At last the FTSE breaks through R1, but higher levels ahead.
Nb. Our comment from the 10/25/19
If the last week of the November expiry was all about the zone, then this has transferred across to the October expiry in its first week.
On the very first day, Monday 21st, the intraday high was 7197.53, providing the first test of the zones bottom boundary at 7200.
The next day saw the market close at 7212.49, after what was a good tussle with it throughout the day.
Wednesday saw a retest of it, confirmation if you like, with the intraday low of 7194.13.
And Thursday saw it blast through the upper boundary, which is rather aggressive of the FTSE to say the least.
Therefore, it is prudent to mention how the ratios have evolved this week, and while we have seen a little strength below the zone, with R1 replacing Y2 at 7050, this still leaves a scary 150-points of Y1.
Above the zone, 7300 has moved up from Y1 to Y2, and 7350 from Y2 to R1, meaning 7400 has gone from R1 to R2.
At the start of an expiry there is a natural tendency to build, so it’s more about the degree, and there is no contest over the fact that resistance wins.
The big question is whether the intraday high yesterday of 7338.87 was a test of R1?
Only 0.15%, so it’s a tough call.
But, at the end of the day, it is all down to your tolerance, and as things stand the FTSE is now facing R1, R2 & R3 in quick succession, with nothing below it until 7050.
There are no prizes for guessing our stance, and at the very least, everyone else should have very tight stops.
Range: 7200 to 7300 or 7300 to 7350
Activity: Very good
Type: On balance just fractionally bullish
Nb. Our comment on 11/05/19
We have said it before that the ratios need to be calculated daily, and as they are not, you must be very aware that they do evolve.
Thankfully, in the FTSE case, this has not been very much.
Last Monday, the 28th October, the intraday high was 7346.92, making this the second test of R1 at 7350.
This basically dictated the rest of the week, along with the upper boundary of the zone at 7300.
Therefore, it was no surprise yesterday’s third test saw it break through, and the fact the ratios have weakened above the zone only going to make this more likely.
7350 is still R1 admittedly, but it is now only just above the threshold, so we would fully expect that to become Y2 shortly, leaving 7400 as R1.
However, the real test will be 7450, as this has remained as R3, so this is now towering above R1.
And judging by how difficult this index has found R1, we just can’t see it making any headway at all against the hugely bigger R3.
Finally, don’t forget next week is the rollover, so it could start getting quite animated towards the end of the week, and below the zone the ratio has hardly strengthened, so it’s still sitting atop a chasm this market.