Can R2 Ratio stem the SPX bears?

Can R2 stem the SPX bears?


Nb. Our comment from the 05/04/22


Apologies for the late update, probably made all the worse as the markets have been so expectedly volatile.

When we last published (26/05/22 and please see above) it was all about R1 at 4195, and as the market closed that day at 4175.20, it was definitely the bears in control.

However, the next day, Wednesday, saw the bulls try to wrest back control with a very decent rally. But, R1 was unchanged, despite the zone falling to where it is today, so the close at 4183.96 did look slightly ominous, despite it being so close.

A very decent gap up at the open gave the market a good start, and with the intraday low of 4183.96 coupled with an unchanged R1 showed it was still being a nuisance.

Friday saw the bears really take it to the ratios, although as we said above, it seems our strike three was rather pertinent.

On Monday and Tuesday this week R1 slipped to 4170 and 4145 respectively.

For those purists the intraday high on Monday was 4169.81, whereas the intraday low on Tuesday was 4147.08.

So, it was still being very much involved, it is just a shame we don’t publish daily anymore, as then you could see the dynamic delta in real time.

Looking forward, and a lot depends now on how the ratios evolve daily of course, but there are still some guidelines we can possibly help you with.

Firstly, the zone is likely to move to 4295-4305.

Depending on sensitivity, the rollover and expiry is next week.

The overall respective Y ratio bandwidths remain unchanged at 310 and 510-points, so really don’t expect any reduction in volatility.

Otherwise, unless you are a bear that is, fingers crossed that the dynamic delta created by R1 continues to do its job.


Range:            4145  to  4395           

Activity:          Poor

Type:              Neutral




Nb. Our comment for 05/11/22


It is certainly going to be a grandstand finish to this expiry, and derivatives have evidently got their work cut out for them.

A lot has gone on from our last comment but, since then, it has been all about the R ratios.

On Thursday 5th when R1 was at 4145, the market went as low as 4106.01 before finishing at 4146.87. This could have been a good sign, and on another day, it could well have been so, the bulls having fought back so hard to get the market back into the Y ratios.

The Friday saw a bad start but, again, the bulls fought back, getting the market as high as 4157.69 (nb. R1 still at 4145). Then it all went sour, with the market plummeting to R2 at 4070, with the intraday low of 4067.91.

The fact that it bounced off this level, but still closed south of R1 was a warning.

Therefore, the first two days of this week have all been about R2, which had now slipped to 3995. Monday’s intraday low was 3975.48 and the close was 3991.24. Very worrying for Tuesday. Which actually started well, but then went down to 3958.17, before rallying back above R2 for the close.

Classic bull vs bear stuff, each using the dynamic delta to advance their respective causes.

This now makes today rather critical, or should we say, holding above R2 rather critical for the bulls.

We do think there is at least one more day of R2 staying at 3995, but no denying the ratios are slipping below the zone.

Of course, we expect the zone to move down, and don’t lose sight of the fact it is the rollover and expiry next week. However, there is no front-runner at present.

We suspect, the outcome of today, and possibly tomorrow, will go a long way to defining where any likely expiry of this month will be.

We have to side with the bulls, simply because they are backed up by the R2 amount of dynamic delta futures buying but, we haven’t seen this index being so aggressive (either way) for a very long time, so our conviction level is not 100% even if the levels remain unchanged.


Range:            3995  to  4095           

Activity:          Poor

Type:              Bullish


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May 11th, 2022 by