Nb. Our comment from the 11/04/20
Well we sincerely hope that you did read our last note, premarket on the Wednesday 28th October, as the market has pretty much played out exactly as we guessed.
In fact, this is really the reason why we always repeat our previous comment, as it is so much easier doing this than using up space having to reference it.
The real battleground was last Friday, and despite the intraday low coming in at 3233.94, we actually lost count of how many times the SPX bounced off 3245, or just below it, meaning this was the real, or pragmatic, intraday low.
Will this expiry play out exactly the same way as October’s?
Nobody really knows, and, of course, there is an election issue to consider this trip.
We would like to think so, but we have noticed that the zone could easily reverse its recent gain, and that is not good.
Unfortunately, the table above is slightly misleading in this respect, as it shows R1 slipping 25-points, but R2 gaining 15.
The fact is actually different, as R1 has been marginally lower, and not recovered much, whereas R2 actually dropped to 3045, and has recovered up to and beyond its previously published level.
Above the zone it is more accurate, as in the last week the ratios have continued in one direction throughout.
However, the overriding issue, has always been the gargantuan Y ratio bandwidth, which has only slightly improved but is still 395-points wide.
The problem, for us at least, is that if the zone flips back to 3345-3355, or even worse.
But, as there is still two and a half weeks to go, and, importantly, activity has kicked in, we suspect that this expiry is only just getting going.
Don’t forget, next up is Thanksgiving, but until the ratios and zone, become a bit clearer in what way they are going, we have to say we are pretty much back to square one this expiry, especially as the market is now right between the original zone and the new one.
But whichever way it decides, it won’t be gentle.
Range: 3245 to 3395
Activity: Very good
Type: On balance bullish
Nb. Our comment for 11/10/20
Indeed, it certainly wasn’t gentle.
More to the point, who knew Pfizer was developing a vaccine? You did! Why didn’t you say? Sorry, what do you mean they have been shouting about it from the rooftops for several months now? And, what, how many others? At least a dozen more vaccines, really! Who knew? …Everyone it seems.
This is not meant to be facetious, but deadly serious.
As please refer to our first comment on this expiry, back on the 21st October, when we alluded to the similarities with the previous expiry, and on the 28th we actually said; “Don’t forget the last expiry, which went down to Y2 before reversing all the way back up to its R ratios, in a 10% or 350-point recovery. Nb. The purists would note if you caught the down leg at the start, that adds another 3% on to the 4-week total round-trip ride. Nice.”
Now, we have already seen the test of Y2, way down there at 3245, and courtesy of the “surprise” announcement yesterday, we have seen this index test R2, with the intraday high of 3645.99.
Please note, and as in the table above, R2 today is now at 3705.
So, down to 3245, which was from 3500 at the start of this expiry, is 255-points, then up to 3645 is 400-points, making a grand total of 655-points, or a massive 18.7%.
This is the way things are now, and as we have said many times in the past, the regulator needs to get a grip, as this is just not natural or beneficial, except, perhaps, to traders.
There is still a week and a half to go this expiry, and the ratios have returned to strengthening below the zone and weakening above it.
The zone itself could easily resume its upward trajectory, and all in good time for Thanksgiving.
For the record, the all time high here was 3588.11, so it has achieved this already.
So, for us, the only thing that remains, would be to see this index in or around its zone, wherever that may end up, this time next week.
Range: 3405 to 3605