A Ratio vacuum is allowing the SPX to rise

The SPX has certainly had a bullish expiry, but the mechanics of why need a closer look.


Nb. Our comment from the 08/10/22


As we said, this one (expiry) may be one for the bulls, and so it has with a whopping rise of 7.96% so far.

In fact, if you go from the expiry high of 4186.62 it is actually 9.64%…and not many others saw this coming back on 18th July when this expiry started.

But, more importantly, is what might happen next?

The first aspect we have noted is that activity is going through a normal mid-expiry doldrum. While this is quite common, it does mean a degree of loss of control by the derivatives.

The second aspect to note is that, despite such a huge Y ratio bandwidth, the zone hasn’t moved, and more interestingly, not made any sign that it is likely to.

Thirdly, and this holds true in any expiry, don’t get fooled into believing any 4th Estate hyperbole about what is driving this market. There isn’t anything. It is simply because there is no ratio to speak of to get in the way. Although, almost 10% is a very long way we concede, so we understand why they have to try to label it, but it was nothing that wasn’t seen as possible meaning that the reason was also foreseeable.

Bearing these three aspects in mind, one might want to now consider that the rollover and expiry are next week.

Therefore, activity will pick up, so will volatility in all likelihood, and this will then determine if the zone remains steadfast, or looks likely to adapt.

In the meantime, it is worth remembering that this index is in Y2 ratio. Not difficult to handle, but with low activity, it would certainly make things uncomfortable.

Both Y2 and R1 have been higher, 4105 and 4255 respectively, so where they stand today is actually them strengthening, adding weight to the zone remaining where it is.

Bearing all this in mind, and as things stand, we have to start thinking about this index returning to its zone for next week.

The all-important question, is will the zone shift in the meantime?


Range:            4005  to  4230           

Activity:          Very poor

Type:              Neutral



Nb. Our comment for 08/17/22


Firstly, we must say it has definitely been an expiry for the bulls, and once the dust has settled, we will let you know the numbers.

A week ago, we said that this week will be determined by whether or not the zone decides to shift.

And it obviously hasn’t, so you would well be within your rights to question why this index isn’t nearer its zone at 4000.

We think that although the market is 300-points away from its zone, it has not been that bad an expiry for derivatives. Also, even though the market is pounding at R1 (yesterday R1 was at 4305) it hasn’t got carried away, with R1 keeping it in check.

Admittedly it is a fast-retreating R1, but that is neither here nor there. The fact that the entire Y ratio bandwidth is now 535-points (12.43%) wide is really the story of this expiry.

The real question one should be asking oneself, is if everybody is truly bullish then why isn’t any money going down in this respect? To explain, if money was going down on the table the ratio would be increasing not decreasing. And we would be seeing a rising zone, etc.

So, it is a bullish vacuum that this market is being sucked upwards into, at least this is the case from our perspective.

All this is fine for this the August expiry, especially as intermediary expiries are notoriously thin but, the real issue, is will this continue on into the September expiry, the third and therefore second biggest, triple witching expiry of the year.

It is asking a lot, as everything goes up several notches in a triple. The aspect to look out for, is whether or not the bulls will be able to maintain this upward momentum if there is some significant ratio resistance in the form of dynamic delta and not just a vacuum?


Range:            4005  to  4355           

Activity:          Moderate

Type:              Bearish

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August 17th, 2022 by