Nb. Our comment from the 07/04/2022
“Big call” indeed, as the FTSE had to dig itself out of the R3 ratio hole it had dug itself into first.
By which we mean the open on the very day we last published, the 22nd June, when the market opened below 7150 and really looked in a very sorry state.
Sadly, we just don’t know when 7150 changed from R3 to R2, but whenever it was, this was always the crucial level.
Still is, as having gone all the way back up to its zone’s bottom boundary, at 7350, here we are back at R2 again.
That failure, on the 28th and 29th, when the intraday highs were 7362.37 and 7345.45 respectively, was very damaging for the bulls. Therefore, the fact that the market closes on Thursday and Friday last week were all about 7150 again, should have come as no surprise.
The fact that the Y1 ratio bandwidth below the zone is 200-points wide, also accounts for the big moves, essentially from 7350 to 7150.
So, although it may have appeared exciting at the time, in essence this market has gone absolutely nowhere in two weeks.
Definitely more troubling for the bulls, as not breaking back up into its zone at 7350 shows a worrying lack of commitment from them. Whereas the bears, have been happy to make deep intraday inroads into the R2 ratio bandwidth. However, both are now on strike three from last week alone.
As we are now just at the half way stage of this expiry, there is ample time left. So, although the market hasn’t really moved in the last two weeks, it does now know where the pertinent levels are. Therefore, game on, we think.
Range: 7050 to 7150 or 7150 to 7350
Type: On balance only just bullish
Nb. Our comment on 07/11/22
On the day of our last comment (4/7/22) we thought R2 had done the trick again, with the market finishing up 64-points that day.
Sadly, the very next day, Tuesday 5th, changed the picture entirely, with the huge fall of 207.18-points, which also took the market into the R3 ratio bandwidth.
Obviously, this was one of those instances when equities ruled over derivatives, and the futures buying generated by the dynamic delta had little or no effect.
It does happen, more commonly in those indices with a hundred or less constituents, especially where there are just one or two sectors that account for a disproportionate weighting within the overall index.
For the FTSE on the 5th this was the case with the oil stocks, which all suffered on the back of Brent giving up 10%.
There is absolutely nothing we can do about this, and it is just one of those peculiarities that affect the FTSE.
However, for the brave, it can represent a good opportunity, as generally those equity moments are fleeting, whereas the dynamic delta is there for the length of the expiry.
Naturally, a move like this will shake things up, so the move down in the zone is not altogether surprising. In fact, with such a large Y1 ratio bandwidth below the zone when it was at 7400, it was always a distinct possibility, especially towards the expiry.
7150 is still a key level, although how resilient it will remain after so many tests and breaches, we just don’t know.
The big test for derivatives will be keeping this market inside its new zone for the rollover and expiry, which after the big miss in the June expiry would probably be most welcome. And not that perhaps one might realize, but this index is still up almost 200-points this expiry, so there is a lot to play for still.
Range: 7150 to 7250
Type: On balance bullish