Nb. Our comment from the 08/07/20
The table above doesn’t necessarily reveal the entire story, so it is well worth actually reading this, especially if you are a trader.
For those of you who are trading, then you will know exactly to what we refer, as on Monday the intraday high was 3302.73. Not even mentioning the FTSE and 5850.
Then, on Tuesday, the epic battle this market had with Y2 at 3305 was magical to behold, assuming that is, you knew where Y2, and the inevitable dynamic delta hedging, stood.
We use the word “magical”, as that is exactly what was needed, as in literally the last seconds of trading, to get the market across the line.
It doesn’t matter how it does it, but it’s the end result that counts.
For those who have been readers for a while, will be familiar with the more usual method employed, the “quarterback sneak”.
Obviously, once across, in what we would term, the cowardly manner (least expensive also), it meant the next level was R1.
In our last note, this was at 3345, and apologies if you traded on that yesterday, although the drawdown would have been 6-points, it might still work, as this level moved to 3355 the very next day, Wednesday 5th August.
Which just goes to highlight a very important point, in that these ratios evolve, especially as they are trade driven, so we should publish daily, but as we don’t, at least you should be aware of this issue.
This couldn’t be more pertinent to what is happening below the zone, as, on the table above, it looks like the ratios are simply continuing their steady climb, but yesterday, well from Wednesday actually, Y2 was 3045 and R2 2870.
So, in fact, they have fallen slightly.
Now, this is far too early to call it a trend, but it is significant nonetheless.
Anyway, it is all down to R1 now, and as they say, the proof is in the pudding (or dynamic delta for us).
Range: 3205 to 3355
Nb. Our comment for 08/11/20
When we last published, Friday 7th August, R1 was just ahead of this market, it eventually having got over Y2.
That very day it had a fairly epic battle with R1 at 3355, first early on in the morning for about 20 minutes, then again just after midday, but not for nearly as long, until it eventually managed to creep back up to close just beneath it.
We did calculate the ratios on Monday, although we didn’t publish, and R1 had slipped to 3370.
So, it was interesting to see how difficult this market found it, trying to wade through what by now was just very high Y2 ratio.
The other interesting aspect yesterday, was the activity, which was average, but as that was all down to just the put activity, that was quite impressive.
At the end of the day, there hasn’t been much change in what has been happening here.
The ratios continue to decline above the zone, which in all likelihood will move up again, while they continue to build below it.
And, as we said previously, this is bullish by default, as shifting the Y ratios is hardly onerous.
The concern that remains, is that there hasn’t been any significant decrease in the Y ratio bandwidth, which still stands at 415-points.
The real focus now will be towards the rollover and expiry next week, and don’t forget next up is the September triple expiry, so these pathetic volume levels won’t be around for very much longer.
One point to bear in mind, is that the all time high here is 3393.52, and there is not a lot of ratio stopping them should they set their sights on it.
Range: 3205 to 3380