Category: Uncategorized

Apr
19
2024
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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Posted in Uncategorized Tagged with:

Apr
15
2024
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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Mar
22
2024
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

www.hedgeratioanalysis.com

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Posted in Uncategorized

Mar
20
2024
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

www.hedgeratioanalysis.com

 

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

www.hedgeratioanalysis.com

Available to buy now

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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Mar
04
2024
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

www.hedgeratioanalysis.com

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

Available to buy now

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.

Posted in Uncategorized

Feb
20
2024
February 20th, 2024 by Richard

The FTSE starts the mighty March expiry in an interesting situation.

Nb. Our comment on 19/02/24

Well, the last week of the Feb expiry was certainly exciting, as these weeks often are.

The Monday started out quite boring and, apart from a test of the bottom boundary (7555.47), maintained this indifference to the close of play.

Then it came to life on the Tuesday, with derivatives fighting a rearguard action to keep the market even in its zone’s proximity.

Rollover Wednesday saw this fight intensify, but in the end the market did regain its zone on this significant day.

Thursday was like Monday, but Friday saw battle resume and, although the official open was 7597.53 (the previous day’s close), the real open was around 7641. Right on the upper boundary. So, to hold the market for a settlement price of 7660.15, was a hard-fought victory really. Especially, as after that, the market leapt up 114-points.

Good expiry though for derivatives, and you if you knew where the ratio levels were, but the first triple of the year, March, is an entirely different beast.

While in the intermediary expiry Feb, the market found R1 too much to handle at 7700. Or, more precisely, the dynamic delta futures selling equivalent to R1, too much to handle, but everything ramps up in a triple such as March.

Of course, any ratio inspired futures selling, is going to have an impact, its just now, only the higher ratios are the ones that can become pivotal for markets.

As we know, precisely, where the ratio levels are, the only question that remains is how sensitive this market is going to be?

After Friday’s rise, this means the mighty March expiry is already going to start in R1 ratio, a good baptism by fire if you like.

This bandwidth goes up to 7750, so not that far away at all. More significantly, it also skips a level, as it is R3. A very solid R3 as well, so the market should notice it for sure. Quite often, it sometimes does take a while to build up enough of a head of steam for the market to tackle this number of futures selling, so not only is it a high ratio level but its also catching the market early, so best watch out.

 

Range:            7650  to  7750      

Activity:          Very poor

Type:              Bullish

www.hedgeratioanalysis.com

 

Nb. Our comment from 12/02/24 (The February expiry)

Indeed, it was “another exciting week going nowhere”.

Actually, it did go somewhere, which was back up to R1. What we are referring to, is the fact that on the week the overall change was a fall of 42.96-points but, and far more importantly, it finished back inside its zone.

And it followed the ratio playbook to the letter again last week.

Monday was a sighting shot, with the intraday high being a test of the upper boundary at 7650.

Which did then prove “porous” as after Monday 7650 hardly caused a ripple in the market’s movement, in either direction. Tuesday and Wednesday, with intraday highs of 7693.60 and 7694.90 respectively, were definitely tests of R1 at 7700.

Interestingly, Tuesday was the only day last week that the FTSE actually closed outside its zone. This just goes to prove how serious they were in trying to continue with the rally, and therefore how serious the test of R1 was on Wednesday.

The last two days of last week were all about the market reestablishing boundaries. The intraday high on Thursday was 7653.40 and the intraday low on Friday was 7557.35. Basically, a two-day zone bandwidth test.

This makes next week rather interesting, especially in light of the changes in the ratio table.

Below the zone it looks quite dramatic but, all that has really changed, is we have lost Y2 which has become R1. The other R ratios remain the same.

Above the zone, they have also strengthened, but not by enough to effect any changes.

The first few days, at least until rollover Wednesday, should be all about the zone but, and as we say every time, the final week of an expiry always gets a bit excitable.

What is different this time, is next up is the mighty March expiry, the first triple of 2024. Suffice it to say, but the zone mirrors February’s however R1 starts at 7650 above it and not until 7450 below it however, as everything ramps up by a factor of three at the least, it can sometimes extend its influence forward into this current expiry due solely to the weight of its numbers alone.

 

Range:            7550  to  7650      

Activity:          Very poor

Type:              On balance bearish

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.

Available to buy now

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Feb
02
2024
February 2nd, 2024 by Richard

5000 doesn't look so outlandish now for the SPX

and the ratios this expiry are favourable

Nb. Our comment for 30/01/24

When we first mentioned 5000 it was back on the 9th January in the middle of the Jan expiry, when the market was 4763.54.

The astute would point out that we did actually mention 5000 prior to this, but that was to highlight that one of the main brokers had this as their forecast for the SPX to achieve in the whole of 2024.

We mention these two points just to firstly underline how far the market has actually come. Not to mention the alacrity of its ascent but, also the fact that 5000 was a brave forecast back then.

Secondly, this also underscores the importance of derivatives in allowing this move to happen. It wasn’t achieved in the Jan expiry as R1 was in the way but, in this expiry, R1 is safely tucked up there at 5005.

Y2 was also an issue, so it is also worth pointing out that the intraday highs on the 24th and 26th were 4903.68 and 4906.69 respectively. After the first test the index closed 35-points lower, but on the second only 16-points lower.

Of course, that made yesterday’s test strike 3, so no surprise it caved in.

With the market closing at 4927.93 yesterday, 5000 is no longer that outlandish.

So, looking ahead to the next 5 trading days, and the first thing to notice is that the market is now in the Y2 ratio bandwidth.

Overall, the Y ratio bandwidth has shrunk from 485 to 410-points, and the Y1 bandwidth from 310 to 260-points.

Therefore, the ratios have obviously strengthened below the zone and, although they haven’t moved above it, they are in fact weaker.

The zone itself hasn’t moved but, not only do we see 4850 as almost a done deal, but also as a stepping-stone to further moves up, and we are not discounting 5000 as the ultimate target for this expiry. Which would prove to be quite the anomaly indeed.

Just don’t forget how wide this Y ratio bandwidth is, as it will still be very susceptible to anything going “Boo”.

 

Range:            4805     to      5005

Activity:          Poor

Type:              On balance bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from the 23/01/24

 

Well, we shouldn’t have been worried at all.

Although in our defence, with so much Y ratio around, hitting the 10-point wide zone on the expiry is like playing pétanque on an ice rink where the object ball is twenty metres away.

However, and as you can see in the right-hand column as you look at it of the ratio table, the settlement price was within 0.38 of a single point away from dead centre of the zone. Remarkable really.

On top of all that, interestingly once the expiry was done, the SPX managed to join the other two in making a new all-time high. Happy days.

Although, it really wasn’t that much of an ask, as R1 in the end in January didn’t start until 4880 even though it was proving sensitive to Y2 (4810) in the closing stages.

Anyway, all history now. Much more important is what February is looking like, which is the left-hand column in the ratio table as you look at it.

The most striking aspect, is that the ridiculously wide Y ratio bandwidth is actually wider in Feb.

The Y1 bandwidth is 310-points wide, and overall, it is 485-points wide. A staggering 10%.

What is even more striking is that Y2 doesn’t even start until 4905.

On top of which, R1 begins at 5005…which means that the “anomaly” we saw a couple of weeks ago at 5000 is now very much in the picture. Who would have thought that a few weeks ago…

The cautionary aspect, is that the corresponding Y2 is way down there at 4595 with R1 at 4520.

That is a huge downside.

At the moment it all looks rosy, if you’re a bull that is, but either have tight stops or some protection, as if anything goes “BOO” then there is absolutely nowt underpinning this current euphoria.

 

Range:            4805     to      4905

Activity:          Poor

Type:              Bullish

www.hedgeratioanalysis.com

Available to buy now

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.

Posted in Uncategorized

Oct
24
2023
October 24th, 2023 by Richard

After a perfect October expiry in the FTSE, let’s hope for more of the same in November.

Nb. Our comment on 10/23/23

So, the “big question” was answered and, yes, it did stay there for the next three days.

It did stray above and therefore outside of its zone early on in the morning but, for the vast majority of the day, it stayed between 7550 and 7650 on rollover Wednesday 18th.

So, yay, the perfect expiry, as we mentioned last week “Anyway, for the perfect expiry, we just need the market to be in its zone on preferably rollover Wednesday” (please see below).

For the record a perfect expiry is when the market hits a ratio level above or below its zone, then goes on to test the corresponding level at the other end, before finishing in its zone.

For the October expiry this meant hitting R3 at 7750 (intraday high 7746.53 on 21/9/23), before reversing all the way down to DR at 7400, don’t forget it went from R2 at 7450 then straight to DR, so no R3 (intraday low 7384.20 on 4/10/23) before closing on rollover Wednesday at 7588.00.

Anyway, moving on, and the ratio table for the November expiry makes for interesting reading.

Especially as the market is already in the R2 ratio bandwidth, courtesy of the fallout from the last two trading days of the Oct expiry.

This makes 7350 the critical level, and it is R3, but only just, as if you look at Friday’s table (on the right as you look at it) R3 didn’t start until 7250. It should still carry a hefty clout, as it is R3 after all but, just bear in mind, it could very easily become R2 again.

Either way, going any further down, this market will henceforth just keep encountering a lot of dynamic delta inspired futures buying.

All the while, R2 at the other end doesn’t kick-in until you hit 7850, meaning there is far more upside as we see it than downside in this expiry.  

 

Range:            7350  to  7450      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com


Nb. Our comment from 10/16/23 (Nb the October expiry)

Well, it wasn’t so much as “wading through ankle-deep water”, as we described what it would be like for the FTSE finding itself in the new Y ratio bandwidth at the start of last week, but rather a skim board across it.

On Monday, the intraday high was 7540.57, just below the bottom boundary of the zone.

However, on Tuesday, it just blasted straight through it and into its zone. Which is literally 100-points of no ratio at all.

So, absolutely no surprise when on Wednesday the intraday high was 7651.98, the upper boundary of its zone.

From DR at 7400 all the way up to its zones upper boundary at 7650 is quite a ride, a 3.38% one to be precise.

But don’t forget, the first leg was from 7750 down to 7400, a 350-point trip. Making the round trip a whopping 600-points, virtually 8%, which is outstanding.

Made even more so when you consider that at the very start of this expiry the market started at 7711.38, and is now currently at 7599.60, which is only a move of just over 100-points.

Anyway, for the perfect expiry, we just need the market to be in its zone on preferably rollover Wednesday, but the actual expiry on Friday would do at a pinch.

As you can see in this week’s ratio table, the market finished dead centre of its zone. That was after it tested 7650 at the start and at the end of the day as well.

So, the big question is whether it can stay here for the next three days?

7650 is still a solid R1, but has been tested over the last three trading days, so is already on strike 4. However, it is backed up by R2 at 7700. The trouble is, in this last week, activity spikes and positions change even more frequently, so it can be a constantly moving target. Nevertheless, as things stand, if it can hold out in its zone for the first three days, then it can cut-loose on the last two.

 

Range:            7550  to  7650      

Activity:          Poor

Type:              On balance not bullish

www.hedgeratioanalysis.com

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Aug
09
2023
August 9th, 2023 by Richard

After failing, yet again, at 7700 for the FTSE it has been all about its zone ever since.

Nb. Our comment on 08/07/23

The trouble with when a market, like the FTSE currently, is so compliant to the influences of the ratio levels, is that is has to end at some point.

Bit like a petulant teenager, eventually it will want to test the boundaries of what it can get away with.

In the meantime, one has to simply follow the ratio play-book.

Last Monday, the 31st, saw the FTSE attack 7700 very first thing, with two spikes about 10mins apart, before it fell back to the intraday low of 7667.81. Then in the afternoon, it had another go, hitting the intraday high of 7722.92 before, significantly, finishing at 7699.41.

Tuesday saw the intraday low of 7650.15, or R1 (albeit a very weak R1) in our language.

Wednesday, the real opening was below 7650 for the record, but by then it was into Y1 ratio bandwidth.

Thursday, saw the market test 7450, very precisely first thing, then after a small bounce, with more vigour, establishing the intraday low of 7437.88 before finishing at 7529.16. Of course, 7450, was the upper boundary of the zone.

Which presumably moved on Friday, as we suggested last week it might, to 7500-7600.

This is exactly where the market spent last Friday of course.

Now, we enter the third week of this expiry, and after last week’s 250-point (3.3%) trip, we rather hope it will relax for a bit inside its new zone. Especially as the week after it will be the rollover and expiry. The rollover being into the third biggie of the year…

Therefore, this week 7500 and 7600 become absolutely critical levels and, the astute, will have noticed the SPX closed below its zone on Friday. Interestingly, both the SPX and the FTSE were in or around their respective zones on Thursday and Friday, rather coincidentally.

It is not a given that this new zone is permanent, as it could easily revert back to 7350-7450, and the bottom boundary is already on strike one. However, if the SPX decides it doesn’t want, or deserve, to be in bear territory, that could influence proceedings over here. Either way, of course. So, basically, watch those boundaries for any possible break out, while bearing in mind we are actually only at the halfway point for the August expiry.

 

Range:            7500  to  7600      

Activity:          Moderate

Type:              Neutral

www.hedgeratioanalysis.com

 

 

Nb. Our comment from 07/31/23

Well, it wasn’t so much a “rude awakening” when the market encountered 7700, but more like a brick wall.

Apart from last Monday, every other day last week was a titanic battle with 7700.

Although, admittedly, the inroads in the last two days were greater than those on the Tuesday and Wednesday (intraday highs 7702.35 and 7702.74 respectively) with intraday highs of 7709.66 on the Thursday and 7716.82 on the Friday.

Despite the obvious failure to break through, you have to admire the commitment and tenacity in trying.

However, and far more importantly, is what may be in store for us this week.

As one can see there has been a lot of changes in the ratios, and deservedly so as activity has been at a very decent level, even for week one of the expiry.

First and foremost, 7700. It is now part of the R1 ratio bandwidth, which is still 7650 up to 7750. However, it still represents a step-up within that bandwidth, as at 7700 it is just below the threshold for remaining R2, whereas 7650 is just above the threshold of becoming Y2.

That said, 7700 is already on strike four, with the intraday tests to innumerable to count. In short, we are a bit surprised it remained so resilient on Friday.

Overall, obviously the ratios have fallen around where the market is currently but, outside that, they have actually risen, on both sides.

The upshot is, that the FTSE now has a bit more headroom but, R2 and R3, now lurk at 7750 and 7800 ready to ambush it.

Whereas, below 7700, it is now practically (ok 7650 notwithstanding) all Y ratio. So, brace yourself should this market get even a minor shock.

One saving grace may be that the zone may move to 7500-7600, which may limit the downside risk a bit.

 

Range:            7650  to  (7700) 7750      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

Available to buy now

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Aug
04
2023
August 4th, 2023 by Richard

The SPX's test of Y2 at 4605 did not go well...for the bulls that is

Nb. Our comment for 08/01/23

 

On the face of it, bit of a drab week in the SPX last week but, dig down a bit, and it most certainly had its moments.

The DJX grabbed the all the headlines with its 13 days in a row of straight rises, almost beating, or equalling, the record set back in 1987. Which to us at least, shows how desperate they were for a headline.

Admittedly, Monday and Tuesday were very dreary but, this was only to be expected. Not only was it the start of a new expiry, which can take a little “bedding-in”, especially if the market wasn’t left in a ratio-awkward environment, but it also had a few announcements coming its way. Mainly interest rate based really.

Come Wednesday, and the FED rate rise, saw the market definitely twitch.

However, it was the Thursday that it really came to life, coincidentally the day of the ECB rate announcement. Which, in our opinion, are so well flagged by the organisations themselves beforehand, the room for shock must be very small.

Anyway, the SPX on the 27th, shot up to its intraday high of 4607.07, and its first test of Y2 ratio.

This did not go well, as the market proceeded to lose 78.51-points. Perhaps even being the cause for the DJX to miss its record as well.

As the market only finished down 29.34-points on the day, one would be excused for not picking up on this test or the magnitude of the reaction.

The end result is that it has galvanised a bit of activity, with a bit of movement below the zone and, for the first time this expiry, a small move above it.

More importantly however, may be the shake-up has today created the first signs that the zone may start to move up, although to 4550 its small steps for sure.

Overall, the picture looks bullish…it’s just that humongous Y ratio bandwidth that still gives us the jitters.

 

Range:            4505  to  4610           

Activity:          Poor

Type:              On balance only just bearish

 

www.hedgeratioanalysis.com

 

Nb. Our comment from the 07/25/23

 

Firstly, a quick note about the end of the SPX July expiry, which continued to be bit of a yawn if the truth be known. Well, at least to us that is.

The collapse in the ratio above the zone continued and, in the end, Y2 didn’t start until 4575. So, the settlement price could have happily been anywhere from 4395 all the way up to 4575 as the zone didn’t in the end move.

Officially it was 4554.00. Which is why we decided on what the ratios were on the 18th, as coincidentally the market closed the day before at 4554.98, for comparison in today’s ratio table. To complete the ironic coincidence, yesterday’s close on the SPX was 4554.64, which is on the day we always publish on.

Funnily enough, if you look at the ratio table on the 18th, then you will see that back then Y2 started at 4555.

Anyway, enough of coincidences, and on to the more important aspect, which is what might we expect in the August expiry.

The most obvious aspect, is that the zone here has already moved up to 4500, and actually did so on Friday 21st, the day of the July expiry.

The second aspect, is that on the face of it, the ratios above the new zone appear to have continued to fall however, in the last couple of days they have in fact firmed up.

The third aspect, is that the huge Y ratio bandwidth is still present, and currently goes from 4195 all the way up to 4705.

Gazing into our crystal ball, it’s not very clear in truth, as the danger will be ever-present with that ridiculously wide Y ratio bandwidth.

However, in the absence of any shock (which may even be the FTSE) we suspect August may well be a rerun of July.

 

Range:            4505  to  4605           

Activity:          Average

Type:              On balance only just bearish

 

www.hedgeratioanalysis.com

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