Nb. Our comment from the 08/09/21
Generally, we have the last ratio table on the right above as a term of reference, so everyone can see at a glance how the ratios have changed, and therefore what the trend is.
However today, it is also very useful in helping to explain the price action in the FTSE last week.
Essentially, Monday and Tuesday were governed by the right-hand column, whereas the rest of the week by the left hand one.
In a nutshell, the first two days were all about 7100, whereas the rest of the week was all about 7150.
Very interesting, and also significant, is that after Wednesday’s intraday high of 7142.54, the market never went back to even being near R2 again.
It is a real shame as almost every other market is setting new all-time-highs virtually weekly, yet here it keeps on getting walloped by the R ratios.
Made all the harder to bear having just managed to break free of its zone.
Although there are still two-weeks to go in this expiry, which is already feeling as if it has been going on for ages, the way ahead is beginning to look very difficult.
After 7150 the exponential ratio levels just keep going up and up every 50-points, so it may just crest one hill to find another mountain just in front.
On top of all this, if it fails at 7150, then the commensurate support ratio level is not until 6950.
As the market is at 7122.95, in our view, there is only 27.05-points upside, against 200-points downside, notwithstanding the fact the zones upper boundary appears first. Or, of course, the ratios could change in the meantime.
Range: 7050 to 7150
Nb. Our comment on 08/16/21
We have to hold our hand up here, as we never really expected the market to get past what was then R2 at 7150, let alone R3 at 7200.
But it has, despite the fact those levels at some point last week dropped to R1 and R2 respectively.
So, rather than a 27-point upside, it has managed to carve out a 100-point one, which means it most definitely has grown a pair to achieve these new all-time-highs, and joining all the other indices in doing so.
Which is actually a rather sad reflection on the FTSE in all truth, as although it has achieved this distinction, we don’t think there can be any argument at all, that it has found it particularly hard going, unlike, say, the SPX for instance.
Anyway, it all starts to get very serious this week as it is the rollover and expiry.
More significantly, the FTSE is now facing DR at 7250, which will be an almighty dynamic delta test for an index that can hardly cope with being stuck in the middle of a R2 ratio bandwidth for the last three days.
Obviously in light of our comments above, one can never say never, but yeah, it would be an unprecedented achievement in an intermediary expiry.
Even more so with the rollover looming.
Do not lose sight of the fact the zone is down at 7000, and the nearest Y ratio doesn’t start until it gets below 7150.
Out of interest the triple witching September expiry, has DR ratio at 7250 as well.
Hat’s off to the FTSE for doing what it has done, but unless there is a seismic shift in the ratios over the next day or so, then reality, or the number of futures being dumped on the market courtesy of the dynamic delta, will take its toil we believe.
Range: 7050 to 7250
Type: On balance only just bearish