Can the FTSE cope with R1 Ratio?

The FTSE powers up through its Y Ratio bandwidth, but now comes the real test.


Nb. Our comment from 10/31/22

Well, respect to the zone.

How it managed to contain the FTSE for an entire week we have no idea, but that is exactly what it did with the slight exception of Thursday.

On Thursday Shell reported, which set the oil sector ablaze with them alone finishing up 5.5%. This does highlight another of the oddities of this index, as it is populated by a few very heavily weighted sectors. The oil sector being one, and with the weighting attributed to the oil majors if they get some bullish wind in their sails, like Thursday, it is very difficult for any amount of dynamic delta to contain that.

Although, it is fascinating to watch.

And also, you do tend to get a large deviation in the fair value. That is the difference between the cash (the index itself) and the futures price. Which can make for some good trading opportunities, at least for those that like that type of scalping.

Getting back to the more mundane issues and, although activity has been high this was from a very low baseline, the huge amount of Y ratio remains.

Although, this overall bandwidth has shrunk from 500 to 300-points, this is still a lot of ground to cover, especially for the FTSE.

The zone may come to the rescue again, and it has been known to contain this index for three weeks at a time, but we can’t see it ourselves this time round.

Every day last week either the upper boundary, 7050, or the bottom, 6950, was tested.

So, the market definitely knows what is where in respect of the dynamic delta, and both are on strike three or more anyway.

On top of which the ratio on either side is just the absolute minimal Y1, so not really a huge hurdle, therefore best not to loosen that seatbelt just yet.


Range:            6950  to  7050      

Activity:          Good

Type:              Neutral


Nb. Our comment on 11/07/22


As we said, a lot of ground to cover.

Made even more by the fact that R1 reverted back to where it was the week before. Well, not exactly, as back then it was at 7350, whereas today it is 7300.

We say “today” but, we have no way of knowing now when it did actually change, although we are certain that it hasn’t just moved.

So, that huge Y ratio bandwidth had re-established itself sometime last week.

That means the big move we saw on Friday took the market up to test R2 at 7350 with the intraday high of 7376.23.

It also means, that having closed above 7300, it is now inside the R1 bandwidth.

Which is very aggressive for the FTSE, and only today will we be able to tell how comfortable it really is having to cope with this amount of dynamic delta.

Since it broke free of its zone traversing the Y ratio bandwidth was always likely. In fact, it would have been more of a surprise had it not done so.

We have to give the market a bit of leeway, especially the FTSE, as on Friday it was the turn of another of the heavily weighted sectors. In fact, it was two of them together, namely the miners and banks.

However, Monday should bring some reality back to the market. By reality what we actually mean is futures selling courtesy of the dynamic delta created by R1 and, should it venture higher, R2 as well.

Now, the bulls may well be happy enough to absorb all these futures, we simply just don’t know. However, there has been nothing we have seen that makes us believe there is any great bullish sentiment. Especially as all the big moves so far this expiry has been down to specific stocks, firstly Shell and now HSBC and Rio’s, which is why we are sceptical and for the moment at least, put our faith in the dynamic delta.


Range:            6950  to  7050      

Activity:          Good

Type:              Neutral

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November 7th, 2022 by