Nb. Our comment on 07/10/23
Gosh, we really hope you had taken note of the levels we mentioned last week.
In fact, even the part about ratios affecting the SPX that did indeed translate across.
Monday and Tuesday were indeed crucial last week, as on Monday the intraday high was 7561.26 and, not just once but on three very identifiable spikes up during the day, and yet the market finished at 7527.26.
On the Tuesday the intraday high was 7547.38, at the end of a steady climb throughout the day but, again, it closed at 7519.72.
That made two very distinct tests of the bottom boundary of the zone at 7550, and the failure to breach it should have set the warning bells off.
Of course, when the Street reopened on the Wednesday it was not good news from over there, which only conspired to compound this failure over here.
Worth mentioning, that on the Thursday, our old friend R2, managed to support the FTSE right up until 13:00 when, yup, you guessed it, the weak US market finally broke its back.
Interestingly, that day, the intraday low was 7267.62. Although that is 17.62-points above R3 at 7250, it was at that moment down 174.48-points (2.34%), which is chunky for the FTSE, so all the greeks were spiking, especially the Vega, so we are more than happy to call that strike one.
Friday was far more interesting as, if you knew about R3 at 7250 that is, you could clearly see the confusion in the market, which basically wanted to fall but couldn’t understand the steady but significant futures buying.
No coincidence, to us at least, that it closed at 7256.94.
Looking ahead, the changes in the ratio table are clear to see.
However, the main point is that 7250 is still R3. The trouble is, that it is now on strike three.
Even so, R3 ratio is a lot, especially for an intermediary expiry. So, even if it wants to fall, it is not going to find it easy. Essentially, just like on Friday.
Worth remembering that no amount of ratio is insurmountable, it just shows you were there will be futures buying (or selling) and a scale of how much to expect.
How the market reacts to this, or the strength of its current fear/greed is the unknown factor.
That said, it would be highly unusual for the FTSE to significantly breach R3 during one of the smaller expiries. Furthermore, the SPX, on Friday, closed in its zone, so not so much pressure to come from them, hopefully. Although, they still have a vast amount of Y ratio either side of their zone.
Also, we are now entering the last two weeks of this expiry so, especially towards the end of this week, the zone should start bringing its influence to bear.
The only other aspect to mention, is that although activity has been classed as “very poor” this is mainly due to the fact that a lot of it has essentially netted off against each other. Even so, taking this into account, it hasn’t been exactly inspiring by any calculation.
Range: 7250 to 7550
Activity: Very poor
Type: Bullish
www.hedgeratioanalysis.com
Nb. Our comment from 07/03/23
As we said last week, 7400 did indeed prove to be a real test for the bears.
On the day we published and, quite some considerable time after we may add, the intraday low on that Monday 26th was 7401.18.
Evidently, the dynamic delta inspired bout of futures buying generated by the market hitting R2 at 7400 was more than enough to see this index pivot and reverse direction. Furthermore, it was bit of spike down, so it wasn’t there for very long.
Then it took the rest of last week to travel across the entire R1 ratio bandwidth, as on Friday the intraday high was 7551.59. Or in our world, the bottom boundary of the zone, or our trading range in fact.
From R2 to the zone, or the R1 bandwidth, is 150-points.
More importantly, looking ahead, don’t forget we still have three weeks of this expiry to go.
So, the important level this week will be 7550, or the bottom boundary of the zone.
If the market can get back above this and, let’s face it, the one thing the FTSE has been keen on recently, has been staying in its zone, then it has 100-points of zone above it.
If it fails, the one change in the ratio table for this week, has actually been R2 at 7400, as it has slipped to 7350.
However, 7400 still represents a considerable step-up, as it is only just below the threshold.
Perhaps another aspect to bear in mind, is that the SPX got back to its zone last Thursday and, on Friday, hit Y2 with the intraday high of 4458.48. The point being, is that it may seem set fair over here, but the SPX may run into ratio troubles which can translate across. Otherwise, our best guess is that the FTSE will want to get back inside its zone, which would then make the trading range 7550 to 7650.
Range: 7400 to 7550
Activity: Poor
Type: On balance only just bullish
www.hedgeratioanalysis.com
