.
In fact, quite the opposite, as this, to us at least, is the return to normal.
What isn’t so normal, and is fact very abnormal, is 235-points of Y ratio bandwidth, as, back in the day, one might see a tenth of this, in a triple.
The problem is, when a market has just transversed the entire length of this abnormal minimal ratio bandwidth, there is a degree of momentum inherent, and add another surprise whammy, and then you get a market taking on ratios it hasn’t had the nerve to for a quite a while now.
The intraday low on Friday, 2855.84, was deep into DR ratio, which is a huge amount of dynamic delta to take on, but one that is not unknown in a triple.
The fact the market closed above 2945 is also very significant, as was the fact the intraday low on Monday was 2945.19 and its close above 3085.
It still has a long way to go, but the table above will show you the significant hurdles ahead, on top of which, we rather doubt that we have seen the last of the zones moves down, but, it’s a start.
More to the point, we now know this markets pain threshold.
Range: 3085 to 3145
Nb. Our comment on 03/06/20
Last Friday the intraday, and, so far at least, expiry low, was 2855.84, which was deep in the DR ratio, then around 2895.
So, on todays ratio table above, it is perhaps worth noting that DR now doesn’t start until 2870.
However, from just below 2900, which was the old level, there is a significant step-up in the ratio, as it is closer to being DR than R3.
Perhaps worth reminding that the ratios are in ranges, so a certain point, such as 2895, could be just below the threshold of DR, but still a long way above from the minimum that qualifies as R3.
Anyway, it does show that the ratios are falling below the zone, which is bearish, as is the fact the market is below its zone.
The zone has dropped already this expiry, and although it is static today, we very much doubt that the next time we calculate the ratios it will be where it is now.
The good news, is that as the ratios tumble it brings the Y ratio bandwidth closer.
Today, it is standing at 3095, so it wouldn’t take much for this market to claw its way back into it, making this level very significant.
More good news, is that there is still two weeks to go in this expiry, so plenty of volatility left to take advantage of.
Virus aside, any market that takes on the dynamic delta that occurs when it interacts with the DR ratio, in this case futures buying, is a market that has that many futures to sell to meet that demand, so worth bearing this in mind.
At the end of the day, if the market is happy to supply enough to meet this naturally occurring demand, then it will not have any effect, which will only come when that demand outstrips the supply.