Nb. Our comment from the 04/21/20
Getting that feeling of Deja vu again, greatly enhanced with a healthy dollop of coincidence.
As it was back on the 14th, please see above, that the market was at 5842.66, and facing R1 at 5850, albeit in the April expiry.
The first meaningful ratio it had run into now the market was back above its zone, and so therefore, the first futures selling brought about by the dynamic delta.
As history shows, it didn’t react well, dropping to 5575 by Wednesday 15th, with a repeat of this intraday low on the Thursday.
And so, here we are, in the May expiry now, and the market is again facing R1 at 5850.
The big difference this time, is now it is at the start of the expiry, rather than the end.
However, whether this will embolden people to push through the dynamic delta, remains to be seen.
Otherwise, since the 14th, the ratios for this expiry have filled out quite nicely.
So, there is a decent range and depth already in situ, now all we have to ascertain is the markets appetite.
One word of warning, is that the Y ratio bandwidth does stretch from 5850 all the way down to 5350, so if it turns out it’s not that hungry, then that’s a solid 10% potential pitfall.
Range: 5650 to 5850
Activity: Very good
Nb. Our comment on 04/24/20
Three days later and we are right back to where we were.
Although this is technically strike three, it is really only strike two in this, the May, expiry.
So, we still think it will be a very stern test for this market, as there could still be a lot of nervous people out there, who could easily get spooked by some dynamic delta futures selling.
The zone has changed, and moved up, to 5650-5750, which normally would be a good thing.
However, we are rather sceptical of this move, as it is just within the minimal Y1 ratio, so hardly an onerous achievement.
In fact, it was a very close call, as to whether we made the zone to go from 5650 all the way up to 5750.
We have seen this before, and it makes for a very volatile market.
But, an outstanding trading one.
The big takeaway, is the fact that no other ratio has changed, so there is no corroborating evidence to back this zone move as directional, as opposed to technical.
Could be a big day today, or just a repeat of the last time we were here, sadly.
Range: 5500 to 5850