Nb. Our comment on 04/03/23
Considering this market has already been as low as 7206.82 this expiry, had you acted on it being deep in DR ratio (very high for an intermediary) then you should already be benefitting from a rally of just over 400-points.
Even if you hadn’t, then the levels we pointed out last week should also have given you a couple more possible entry points.
7450 was breached on last Monday, and 7550 on the Wednesday.
Unfortunately, the ratio picture has changed. Considerably so as well.
Firstly, the big drop in the zone, while not unexpected does change the dynamic to a very large extent. Normally, a falling zone is a very bearish sign however, under the current circumstances, it could just simply be in reaction to what the market has already done. Which is our view as things stand.
Also, it evidently hasn’t just changed. This probably happened towards the end of last week, bringing the market move on Friday into a new light, as the intraday high of 7654.41 was very probably the first test of the new zones’ upper boundary.
Hopefully, the market will calm down and stay zone-bound for the next two weeks but, don’t forget, there is still three weeks to go in this expiry.
As ever with such dramatic changes, it will take a while for the ratios to bed-in. In the meantime, you should know that below the zone R2 at 7450 could easily be R1, so please bear this in mind should the market ever go back and test it. Anyway, as it has already tussled with DR its tolerance level is automatically higher than normal.
Otherwise, it is still a very lopsided expiry, with a very plain to see lack of ratio above the zone with more below it.
Range: 7550 to 7650
Activity: Moderate
Type: On balance bullish
www.hedgeratioanalysis.com
Nb. Our comment from 03/27/23
What a week that was.
And we just hope you had taken note of the ratio levels prior to Monday’s opening bell.
The real world open on Monday 20th was about 7257, not the official 7335.40 (ridiculous differential, and utterly misleading), which meant London was already deeply into the DR ratio bandwidth.
We, and hopefully you, could see the confusion generated by the considerable number of futures buying generated by the DR level of dynamic delta from the outset.
The confusion didn’t last that long as we witnessed a 219-point rally off the back of it.
The market did exceptionally well in those first few days, getting as high as 7585.57, so into the R1 ratio bandwidth.
This is where we hit our perennial problem, as the ratios have changed, and significantly so, but we just don’t know when exactly.
To explain, had the ratios been as they now are last Thursday, then the FTSE would have actually achieved the Y ratio bandwidth.
Anyway, there are still going to be a lot of nerves out there, and there is still a bit of bedding-in for the ratios as well we suspect.
But as it stands, the immediate levels to watch are 7350 (R3) and 7450 (R2), and how the market reacts to the dynamic delta at either, or both, levels will tell you a lot about the strength of the current emotions.
Looking at the bigger picture, getting back into the Y ratios, or above 7550, is the critical point. And as there is now 500-points of the Y Ratio bandwidth, the volatility from the first week could end up looking like just the appetiser.
Range: 7350 to 7450
Activity: Average
Type: On balance only just bullish
www.hedgeratioanalysis.com
