Nb. Our comment from the 04/19/22
Firstly, a quick word about how the April expiry ended last Thursday, and the EDSP was 7582.04. So, it didn’t manage to get back in its zone, the upper boundary being 7550, but it came close, and it finished in Y1, so no great harm done.
Although, it was interesting to see the intraday lows on the last three trading days of this expiry coming in at 7543.03, 7550.94 and 7551.39 respectively.
Looking ahead now to the May expiry, and the first aspect to note is that the zone is at the same level.
Then the second major thing to note is that in May 7650 is only Y2. And, perhaps significantly, it is only just Y2, having crept over the threshold by just a little bit.
For the record, 7700 is a far more solid Y2, and is in fact at the other end of this bandwidth, being just below the threshold of R1.
And, by comparing the tables above you would be correct in thinking that activity has been towards the top end of the scale, reinforced as well by the “very strong” description below, but overall, activity is an awful lot lower than it was in the April expiry.
Although, April was larger than normal, so despite the difference being very noticeable, in fact, May is just a little bit below the historical normal. Nevertheless, we would have expected at least a large chunk of the April activity to rollover into May. It could still do so, but if it doesn’t, money coming off the table is never a good sign.
Otherwise, despite the market being above its zone, it now has a lot more room to manoeuvre to the upside, whereas below the zone it is nicely underpinned by there being no Y ratio at all.
Range: 7550 to 7750
Activity: Very strong
Nb. Our comment on 04/25/22
Looks like the lowly Y2 at 7650 provided enough dynamic delta futures selling to scare the FTSE into turning tail.
Although, it did take over half an hour at or around its intraday high of 7656.47 on Thursday 21st to make up its mind.
And, when you couple this with a weak Street overnight and then again on the Friday, you had the FTSE in a full-blown retreat back into the safety of its zone.
What is more, is that this expiry is still only a week old. So, plenty more time for some fun and games.
On the upside, Y2 has now moved out to 7700. Although, and as we said back on the 19th, the real test should come at 7750. Even more so now, as it goes up to R2 from R1.
Of course, this is assuming the bulls wrest back control. But, as we said, there is still three weeks to go, so plenty of time.
But first, we should see a test of the bottom boundary of the zone at 7450, Which is also strengthened by the fact it is also R1. The fact that there is no Y ratio at all below the zone should give any bulls out there an excuse, even if the dynamic delta inspired futures buying doesn’t do it for them.
If the bears are really in control, and R1 isn’t enough, then backing it up is R2 immediately underneath at 7400. The big concern will be if this is not enough, then there is a very long way before we hit the next level of support, R3 at 7150.
The other alternative is that the market could just stay zone bound, which is not unheard of. If it does decide to take this easy option, then it could bounce around excitedly within its zone for the next two weeks, only breaking out in the final week, which we have seen quite a lot of in the past.
Range: 7450 to 7550
Activity: Very good
Type: On balance only just bullish