Nb. Our comment from the 04/20/22
Firstly, we have to say what a tremendous and fascinating expiry the April one was.
Basically, if you can cast your minds back to last week, on Thursday 13th it jumped 49.14-points to close at 4446.59, which essentially enabled the settlement price to come in on that Friday at 4452.07, right in our zone. So, you can probably add remarkable to that superlative list as well, as with so little ratio around at all, you are talking fine-tuning to the “n’th” degree.
Anyway, looking at the ratio alignment in the new May expiry, which is in fact two trading days old now, and it’s basically more of the same.
Albeit, with a couple of noticeable differences. The first being, that immediately after the expiry, the SPX gave up everything it gained on the Thursday.
This just cemented the fact it was going to start May below its zone, which has remained unchanged whereas April’s zone ended at 4445-4455 so, it was more of a case of exaggerating it.
The second difference is the Delta Ratio, which was 39.0% on the 18th, way below the 50% mark, which indicates an upward bias.
Otherwise, it is probably even scarier than the last expiry as the Y1 ratio bandwidth currently stands at 335-points, and the overall Y ratio bandwidth at 535-points, a colossal 12%.
At the moment the SPX is still exhibiting signs of ultra-sensitivity (vis a vis the expiry on Friday) but, if this dissipates, then we really could see some big moves. And by that we do mean a lot bigger than yesterday’s 70-points.
Also, although we do admit we are currently dealing with extremely fine margins, it is looking possible that 4445-4455 could become the next zone in May as well, which means the market is actually above it at the moment.
Range: 4295 to 4495
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment for 04/26/22
Well, it is not very old this expiry, but boy, has there been a lot going on already.
We have been warning about the extremely wide Y ratio bandwidths, and now you have just experienced why.
But, firstly, obviously the zone hasn’t moved. And we think the reason for this has been because 4395-4405 has taken over as the new potential home for the zone, rather than our suspected 4445-4455.
Nevertheless, we think a move is still imminent. However, a lot may well depend on what happens now after yesterday’s extraordinary moves.
Now, R1 hasn’t moved throughout this expiry, and even before it became the front month, so we have had it at 4195 since the 13th April. So, no excuses for not knowing it was there.
However, we may give you a bit of licence as the intraday low was 4200.82, but not much, as after plunging all the way down from its zone on Friday (intraday high 4512.94), which is a drop of over 300-points in two days making the vega spike, so we are hardly surprised the market reacted a bit early.
And, the astute, would have also noted that the close on Monday was 4296.12, just a fingertip north of Y2.
Which brings us back round to the “what happens now” bit. Was yesterday’s 100-point rally just a knee-jerk reaction to encountering the dynamic delta inspired futures buying? Or have the bulls wrested back control?
Always difficult to tell we have found. The best scenario is that the market goes back down to R1. If the bears are in charge, it will test it again, and it’s still formidable, then its either put up or shut up. If the bears are lacklustre, or wavering, and the bulls are circling, then it shouldn’t need a second test.
Finally, don’t forget our strike three rule, as this may yet be pertinent.
Range: 4195 to 4495
Activity: Moderate
Type: On balance bearish
