Nb. Our comment on 25/11/24
We really hope you took note of our comment last week and our trading range, as it was all about 8150.
Sadly, we never got a test of R3 at 7950, as that would most certainly have been the icing on the cake.
Nevertheless, I think we can safely say that the FTSE really didn’t cope well with the futures buying generated by the R2 ratio dynamic delta.
The only problem was the upper boundary of that bandwidth, 8150, which was tested with intraday highs on Tuesday (8145.86) and Thursday (8152.86).
That made any test of Friday strike three but, it wasn’t required anyway, as the real time market open was about 8207, way above that sticking point.
To cap it all off, by the end of Friday, the FTSE had successfully closed inside its zone.
Essentially a rise of 200-points (2.5%) in a week and so, just as we said, “there is limited downside but plenty of upside, so one for the bulls we think”.
Looking at today’s ratio table, and although there haven’t been many eye-catching changes, there are still some developments to be aware of.
The most important aspect is the fact that the market is now in its zone, which makes our trading range 8250 to 8350.
Obviously, 8250 is critical, and the ratios below here have weakened, but not by enough to change their classification. However, 8200 is making suspicious moves, that might later be a move towards being the next zone if these continue.
However, and especially with the Street’s strength, we suspect the real battleground will be at 8350 this week.
Here, despite being R2, which was a move up from R1 from the week before, it is still just above the threshold. Will it hold, probably not, it is the December expiry after all, but it may take a few goes. 8450 on the other hand, really is very robust ratio speaking, so we doubt it will manage to breach this.
Range: 8250 to 8350
Activity: Very poor
Type: Neutral
www.hedgeratioanalysis.com
Nb. Our comment from 18/11/24
It was a while back but, if you remember, that at the very start of the November expiry on the 21st October the market and R1 were at 8350.
That was the expiry high for the FTSE and, although it did try on several further occasions, it never did manage to really break free of its zone.
This was especially true of the final week, by far the most important, being the rollover and actual settlement, where it never really threatened to leave it.
Although, worth noting, that it was the bottom boundary, 8000, that came to the rescue, specifically on Tuesday and Wednesday with the intraday lows of 8018.55 and 7995.87.
Despite this really being an effect of the final week of the November expiry, as you can see, it will make for an interesting start to the December expiry that becomes the front month today.
However, before we get onto how the ratios are aligned for this expiry, we first must remind you that this expiry is a triple witching one.
Not only that but, as its December, it is also the biggest of the big.
Also, it’s a five-week trip.
Now, the first thing to note, is that the zone in this expiry is at 8250 to 8350, which is a considerable way north of where it is at the moment.
The second thing to note, is that R3 starts at 7950. Of course, as a triple, it naturally needs the higher levels of ratio to make an impact but, R3 is definitely in that category.
In the meantime, the FTSE will start this expiry in the R2 ratio bandwidth, which stretches from aforementioned 7950 up to 8150.
So, this will certainly desensitise the market to the dynamic delta in this the first week, which we often refer to as the extra superfluous one.
Nevertheless, essentially there is limited downside but plenty of upside, so one for the bulls we think.
Range: 7950 to 8150
Activity: Poor
Type: On balance bearish
www.hedgeratioanalysis.com
