Nb. Our comment from the 01/06/21
The closing auction yesterday was, or could turn out to be, a very significant point in this expiry.
But before we get into that we must mention Monday, as it was only the previous trading day that we commented that the only difference now was that this market now knew where R2 was hiding (please see above).
And, post Brexit agreement, it didn’t disappoint, and blasted out of the starting blocks, jumping just over 200-points.
The trouble was, this took it straight back to R2, with the intraday high of 6662.66.
Obviously, it hadn’t got used to the dynamic delta created by R2, but also, it was not really ready to capitulate either, which resulted in the FTSE trading just below 6650 for about the next 7 hours, until it eventually gave up in the final hour of trading.
Fast forward to yesterday’s closing auction, when the market managed to add about 13-points onto the real time close of 6599.60.
Now, the significance is that the ratios have changed, and 6600 is now the demarcation line between Y1 and the R ratios, so staying above it could prove crucial.
Below it is minimal ratio, and the zone (zero ratio), or to look at it another way, 250-points or almost 4%.
Dead ahead is R2, again, but this time it would be strike three, so if it goes there again, it should go “packing”, so there is a glimmer for the bulls, and after the effort of the auction, very possibly the desire.
But, and so typical of markets, any susceptibility to a scare, and if that forces it below 6600, then that’s an awful lot of emptiness waiting for it.
Great trading possibilities though…
Range: 6450 to 6600 or 6600 to 6650 (6700)
Nb. Our comment on 01/11/21
Wowee, is about all we can say.
As you can see from our last comment (above) we fully expected, or perhaps suspected would be more appropriate, that the FTSE had R2 at 6650 in its sights, and this time wasn’t going to take no for an answer.
The momentum also took it straight past R3 at 6700, meaning DR was the next stop.
The intraday high of 6859.14, and the close at 6841.86, pretty much sums it up.
One of the peculiarities of the FTSE, and the NDX is similar, is that in a 100-constituent index certain stocks, or sectors, carry a disproportionate weighting, and if they get the wind in their sails, there is not much that can stand in the way.
However, this momentum tends to be relatively short-lived, and the expiry just carries on, at least to its expiry, which in this case, is this week.
We have seen the zone move, which we flagged back on the 21st and 31st Dec.
But more importantly, and continuing what we saw in our previous comment, activity has been high, coming in again at “good” on our scale, and significantly, has been “bearish”.
With no qualifier in front, as in “on balance”, this means that calls have been taken off the table while puts have been added.
This still leaves it lop-sided, but from 267.6% to now “just” 166.5%, is a huge improvement, but still top heavy nevertheless, so with the rollover and expiry this week it is going to have to go some to just hang on to these hard-fought gains.
Guessing on how things might turn out, based on a lot of expiry end-games, getting this market below 6750 will be an impressive achievement for derivatives.
Needless to say, this makes 6850 the new, or still, crucial level to watch out for.
Range: 6850 to 6950