The SPX is now stuck in the R2 Ratio bandwidth rather than the R3 one it was in.
Nb. Our comment from 11/26/19
Looks like “post” the holiday it is.
There was always that risk, and to be fair, Wednesday and Thursday last week were the deciding days.
On Wed it closed at 3108.46, having had the intraday low of 3091.41, which was hugely significant considering our range was 3105 to 3155.
Holding back in the R3 bandwidth showed remarkable resilience, which they needed again the very next day, with the intraday low of 3094.55 and the close of 3103.54.
It could have gone well for the bears at that point, but, as we said last week, it’s best not to underestimate the “Thanksgiving Effect”.
Looking forward, and it always gets a bit, well ok, a lot, silly in the thin market’s tomorrow and Friday, so unless you are of that temperament best to look towards next week now.
The ratios are building below the zone, which is bullish.
The fact the zone hasn’t moved is not.
The ratios above are slipping, also bullish, but considering where this market is in relation to them, this may just have the effect of taking away the support.
So, we maintain our stance, that this index is walking on very thin ice, but it is a situation it is not unfamiliar with at this particular point in time.
If previous years are anything to go by, sanity doesn’t return until late Monday, sometimes Tuesday or later, and so where this index is then in relation to the ratios will be the issue, not for the remainder of this week.
A bit like “shields are at 30% Captain, but holding, just”.
Range: 3130 to 3165
Type: On balance bearish
Nb. Our comment on 12/06/19
The top end of our trading range before Thanksgiving was 3165, and we must apologies, as we forgot to mention what we call a “step-up” in the ratios at 3155.
This is where, within a bandwidth, in this case R3, the actual numerical ratio is closer to the next level up, as opposed to the one below.
Quite often, as the ratios move, these levels get revealed as a level in their own right.
This is what has happened here, as the step-up at 3155 on the 26th has become R3 in its own right.
We mention this as this index, intraday on the 27th, reached 3154.26, so it has already been here once, so knows what to expect, although back then it was a lot nearer to DR than it is today.
This just highlights what we said last time, the ratios below are building, and those above the zone slipping, both of which are bullish.
The static zone is not, nor is the fact it is over 100-points below the current level.
But, don’t forget that this is the mighty Dec expiry, so it is absolutely massive, and this year is the biggest we have seen for some time.
Although it hasn’t yet reached the proportions of last year, but easily swamps the preceding 4 years before that.
We mention this as it is very unusual, considering its size, to see any Y ratio at all, and, on top of which, the B ratios only appear at 3230, and then only above the zone.
So, despite its magnitude, it is a very thin index where the ratios are concerned, so, as we gallop towards the expiry, the moves may, probably will, become extreme.