Nb. Our comment from the 07/05/21
This now makes week two that the FTSE has meandered around inside its zone.
The only difference this last week has over the previous week, is that there is no confusion over the boundary tests.
Friday saw an intraday high of 7162.16, so definitely a test, a test which it held for perhaps 15/20 minutes, so there is no doubt it was certainly trying hard.
But for the rest of the day, it hovered just below the upper boundary, and with no further attempts at it for the rest of the day this means a sad lack of conviction.
Wednesday was the odd one, as in real time the market closed at 7052.62, so the bottom boundary did hold, having been tested quite severely during the day.
It was the auction that took the market to 7037.47 and below the boundary, which always makes for a difficult call, it not being representative of an open market.
Under these circumstances it could have gone either way, as the motivations are always rather obscure, so it wasn’t a great surprise that the next day the market opened up strongly.
The official open was 7037.47, but we all know by now how bogus that is, and we put the real open at about 15-points above the bottom boundary.
The inescapable truth is that now the market has tested both boundaries, it certainly knows what is where now, and by which we mean it knows where the dynamic delta is hiding, and has a rough idea of its magnitude.
It could just stay zone-bound, and it has done so previously, but also quite often it can get frustrated about now, having been caged for a fortnight.
Obviously, the easier path is southwards, but, judging by Thursday’s recovery, the bulls are still out there.
However, as things stand, we have to go with zone-bound, as neither team has given us enough of an indication of conviction for us to see either boundary cracking.
Range: 7050 to 7150
Activity: Moderate
Type: Bearish
Nb. Our comment on 07/12/21
Please excuse us for getting a little excited about the possibility of a perfect expiry, but it is hard to contain.
This is not so much about the FTSE getting stuck inside its zone, but rather trading between two corresponding R ratios.
The fact that R1 is also the upper boundary of its zone is immaterial.
So, as you have guessed by now, the first condition is to reverse direction at a R, or higher, ratio level. This was 7150.
The second condition is to again reverse direction at the same R number at the other end which, in this instance was R1 at 7000, with the intraday low of 6981.57 on Thursday.
We must however, also point out that most of the action that day was around 7000, the low being a very brief spike. And, a shout out must go to the bottom boundary of the zone, which put up a stellar defence on the way down, for a good half hour.
The final, and yet to pass condition, is that the market must be in its zone on the Wednesday (rollover) or on the actual expiry. Fingers crossed, eh!
This of course means that we are now entering the final week of this expiry.
This also means, that the FTSE must be getting very frustrated indeed, not only being effectively zone-bound for three-weeks but, as you can see in the above table, it has only moved 1.5-points in 5 trading days, ouch. Albeit 5 exciting days.
It’s going to be a tough ask, especially as everyone now knows where, and how much, dynamic delta to expect when, or if, they go there.
One last comment, is please do be aware of the official market data, as on Friday they managed to get the FTSE low as 7030.22, and as they always use the previous days close as the open, which was 7030.66, this means the market must have fallen 0.44-points from the open, which was when most were anticipating an open circa 7055.
So, the real data should be, open:7055, high:7116.32 (real time) 7121.88 (post auction), low:7044 and the close being 7116.32.
This makes the official O, H, L, C of 7030.66, 7121.88, 7030.22, 7121.88 meaningless. Or worse, misleading.
On the ratio front, above the zone, they have basically returned to where they were on the 28th June, so the move is perhaps not quite as dramatic as the table above suggests.
Range: 7050 to 7150
Activity: Poor
Type: Neutral
