Category: Uncategorized

November 25th, 2024 by Richard

As anticipated the bulls take control in the FTSE Dec expiry

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

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September 11th, 2024 by Richard

The SPX goes from R1 to R1 traversing the entire 260-point Y ratio bandwidth.

Nb. Our comment for 10/09/24

We do sincerely hope you paid heed to what we said last week, as that was quite some ride.

We didn’t need to have worried about whether or not Thursday 29th August was or was not another test of R1 at 5655, as the market never went there again. So, whether that was two or three tests is now a moot point.

However, there is no denying that the SPX is “still maintaining its rather unhealthy relationship with R1”.

As Wall St. was closed on Monday 2nd September, it only took three-days to traverse across the entire Y ratio bandwidth to go from one R1 to the other corresponding R1 at 5395.

Albeit with a pitstop on the Tuesday, after it bounced off Y2 at 5495 with the intraday low of 5504.33.

Friday saw the intraday low of 5402.62, clearly getting considerable support from all the dynamic delta from R1 at 5395, as it spent a very considerable time there throughout the day.

So, no surprise to us at least, with the bounce this week but, the real question, is what’s next.

The problem here, is that there have only been a couple of changes in the ratio table (R3 & DR below the zone), and they were at least four-days ago.

This means there has been virtually no movement and so no clue as to which way the pendulum might now be swinging.

On top of which, there is still two-weeks to go, so all this is about a week too early to get the perfect expiry, which would now be to see the settlement in the zone. As the market is still entrenched in its Y ratio bandwidth it could whizz around very easily with minimal interference. The best outcome, would be for it to get back to its zone and then decide.

 

Range:            5395   to    5655

Activity:          Only just registered

Type:              Not bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment for 03/09/24

Can’t quite make up its mind, but in the meantime the SPX has still maintained this rather unhealthy relationship with R1.

Apologies for not posting last week, especially as we now realise that this is the first you would have realised that R1 above the zone has moved to 5655.

In fact, it did this way back on the 21st August, which gave the market the green light to move past 5605 of course.

It was a very significant change as well, as had you known that R1 was standing at 5655 then you would have appreciated why the SPX topped out where it did on three of the five trading days last week.

The exceptions being the Tuesday and Wednesday when it only got to 5631.18 and 5627.03 respectively.

Other than this, there have been a few other changes, easily seen in today’s table, but none nearly as impactful.

Looking ahead, and obviously R1 at 5655 is the critical level and it has now been tested thrice, although there is bit of a question mark over Thursday, so it’s now just a question of how resilient it can be.

The problem for us, is that the intraday lows last week were 5602.34, 5593.48, 5560.95, 5583.71 and 5581.79, which were all in the Y ratio bandwidth, and by some considerable margin.

The point being, is if the bulls were that committed it wouldn’t pull back that far, but rather keep knocking on R1’s door.

If it can get past R1, then there is 70-points before R2 but, worth noting, there is a considerable step-up in the ratios at 5705.

However, the real aspect to be very aware of, is that the corresponding R1 level doesn’t start until 5395. It’s your risk profile but, for us, that’s too rich.

 

Range:            5555   to    5655

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com

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July 29th, 2024 by Richard

After the FTSE's zones bottom boundary saves the bulls last week, the ratio shoe is now on the other foot.

Nb. Our comment on 29/07/24

Just to keep us on our toes, the zone hasn’t moved to 7950-8050 as we thought it might last week, but has fallen to 8100-8200 instead.

This didn’t affect what happened at the start of last week, but very probably had an impact on what happened on Friday.

At the start of the week, it was indeed all about the bottom boundary of the zone at that time, 8150.

Monday saw the intraday low of 8155.72, whereas on the Tuesday it was 8151.46. That Tuesday test was truly spectacular, as it spiked down at 09:00, touched 8150 and promptly rebounded 80-points. Amazing really. However, as if that wasn’t enough, it retrenched all the way back down to 8150, touched it again at 15:00 before rallying into the close.

On the Wednesday, which was also strike three, we thought the dam would burst, but it recovered to close just above it and back in its zone.

Then on Thursday, the bears attacked again but, yet again, it recovered to close back inside its zone. This really set the field for Friday’s gains, helped no doubt by the upper boundary being no longer at 8250.

Looking at today’s ratio table, we rather doubt the fun is going to stop this week either.

Primarily because R1 now awaits this index at 8300. The question that we need to answer is whether or not the intraday high of 8290.33, coming at the end of a 100-point jump, was a test or not.

We have to go with yes it was, but this week should be more definitive, we are sure.

If the market can cope with the dynamic delta released by this level of ratio, and 8300 has only just crept above the threshold this week so this is entirely possible, then it might just fall to 8350 to provide the real test.

If the bulls can pass that test, then there is a huge jump in the ratios at 8450 and, don’t forget these ratio levels are exponential, that waits in ambush. Our preferred outcome is for it to wallow in the Y ratios of course.

  

Range:            8200  to  8300 / 8350      

Activity:          Average

Type:              On balance bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment from 22/07/24

The settlement price for the FTSE July expiry was 8174.94, which was in a very weird trading day that was seriously affected by the worldwide IT outage.

Although, with the caveat of whether to trust the data under such circumstances, it seems the FTSE had a whopping trading range of almost 70-points during the expiry auction period, which was fun to watch but perhaps not to be part of.

In the end the July zone didn’t move to match August’s, but anywhere below 8200 was absolutely fine, being in the Y1 ratio bandwidth.

Furthermore, it was probably for the best that the July expiry ended last week, as 7800 was making a play to be the next zone.

So, in a rather bizarre twist, here we are in the August expiry, and the zone has held steady at 8200, meaning this trip starts off in its zone.

However, if you compare the ratios from a week earlier to today’s, you will clearly see the ratios above the zone have strengthened.

The most obvious is the appearance of R1 at 8350, but DR has also moved in a very considerable way.

Below the zone, it’s the exact opposite, with Y2 disappearing as has DR.

More to the point, we are seeing 7950-8050 making a move towards being the next zone.

All three aspects are bearish and, as it is all now Y1 from 8150 down to 7950, there is precious little support.

This means the current bottom boundary of the zone, 8150, will be crucial.

Our only concern, is what with all the problems on Friday, this may not be the correct reflection we are seeing, and it may take a day or so to sort out what might have been affected by last week’s outage.

 

Range:            7950  to  8150     or      8150  to  8250      

Activity:          Good

Type:              Bullish

www.hedgeratioanalysis.com

 

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June 23rd, 2024 by Richard

After fun and games in the June expiry, the FTSE starts July in an interesting position.

Nb. Our comment on 24/06/24

Rather bizarrely, the zone in June never did actually move, but what we said about 8150 and 8250 being the critical levels for last week was spot on.

8150 was the centre of attention at the start of the week, whereas it was the turn of 8250 at the end of the week.

However, the most impressive moment came at the moment of the actual expiry, when the FTSE dropped 50-points in a heartbeat to achieve the settlement price of 8200.74.

The zone may not have moved physically but, there is absolutely no doubt, that for all intents and purposes it was in fact at 8200.

Now, if you look at the ratio table you will see we have included what the July ratios looked like back on the 17th, when June was still the front month.

The reason for this, is because it is worth knowing that the zone back then in July went from 8000 all the way up to 8150.

Not only that, but the Y ratio bandwidth stretched from 7750 all the way up to 8250.

The point of being aware of this, is that the zone in July has already moved down.

On top of which, the Y ratio bandwidth still goes from 7800 all the way up to 8250, so hardly any change at all.

Another point to mention, is that although the ratio at 8250 is R1, it is only just below the threshold of being R2. Which starts at 8300 anyway.

Considering the market closed on Friday at 8237.72 then there are no prizes for guessing which way is the path of least resistance.

And, it’s a very long path as well.

From a ratio viewpoint, then this should be one for the bears, at least at the start.

The only fly in this ointment, is whether or not they are still desperately trying to prove this index isn’t controlled by derivatives and is therefore as good to list in as any other market. Good luck with that is all we can say.

 

Range:            8050  to  8250      

Activity:          Good

Type:              On balance only just bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from 17/06/24 (NB. The June expiry)

 

It really does seem an age ago that the FTSE hit the intraday high of 8451.64 thereby experiencing the force of all that dynamic delta generated by R3 level ratio.

Since then, it has been a weekly progression of this index hitting the stepping stones of different ratio levels until it has reached where it is today.

So, and being true to form and as mentioned last week, the first three days of last week were all about R1 at 8250.

The respective intraday highs were 8245.37, 8261.74 and 8243.22 but, and significantly, none of the closes on those days were above 8250. The closest was on the Tuesday when the market closed at 8147.81.

However, the best test came on the Wednesday, with the market at 8200 it spiked up to the intraday high, near enough 44-points, before finishing at 8225 on a 5-minute bar. More impressively, it never got close to that high again for the rest of the day.

Anyway, more importantly, is what about the week ahead, especially as it’s the rollover and expiry.

Looking at the zone first and 8200 hasn’t made any further progress this week, which doesn’t rule it out of course, but it does mean it has its work cut out for it as it has it all to do in just a few days now. 7900 has also now pretty much ruled itself out of the picture, courtesy of it now being R1.

The intriguing aspect is the activity, and we suspect it is that low due to the simple reason that those opening positions have been matched equally by those closing theirs. What this means in reality, is that there is no agenda in play. At the moment at least, as rollovers tend to change this situation dramatically.

Also, don’t forget, this index is now down 200-points (2.4%) so far on this expiry. OK, it was ridiculously high to begin with, taking on R3, and it tried to get back above 8250 and failed, so both facts combined say to us that the trend is down.

Probably, the best-case scenario is that the zone moves to 8200, which would make 8150 and 8250 the critical levels for this week.

 

Range:            8050  to  8250      

Activity:          Only just registered

Type:              Bullish

www.hedgeratioanalysis.com

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May 6th, 2024 by Richard

The SPX enters the final two-weeks of the May expiry in the middle of its Y1 Ratio bandwidth.

Nb. Our comment for 06/05/24

We think the market must have read what we said, as it did exactly that.

Starting on the very day we last published, Tuesday 30th April, when the market dropped 80.48-points.

Then the Wednesday neatly encapsulated everything we had said, with the market performing an 80-point round trip.

The final two days were more one-way traffic, but were still quite chunky moves.

However, at the end of the day and as you can see in the ratio table, nothing has changed in our respect, as the market remains in its Y1 ratio bandwidth.

In fact, and despite last week being an exciting ride, the net gain is only 11-points. Virtually nothing.

Therefore, what we said last week still holds true for this week. That is apart from the part about the bulls’ fence-sitting, as since the market touched its zone (6-points away on the 2nd) they have obviously been tempted back in.

Although, it must be said, not in any great stampede, otherwise this index would have already tested Y2 by now.

Otherwise, the ratios are all a little firmer below the zone. Above the zone, only the higher ratios have firmed, although the fact that the others have held steady is significant.

On balance the bulls’ just about edge it but, the real game changer might be what we said at the very start of this expiry, that it is easier to recover lost ground than win it in the first place.

We are of course referring to the zone and today we have seen a definite move towards 5100 and/or 5150. With two-weeks still to go, we think that this will be the main driving force, especially in the absence of so many players.

 

Range:            5005     to      5205

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com

 

 

 

Nb. Our comment from the 30/04/24

 

In comparison to the FTSE the SPX has been far more reticent and, although we didn’t specifically say so last week, it hasn’t disappointed in producing the very much expected usual volatility and whipsaw associated with being in the absolutely minimal Y1 ratio.

In fact, it has been the whipsaw that has most impressed us, flipping 20/30 or even 40-points in minutes, especially pre-market.

However, even though it is up just over 100-points on the week, in ratio terms it really hasn’t gone anywhere.

However, don’t get lulled into a false sense of security, as it could easily motor, albeit in either direction.

As one can see from the ratio table, the Y1 ratio bandwidth, which is entirely above the zone, is an impressive 210-points wide.

As this index is circa 5115, that means it could jump 100-points in either direction with very little impetus at all.

And then, that just takes it to Y2 and, this bandwidth, stretches for a further 165-points on top of Y1. Albeit mainly above the zone as well.

Don’t forget this index challenged R1 in the last expiry, when it established its new all-time high and just before that 5% pullback to its zone.

Therefore, and again referencing the FTSE, one does have to wonder why the bulls aren’t taking advantage.

It’s not as if they don’t know by now how little ratio currently surrounds them.

The ratios tell us this index could move 100-points very easily in either direction, or more with just a little incentive.

However, our head says with the bulls obviously fence-sitting, weakness is the more likely outcome unless a spark is ignited.

 

Range:            5005     to      5205

Activity:          Poor

Type:              Bullish

www.hedgeratioanalysis.com

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April 19th, 2024 by Richard

Wow, the SPX ends the April expiry in its zone

Nb. Our comment for 19/04/24

So, here we are at the expiry of the SPX April expiry and just a week ago who would have thought we would be anywhere near the zone.

Actually, on rollover Wednesday when this index hit its intraday low of 5007.25, just 2.25-points above the zones’ upper boundary, we were more than happy with that.

So, today is just the icing on the cake.

To put this in perspective, the market for the rollover and expiry have been within a few points of its very narrow zone and, that is after, it has dropped from 5265, a whopping 5% drop.

So, to get within just a few points is exceptional.

To be fair, it could easily have gone the other way, and it is perhaps interesting to reread what we said way back on the 9th and interpret that with the value of hindsight.

Perhaps, the most significant aspect of all this is not so much where this index has ended this expiry, but rather the manner in which it has.

The point is that, and this is true for the FTSE100 as well, that this retrenchment has been very controlled and calm, despite the magnitude of it.

Coincidence or not, it is worth considering the fact that both the FTSE100 and SPX have ended up this expiry in or around their respective zones, and that is after both had been tangling with their respective R ratios.

We have always maintained, that every expiry the market, or more pertinently, the Fourth Estate attribute the move to, either geopolitical, interest rate/economic or technical reasons.

The point being, is that every market ignores the fact that this is a natural outcome of the derivative influence.

Finally, perhaps we should actually be grateful, as if panic or fear had been the dominant factor, then an orderly expiry around the zone would not have been even remotely possible.

 

Range:            5005     to      5255

Activity:          Moderate

Type:              On balance just bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment from the 09/04/24

 

It has been two trading days since our last comment, but sadly the picture isn’t that much clearer.

Friday saw the market recapture all that it had lost on the Thursday, adding weight to our expectation of whipsaw and volatility now the SPX is in the midst of a very wide Y ratio bandwidth.

Then yesterday, Monday, saw it stagnate. The entire trading range was just 23-points.

And in just two trading days we have seen the ratios below the zone slip back and recover.

Whereas, above the zone, they have pretty much consistently given up ground.

To us this means the bulls are still there, but not as active as before.

The key is going to be the zone, and everything we have seen so far this expiry says to us it is going to move up…so it really is just a question of to where?

Naturally, its never as simple as that, as please don’t lose sight of the fact that the Y ratio bandwidth currently goes from 4970 all the way up to 5305.

That is 335-points of absolutely minimal ratio, so the market could easily move anywhere within this bandwidth.

However, based on those very small margins, at the moment it is still looking good for the bulls.

Sometimes though, it can be prudent to ask oneself why there is so much Y ratio about. The only answer is that when uncertain less money is put down on the table and, with less participation, less ratio.

So, from what little there is, it is looking bullish, but there is precious little support under this market. Why we are not seeing 100 plus point moves a day is the real surprise, and if we start seeing those, then we could see a bit of momentum build.

 

Range:            5005     to      5305

Activity:          Poor

Type:              On balance bearish

www.hedgeratioanalysis.com

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April 15th, 2024 by Richard

The Ratio levels dominated the FTSE100 last week

Nb. Our comment on 15/04/24

Again, the last five trading days were dominated by our ratio levels.

On Monday the intraday high was 7953.16, whereas on Tuesday it was 7962.78. The market peaked twice 12-points above 7950, once in the am then again late afternoon but, aside from those twin spikes, the bulk of the days price action was on or around 7950.

On the Wednesday, which was also strike three incidentally, the market pushed through 7950 and went on to test R2 at 8000 with the intraday high of 7999.84.

Having dropped back nigh on 40-points after that test, the bulls were again left scratching their heads as to why everyone wasn’t on their side. This also resulted in a lame Thursday while they appraised the situation.

Evidently, they were desperate to join the other markets in establishing a new all-time high so, on the Friday, they dispensed with protocol and the market opened at about 7970, and then immediately went straight back up to 8000 in the first few minutes. We know the official open was 7923.80, but we all know that’s rubbish. Incidentally, Friday’s test of 8000 was also strike three, the first being back on the 4th April.

Sadly, and as we mentioned previously, the all-time high of 8047.06 was being protected by R3 at 8050. Now, that is a lot of dynamic delta futures selling, and as the vega was spiking with the market being up 121.18-points, it’s no surprise to us that the intraday high was 8044.98.

Significant as well, that the close was just below 8000.

Now there have been quite a few changes in the ratios which you should be aware of.

Most importantly, is the fact that none of these changes are above the zone. So, you should be very familiar by now with these pertinent levels.

Below the zone we now see Y2 appearing, with a few of the R ratios slipping, which is bearish.

However, the overriding influence this week should be the rollover and expiry, so a retreat back to 7800 is what we would expect anyway, despite the geopolitical situation. Ironically, the May expiry is looking good should the want to have another pop at the new high, but still very early days there of course.

 

Range:            7950  to  8000      

Activity:          Moderate

Type:              On balance only just bullish

www.hedgeratioanalysis.com

 

Nb. Our comment from 08/04/24

 

London was closed last Monday, so the first day of trading was Tuesday 2nd and true to form it went up to the 8000 level which we mentioned (please see below).

Significantly, it closed just below the other level we mentioned, 7950.

Wednesday was bit of a holding pattern, where the bulls tried to work out why everyone wasn’t on their side.

This meant Thursday was a rerun of Tuesday, significantly topping out at 7990.41, just below the 8000 level, as everyone now knew there was a big futures seller there and didn’t want to be the one getting filled.

Friday was essentially the culmination of the bulls’ failure to deal with the dynamic delta at 8000.

As you can see in today’s ratio table there have been quite a few changes, but it is generally the same levels which are pertinent.

8000 is now out on its own at R2 although, in the last two-weeks, it has gone from being just below the R3 threshold to now, being only just above the R2 threshold.

Should still pack a punch though, or at least for the first couple of days it will.

7950 remains the demarcation line between the Y and R ratios, so still a critical level.

We still have two-weeks to go in this expiry but, by the end of this week, thoughts should be starting to focus on the zone.

In the meantime, now the FTSE is in the Y ratio bandwidth expect volatility and whipsaw, just as we have been seeing in the SPX recently.

Don’t forget, at the start of this expiry the zone was at 7650-7750, and it’s not beyond the realms of possibility that it could revert back.

 

Range:            7850  to  7950      

Activity:          Poor

Type:              On balance not bullish

www.hedgeratioanalysis.com

 

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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March 22nd, 2024 by Richard

The SPX April expiry starts with a defining moment.

Nb. Our comment for 19/03/24

Again, before we get onto April a quick recap of the March rollover and expiry.

You can see last weeks comments below and, in our defence, it was a weird expiry from the very start, what with absolutely no Y ratio at all. To compound that, the lowest level (apart from the zone naturally) was R2.

Anyway, 5180 was still a step-up level despite R3 having moved to 5205, and it capped most of the action last week. The intraday highs on Tuesday, Wednesday and Thursday were 5179.87, 5179.14 and 5176.85 respectively. The closes on those days were in or around 5150 significantly.

However, the zone held steady despite all this, so at the final reckoning the settlement price of 5101.67 seems a bit like a compromise in the midst of the R2 bandwidth.

This was probably the best it could do having had to play the hand it was dealt coupled with the fact that despite trying its hardest, nothing really changed throughout.

At least in April we have the return of some Y ratio. However, if you compare how much there was back on the 12th to how much is left today, then we wonder how much longer it will last.

Please note also, that it is Y2, there is no Y1.

The good news, if you are a bull that is, is with the ratios building up underneath the zone then this is how it should be to give it the impetus to move upwards.

Until it does however, there will always be that risk of the market visiting it where it is.

This makes 5155 quite a significant level, and also why we believe yesterday’s close just below it is no coincidence.

Defining moment already for the SPX in this new 5-week expiry it seems.

Please note also, that last week R1 was at 5205, so this now becomes an important step-up level.

 

Range:            5005     to      5155

Activity:          Poor

Type:              On balance only just bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from the 12/03/24 (NB. The March expiry)

 

It really was all about the ratio levels we mentioned last week.

On the Tuesday, R3 at 5130 was obviously just too much for it, eventually finishing down 52.30-points.

The intraday high on Wednesday of 5127.97 just went to show that 5130 was still a level of resistance.

After that, and again we mentioned that we didn’t expect it to hold for very long, our next level was 5155. The intraday high on Thursday was 5165.62, so bit of an overshoot, but there was an awful lot of activity during the day at 5155.

On Friday, R3 had slipped again to 5180, and the intraday high was 5189.26.

Since that high the SPX did retreat 100-points, intraday low on Monday was 5091.14, which sets it up nicely for the grand finale, namely the rollover and expiry.

As you can see in the ratio table there have been further movements in the ratios.

Most notably, R3 above the zone now resides at 5205, giving plenty of room now to resume its upwards march towards continually knocking on R3’s retreating door.

Although, 5205, should hold for today and quite possibly tomorrow as well.

However, the really big question is whether or not the zone is going to move, as 5000 is still a long way below the current market.

We do see 5145-5155 as making an effort but, it still has a long way to go and just 3 days in which to do it.

Part of the problem has been a huge increase in activity yesterday and today and, although rated as moderate, as this is a triple that is actually very impressive.

Perhaps more significantly, on both days it has been classed as neutral.

This doesn’t actually help, as it basically means there are as many bulls as there are bears so, you are looking at a 100-point move, just there are no clues as to which way. Although, historically, continuing to batter R3 does seem to be more common than not.

 

Range:            5005     to      5205

Activity:          Moderate

Type:              Neutral

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March 20th, 2024 by Richard

The FTSE April expiry is here and it could be a fun ride.

Nb. Our comment on 18/03/24

Before we get on to the April expiry we must comment on the last week of the mighty March one.

Obviously, it didn’t finish in its zone on rollover Wednesday but, we suspect they were already counting up their gains from the previous three weeks, so were not that bothered.

The writing was on the wall on Monday, with the market closing at 7669.23, just above the zone’s upper boundary at 7650.

Then on Tuesday, from 11am onwards the FTSE traded between 7740 and 7760, bouncing between those two lines like a ping pong ball. Which back then was testing R2 at 7750. Today, if that expiry was still live, 7750 would be R1.

Essentially, 7750 dominated the last four days of the March expiry. It still could have capitulated at any time, especially either the Wednesday or expiry day, Friday, but it seemed happy to just sit there banging its head on 7750.

Perhaps, with one eye on the April expiry, they were more than happy to see it between 7650 and 7750.

On a final note, regarding March, had the zone changed, 7450-7550 would have been the favourite, so the bulls got away with one there for sure.

Anyway, April, and the most striking aspect is the zone is at 7650-7750, and has been since before the 11th significantly.

This is all well and good as long as the market is happy to stay in there and, we are certain, the market would be well pleased taking all that time value again.

The issue this time, is that there is an awful lot of Y ratio either side of the zone.

This gives you a potential trading range over the next five weeks (that includes the April Bank Holiday) of 7550 all the way up to 7900.

As we said last week, the FTSE may be arriving at the party just before the police.

However, don’t lose sight of the lack of support either. Either, or both ways, it could be a real fun ride this expiry.

 

Range:            7650  to  7750      

Activity:          Strong

Type:              On balance only just bearish

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Nb. Our comment from 11/03/24 (NB. The March expiry)

 

Hate to say it but, and this is what is both good and bad about London, the FTSE is currently under total sway of derivatives.

The overall move this week was down 22.76-points, yawn.

However, there wasn’t a day that didn’t involve the upper boundary of the zone. If the market itself can’t generate enough firepower to outdo the dynamic delta, then it will always end up like it has for the last three weeks.

Monday, as anticipated, the FTSE retreated back inside its zone. The intraday high of 7654.81 on Tuesday saw it try, but fail to break back out.

The Wednesday was the big day, despite the official open of 7646.16 the real one was 7651, significantly above the upper boundary. The very first bar on the open established the intraday low of 7639.03 but, those first few minutes, were the only time the market was below said boundary.

Sadly, memories of 7750 curtailed the bull’s enthusiasm and, both Thursday and Friday, were all about said boundary yet again with the intraday lows of 7645.06 and 7646.20 respectively.

This brings it all around rather neatly to the final week of the mighty March expiry.

It really is a great expiry to absorb all that time value due to the fact it is a triple, and therefore at least three times the size of intermediary expiries.

Anyway, rollover Wednesday is now but a heartbeat away so, if can get into its zone for that then job done, then it can party for the final two days.

Being realistic, this expiry has been a result for the FTSE, as if it wasn’t for every other Western market hitting all-time highs, then the FTSE would have spent far more time in its zone. This would have meant visiting 7550 and, with only Y2 beneath that boundary, 7450 would have been a very distinct probability.

So, going nowhere, was actually a result for the bulls.

Early days but, April looks a far better expiry for the bulls, however it may just be wanting to join the party when it’s winding up.

 

Range:            7650  to  7750      

Activity:          Very poor

Type:              On balance only just not bearish

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March 4th, 2024 by Richard

Significant changes in the FTSE Ratio table and why there is such a huge disconnect between London and Europe

Nb. Our comment on 04/03/24

The FTSE managed a net loss on the week of 23.78-points but, again, it was an exciting ride.

All the while, the market is rubbing its hands with all this time value erosion.

The trouble is that it is not quite as vanilla as all that.

At the start of the week the FTSE did manage to get back above 7700 but, it was exceedingly plain to see, that the memory of that big futures seller at 7750 (R3) was playing on their minds.

With that attitude, it was simply a case of going back to the zone’s upper boundary at 7650. This basically occupied it for the best part of Tuesday and Wednesday.

There is absolutely no doubt in our mind that the FTSE would have been more than happy, ecstatic even, to stay zone-bound for the remainder of last week if it weren’t for external factors.

In a nutshell, every other Western market was hitting new highs, especially the DAX. They have managed to pump up their all-time high from 17198 at the start of this expiry, to 17816 currently (3.6%).

This just goes to show the huge disconnect between London and the rest of the world. There is a very blatant reason for this and, this will surprise many, it is not economic but simply market structure. Far too complex to explain here but, suffice it to say, why these delta levels are so effective in the FTSE.

So, next week, and there have been significant changes in the ratio table.

As you can see, 7750 is now R2. This still represents a serious step-up, especially as these levels are exponential, but obviously therefore, is a lot less than R3.

That now lurks at 7800, with the truly impressive DR still holding firm at 7850.

Therefore, we can see the FTSE force its way up to 7800 but, the preferred outcome, even by the markets desire we believe, is to get back to its zone.

Worth remembering that the SPX is fighting R3 itself, so we rather doubt much help will be coming from that quarter to help London grow a pair and start taking on those ratio levels itself.

 

Range:            7650  to  7750      

Activity:          Poor

Type:              Bearish

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Nb. Our comment from 26/02/24

Seems like we are back to that favourite pattern of the FTSE of excitedly going nowhere. Of course, it certainly helps to erode the time value element.

Well, it did manage a drop of 5.43-points, but you know what we mean.

However, if you knew where the ratio levels were, then the FTSE did in fact have a very educational week. One that sets up the rest of this expiry nicely.

We took great pains in last weeks comment to highlight the significance of 7750 (please see below) and the market certainly didn’t disappoint.

On Tuesday the intraday high was 7748.73, so we have absolutely no hesitation in calling that strike one of the R3 lurking there.

The very next day we saw the market test the other end of our 100-point trading range, namely 7650 otherwise known as the upper boundary of the zone.

Wednesday’s intraday low was7642.75 but, and significantly, the close was back above the zone at 7662.51.

Just for confirmation the market tested it again on the Thursday, with the intraday low of 7651.65.

Looking ahead, and you now know that the market knows what is at 7650 and 7750 now.

This makes life very straightforward, especially as you can see in today’s ratio table that above the zone there haven’t been any changes.

This means R3 is still there, and the market knows it, so if it isn’t hugely committed then it will shy away from testing it again.

Also, after Wednesday and Thursday, the upper boundary, 7650, is now on strike three.

For the bullish case, the ratios below the zone have all seen some decent strength.

For the bears, R3 at 7750 is still a very tough level to get over but, if it does, then it could get as high as 7850. However, the DR ratio there is an absolute mountain. On balance, the most likely outcome would be for it to head into the safety of its zone. 

 

Range:            7650  to  7750      

Activity:          Moderate

Type:              On balance bearish

www.hedgeratioanalysis.com

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