Nb. Our comment on 07/03/23
As we said last week, 7400 did indeed prove to be a real test for the bears.
On the day we published and, quite some considerable time after we may add, the intraday low on that Monday 26th was 7401.18.
Evidently, the dynamic delta inspired bout of futures buying generated by the market hitting R2 at 7400 was more than enough to see this index pivot and reverse direction. Furthermore, it was bit of spike down, so it wasn’t there for very long.
Then it took the rest of last week to travel across the entire R1 ratio bandwidth, as on Friday the intraday high was 7551.59. Or in our world, the bottom boundary of the zone, or our trading range in fact.
From R2 to the zone, or the R1 bandwidth, is 150-points.
More importantly, looking ahead, don’t forget we still have three weeks of this expiry to go.
So, the important level this week will be 7550, or the bottom boundary of the zone.
If the market can get back above this and, lets face it, the one thing the FTSE has been keen on recently, has been staying in its zone, then it has 100-points of zone above it.
If it fails, the one change in the ratio table for this week, has actually been R2 at 7400, as it has slipped to 7350.
However, 7400 still represents a considerable step-up, as it is only just below the threshold.
Perhaps another aspect to bear in mind, is that the SPX got back to its zone last Thursday and, on Friday, hit Y2 with the intraday high of 4458.48. The point being, is that it may seem set fair over here, but the SPX may run into ratio troubles which can translate across. Otherwise, our best guess is that the FTSE will want to get back inside its zone, which would then make the trading range 7550 to 7650.
Range: 7400 to 7550
Activity: Poor
Type: On balance only just bullish
www.hedgeratioanalysis.com
Nb. Our comment from 06/26/23
Back to the usual format for the foreseeable, which also holds true for the actual expiry, now we are down to four weeks.
And last week was indeed all about the zone, just not the boundary we expected.
Although, there was plenty of warning what with the intraday low on Tuesday of 7566.33. Followed closely by 7520.92 on the Wednesday, which saw the market close at 7559.18, just above the bottom boundary at 7550.
It was certainly trying to stay in its zone but, most certainly, it wasn’t helped by what was happening in Europe and across the pond.
Anyway, once the boundary gave way on Thursday, it has managed to almost catch up on the drop seen in Europe.
Looking ahead and, at this point it may be worth considering the type of activity we mention below. As “on balance bullish” is quite bland, although it can all that is necessary normally.
However, this early on in an expiry, it can sometimes be worth pointing out that this description has been derived from the fact that there has definitely been a lot of bullish call activity but, the put activity was far more diverse, with ITM increasing but OTM decreasing. So, very much a mixed picture but, netted-off, definitely flattering the “bullish” activity calculation.
The overall result can be seen in the ratio table.
The obvious aspect is that R2 kicks-in at 7400, and how the FTSE deals with this number of futures buying generated by the dynamic delta will be a real test for the bears. Perhaps what isn’t so obvious is, that there is a small step-up in the level of R1 ratio at 7450, which may also generate an insight as to how committed the bears really are.
Range: 7400 to 7550
Activity: Moderate
Type: On balance bullish
www.hedgeratioanalysis.com
