Can the SPX cope with R1 dynamic delta

Can the SPX maintain this new-found aggression, or will the R1 ratio dynamic delta be too much for it?

Nb. Our comment for 04/04/23


Commentators curse or what. No sooner do we say it doesn’t look like it wants to get above its zone, then it does just that.

In our defence, the test on Wednesday 29th was about strike 5, so it really wasn’t a total surprise.

Of course, once it had managed it then there wasn’t really a backward glance.

The problem was, as we mentioned last week, that the R1 ratio was getting closer, narrowing the overall Y ratio bandwidth.

However, in our last comment R1 had moved in to 4080, but by the Wednesday it had retreated back to 4105, from where it was originally.

And it was 4105 that caused a lot of resistance to this index on Friday, but a level it significantly closed above.

Yesterday, Monday 3rd, saw this index open strongly, but then come back to 4105 on many occasions. In fact, it spent almost all but the first and last hour bouncing around it.

So, the big question is whether or not it can cope with being in the R1 ratio bandwidth.

On the evidence of Friday, yesterday and today we have to say that it appears to be really struggling with it.

R1 doesn’t generate a huge amount of dynamic delta futures selling, but it really all depends on the markets appetite at any given moment in time.

With this in mind, there is a considerable step-up in the ratio level at 4155, albeit being still within the R1 bandwidth. Then you have R2 at 4205, as you can see in the table. So, to us at least, if it doesn’t start taking on this level of dynamic delta then back to the zone (or further) it goes.


Range:            3895  to  4005           

Activity:          Moderate

Type:              Neutral


Nb. Our comment from the 03/28/23


It really didn’t take very long last week for the SPX to prove our “Point one”, jumping over 100-points to get back to its zone at 4000.

Of course, this would have definitely been aided and abetted by the FTSE’s reaction to DR ratio at the start of its April expiry trip.

The Wednesday and Thursday were also all about their zone. Wednesday saw the rate hike and the market swing from 4039.49 to 3936.97.

However, on the Thursday the market retested the zones upper boundary with the intraday high of 4007.66.

This was also strike three, so we thought it may break through, but the close at 3948.72 was not good news for the bulls.

Friday was a bit odd for us, as it really didn’t achieve anything. Even the intraday low of 3909.16 was a bit shy of R1 at 3895.

Yesterday, saw strike four of the upper boundary with the intraday high of 4003.83, but still no close in or above its zone.

Basically, the SPX is in neutral for us. Although it is toying with its zone, it still can’t quite muster the conviction to break convincingly above it.

In the meantime, the more preferred option seems to be to reside below it, therefore remaining in bear territory.

The only issue we have with this is that the overall Y ratio bandwidth is shrinking all the time, currently standing at just 185-points. Quite a difference to last week when it was 310-points.

The upshot of which, to us at least, is to potentially restrict the overall trading range. Making it a bit boring really.


Range:            3895  to  4005           

Activity:          Moderate

Type:              Neutral

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April 4th, 2023 by