3105 and 3155 decisive levels for the SPX in the Dec expiry.

Nb. Our comment from 11/15/19 (Not published)

We did not publish anything about the December expiry, our last comment was on the 14^th Nov in respect of the Nov expiry, which did extremely well just to stay inside its Y ratio for it.

The settlement price was 3110.52, so it just continued “knock, knock knocking on that R ratio door” right to the bitter end.

What we call the Thanksgiving Effect.

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Nb. Our comment on 11/19/19

The trouble with the “Thanksgiving Effect” is it skews the start of the next expiry, or at least can do.

And, this is exactly what has happened here, as it has forced the Dec expiry to start in R3 ratio.

There is no doubt at all that it doesn’t want to be battling this many futures this early on, and this now places derivatives firmly against equities.

Equities love the Thanksgiving rally, but in derivatives, when every step is met with an R3 level of dynamic delta, it’s not so easy.

You have to be really bullish to want to buy that many futures.

The fact that the ratios are significantly underdeveloped, reveals that people are not so convinced, after all, and not that long ago, it was extremely rare to see any Y ratio at all in one of the big expiries, and definitely not the biggest of the big.

Will equities allow for any pullback before, or even after, the 28^th?

We doubt it, entirely because they haven’t in the past, and this scenario is no stranger.

But this is one weird Presidency, where every day something’s new, so when we say the above, we do so with a conviction ratio in the low teens.

Obviously, 3105 and 3155 are incredibly significant levels, and the first one to break will tell you all you will need to know about the conviction and desire in this market.

However, please do bear in mind, that the corresponding R3 ratio level is way down there at 2845, and if players were truly bullish then these ratios would be climbing, as would the zone itself.

Both may well do so, but also don’t forget how thin the US markets get next week, and are therefore notoriously volatile, as well as somewhat gung-ho.

Obviously, we are bearish, but in light of where we are in the calendar, a reappraisal post the holidays is the sensible suggestion.

Range:            3105  to  3155          

Activity:          Moderate       

Type:              On balance only just bearish