Nb. Our comment from the 02/07/22
Despite it being “a tough ask” they did manage to keep this market in its zone.
And by doing so, we have now seen a very decent build up in the ratios below the zone.
Again, it was an exciting start to the week, and if you were watching on Monday then that would have given you a massive clue about what might be in store for the rest of last week. At 10:30 the market went down to 7452 before recovering. Then again at 14:50 it had another go, getting back down to 7451 before one final attempt just before the close when it hit 7451 again. Three tests of the bottom boundary, and not one breach in sight.
Therefore, it was hardly surprising when we saw the intraday high of 7549.29, the upper boundary, the very next day.
Of course, we don’t know when 7550 dropped from R1 to Y2, but three days in row where the intraday high was around 7600 suggests it was about Wednesday or Thursday. Interestingly, only the Thursday closed outside of the zone.
It is not unheard of for this market to spend a third week in its zone but, as activity has continued to be so good, we suspect this is going to be even harder to achieve this week
However, there is now some Y ratio either side of the zone, so plenty of scope for it to escape should it want to.
Below the zone is still where there is the more scope, with R1 now starting at 7350.
Above the zone is still rather limited, with R1 remaining at 7600 and thereafter the exponential ratios climb one rung up every 50-points so, if they want a new all-time-high, then they are going to have to work for it and be prepared to take on all those futures forced out by the dynamic delta.
Range: 7450 to 7550
Type: On balance bearish
Nb. Our comment on 02/14/22
And work for it they did, although they did wait until Tuesday before attacking R1.
Well, we presume R1 was still at 7600 on Tuesday but we just don’t know for sure as we should, but we don’t, calculate these ratios daily.
Even last Monday it was just over the threshold, as was R2 at 7650, so it wouldn’t have taken very much at all to get it to slip a little bit further.
Both R1 and R2 are today about the middle of their range, so we would expect them to be the same tomorrow.
But, this week, being the rollover and expiry, it should all return to being about the zone.
As it stands that means a target of below 7550 but, as is always the way when the time runs out, there are a lot of position changes. Obviously, we can’t predict what these will be but, on the evidence so far, if 7600 continues to lose its ratios at the same pace as it is currently, then we could easily see a zone move to 7550-7650 for example.
Which is a very long way from the start of this expiry when it was looking like 7250-7350 might be the next zone.
Whether or not the zone does actually move it means that 7650 is going to be the critical point this week, so watch it closely.
Another aspect to bear in mind is what is happening across the pond, as although the SPX has been around or below 4500, we still haven’t seen that zone move. Interestingly, in the potentially opposite direction to what may happen here. But the point is, that as expiry approaches it is looking like the ratio forces that will come to bear here should exert a downward pressure, whereas over there it should be upwards.
And, don’t forget, next up is the first triple of the year.
Range: 7550 to 7650 or 7650 to 7700