Nb. Our comment from the 09/21/2022
Well, the September expiry did end up a textbook one.
On the Wednesday and Thursday, the intraday lows were 7259.24 and 7258.67 respectively, and the EDSP was 7264.45. So, there was no doubt at all they held it in its zone over the rollover and expiry, which when you consider what was happening in the US, then this is even more impressive.
Moving swiftly on to more important matters…October, and the new 5-week expiry.
Obviously, the close last Friday was south of the zone, so the grand intentions of September evidently didn’t carry across into the October expiry.
With the short notice Bank Holiday on Monday no doubt affecting things, Tuesday was going to be crucial in determining what the possible intentions might be for this expiry.
And having been almost 100-points higher at one stage seemed to answer that. However, it really didn’t take much to knock the legs out from under that rally, and very early on into the proceedings as well.
More importantly, the bottom boundary of the zone (7250) hardly put up any resistance at all. In stark contrast to the week before.
The next level of support is not until it hits Y2 at 7150.
After that, you have to wait until 7050 before it hits R1.
Even from the very start the ratios were lopsided (no Y ratio above the zone), so it always had the potential to be a hard slog this expiry for the bulls.
Therefore, the only question that really remains, is what will tempt them back in to the fray, Y2, R1 or might it take R3 at 6950?
Range: 7050 to 7250
Nb. Our comment on 09/26/22
October could well turn out to be another classic expiry, albeit one that still carries the memories of 1987, courtesy of it being regurgitated by the press every year.
First however we must look back at last week, before going over the coming one.
Wednesday the 21st was significant not just because it started weak and finished strong, but because the intraday high was 7258.87.
This was a test of its zone’s bottom boundary, and the fact it failed to hold onto it was the significant part.
Thursday was also significant, as the intraday low was 7149.59, right on Y2.
It did close back above it, giving the bulls a small crumb of comfort, but not by very much, in the end closing at 7159.52.
Who knows whether R1 at 7050 might have been more effective on Friday if it wasn’t for the shocks coming out of the mini-budget.
It is just R1, and don’t forget these ratios are exponential, but with gilts and sterling also getting hammered it really didn’t have much of a chance. Sometimes this is also healthy, as it does show that sometimes derivatives don’t have it all their own way.
The big, nay huge test, will hopefully come today. By this we mean the market testing R3 at 6950.
This is a significant jump in the ratio level it has been experiencing, and this is a level that will produce a considerable number of futures buying generated by the dynamic delta.
If it holds, it may well tempt the bulls back on board. If the market is really in the doldrums, it will just provide a buyer for those dumping futures. No crystal ball we are afraid, but it should be a fantastic battle. A battle we suspect that will decide what happens for the rest of this expiry.
Range: 6950 to 7250