It is probably difficult to remember back to last Tuesday the 4th February, but that was the day of our last comment, which happened to coincide with the rather large fiscal stimulus made by the Chinese government.
The end result was an opening gap up of about 32-points, which more importantly, took the open to 3280.61, which was above R1, then at 3280.
That left R2 as the last remaining resistance, and (yet) another opening gap up, this time a more moderate 29-points, got the market safely above that by starting the day off at 3324.91.
Essentially the situation hasn’t changed, as the Y ratio bandwidth is pretty much the same, it’s just that it too is moving up with the market.
In US Football they call it moving the chain, making it first down again with ten yards to go.
The only issue here is that the chasm of very minimal ratio remains beneath this market.
Albeit, the zone has moved up, but as we explained previously, moving up into a level of minimal ratio is not the hardest task to achieve, and is almost self-fulfilling if the underlying is so far ahead in the distance as well.
One difference that perhaps may be worth considering, is that after recent events the bulls may not be as resilient as they once were?
Great it’s moving up, great the zone is as well, and great the ratios are reacting, but really not so great is the Y ratio bandwidth hasn’t shrunk and that the rollover starts next week.
Don’t get fooled, the risks are still there, and perhaps the bulls resolve might not be what it once was.
Range: 3255 to 3355
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment on 02/20/20
To be fair it has been bit of a default expiry for the February one.
By which we mean that equities have definitely been in control, and the ratios have adapted around them.
Although, to be fair it hasn’t exactly got the pulses racing, as back at the very start of this trip, the market was 3329.62, so a rise of 56.53-points, or 1.70%, so far over 5-weeks is not that spectacular.
However, dropping back to 3214.68, virtually the top of the then zone, made it a very decent round trip.
The zone has continued upwards, and, no doubt, there is probably one move left in it even at this late stage, but as we said, migrating into Y1 ratio is not the hardest thing and “almost self-fulfilling”.
For us the real yardstick, has been the overall depth of the Y ratio bandwidth, which has remained staggeringly wide throughout.
It started at 245-points, then 210, 210, 220 until now it is 260-points.
So, our analogy still stands, with this bandwidth representing the 10-yards in US football, and all this market has done is move this chain forward.
The risk remains, which is an 8% in-the-blink-of-an-eye type risk.
Great it dodged a bullet, but best not to get complacent.
Tomorrow is expiry, so it looks like this expiry is done, but next up is the first triple of this year, and it shouldn’t be so accommodating.
It seems like the bears had one more battle, as on the very day of our last comment, the FTSE catapulted itself back into its zone, which to us means above 7550.
The official open was 7507.67, the previous days auction close, so not even the real time one, but to market practitioners, what we shall call, the tradable open, was more like 7564.
Madness really.
Same story really, just in reverse (as in the tradable open being below 7550), on the Monday, the day it closed down 173.93-points.
The Tuesday saw the FTSE test R1 at 7450 first thing, got a bloody nose, but felt confident enough to go back and camp out there for 90 minutes, before a benign Street helped it enough to get above it.
Wednesday, was also all about 7450, but this time it was acting as support.
Yesterday, we were back to the official open bearing no resemblance to the tradable one, but suffice it to say 7450 didn’t even get a look-in.
Today, we can see quite a few changes in the ratios, and very significantly, there is a lot more Y ratio about now.
Interestingly 7350 hasn’t changed, so is now also a very significant level.
But the real deciding factor may now well be R1 having now shifted from 7450 to 7400.
This is because the intraday low on Thursday was 7357.62, and that was at the end of a 126-point fall, we have no doubt or hesitation in calling that a test of R2.
If R2 can hold, and now R1 is not that far away, it could easily get back int the Y ratio.
Either way, it is now in a very narrow bandwidth, so it will have to decide one way or the other soon.
Range: 7350 to 7400
Activity: Average
Type: Bearish
Nb. Our comment on 02/13/20
It has been probably a bit too long since our last comment, especially as there have been so many changes to the ratios.
The real biggie, is the fall in the zone to 7400-7500 of course.
We didn’t see that coming, although without calculating the ratios there is naturally no way that we could have.
More importantly, without knowing when that, or the other ratios changed, means we can’t really comment on any market interaction.
However, the last two days activity around 7500, the top of the zone, now makes sense.
There are going to be a lot more twists and turns here for sure, especially as the rollover is upon us next week.
Suffice it to say, that with the Y ratio bandwidth now stretching from 7250 all the way up to 7650, the FTSE has ample latitude to do almost anything.
The only perplexing aspect is why it isn’t putting down moves like the DAX.
One point that is worth remembering, is that over the first three days of this expiry, this index couldn’t break up through what was then the top of its zone, or 7650, which, as you can see is now R1.
The writing was on the wall when the intraday high on the day of our last comment was 3293.47, and, more importantly, the close was below R1 at 3290.
Very interestingly, today, R1 has moved back to 3280, so definitely a level to watch.
However, hopefully you have not been too disappointed with the level of volatility, as you should have been expecting it.
Although a 43.11-point whipsaw on Thursday 30th was quite extreme.
Our only disappointment is that, so far at least, the expiry low is 3214.68, so less than 10-points away from the zone.
This is however tempered by the fact it is just 9.68-points, hardly anything on a three-thousand-point index, and, especially so, after a fall of 123.09-points.
Furthermore, as we have continuously pointed out, that there is still a stupid amount of Y ratio around, and even Y1 ratio, so there is actually a case for arguing the zone itself could be 3150 all the way up to 3230.
With just over two and a half weeks still to go this trip, there is still plenty of life left in the Feb expiry.
And, although, it is good to see the ratios building below the zone, they have also done so above it, so both bullish and bearish.
But, at the end of the day, there is still just over 200-points of Y ratio bandwidth, which is colossal.
So, for us at least, volatility is still the name of the game, as is the risk, as please don’t forget the corresponding R ratios below the zone don’t kick in until 3070, so the main course could still be to come.
Range: 3205 to 3280
Activity: Moderate
Type: On balance bearish
Nb. Our comment on 02/11/20
It is probably difficult to remember back to last Tuesday the 4th February, but that was the day of our last comment, which happened to coincide with the rather large fiscal stimulus made by the Chinese government.
The end result was an opening gap up of about 32-points, which more importantly, took the open to 3280.61, which was above R1, then at 3280.
That left R2 as the last remaining resistance, and (yet) another opening gap up, this time a more moderate 29-points, got the market safely above that by starting the day off at 3324.91.
Essentially the situation hasn’t changed, as the Y ratio bandwidth is pretty much the same, its just the that it too is moving up with the market.
In US Football they call it moving the chain, making it first down again with ten yards to go.
The only issue here is that the chasm of very minimal ratio remains beneath this market.
Albeit, the zone has moved up, but as we explained previously, moving up into a level of minimal ratio is not the hardest task to achieve, and is almost self-fulfilling if the underlying is so far ahead in the distance as well.
One difference that perhaps may be worth considering, is that after recent events the bulls may not be as resilient as they once were?
Great its moving up, great the zone is as well, and great the ratios are reacting, but really not so great is the Y ratio bandwidth hasn’t shrunk and that the rollover starts next week.
Don’t get fooled, the risk are still there, and perhaps the bulls resolve might not be what it once was.
As we said in our last comment, please do not read anything into the zone move, this is not because of directional forces, but rather because it is so ridiculously thin out there.
Anyway, it is just back to where it started.
The really important ratio to watch is R1 below the zone, which has risen 25-points to 3045.
Pathetic, in a word, even more so considering how far and how fast the market has fallen.
Doubly so, when one factors in the fact the “type” of activity is bearish, which, to us, means an awful lot more puts traded than calls.
In fact, our Delta Ratio level is standing at just 40.7%, which is very bullish, but, under these conditions, not so much, because of where the market is already, and the colossal amount of Y ratio around.
Admittedly, R1 above the zone has conceded some ground, but the enormous risk is still the 245-points on minimal Y ratio bandwidth.
R1 above the zone was 3280, so, for us at least, it was no coincidence that yesterday the SPX spent a lot of time trying to break back up through it.
For the record the intraday high was 3285.78 yesterday.
Obviously, 3290 is now a critical level, as above it is back into the R1 ratio bandwidth.
If it remains below it, the next support level is the nomadic zone.
But, more to the point, if this index remains in the Y ratio bandwidth then the recent volatility will soon appear as if it was just the hors d’oeuvres.
Range: 3205 to 3290
Activity: Average
Type: On balance bearish
Nb. Our comment on 02/04/20
The writing was on the wall when the intraday high on the day of our last comment was 3293.47, and, more importantly, the close was below R1 at 3290.
Very interestingly, today, R1 has moved back to 3280, so definitely a level to watch.
However, hopefully you have not been too disappointed with the level of volatility, as you should have been expecting it.
Although a 43.11-point whipsaw on Thursday 30th was quite extreme.
Our only disappointment is that, so far at least, the expiry low is 3214.68, so less than 10-points away from the zone.
This is however tempered by the fact it is just 9.68-points, hardly anything on a three-thousand-point index, and, especially so, after a fall of 123.09-points.
Furthermore, as we have continuously pointed out, that there is still a stupid amount of Y ratio around, and even Y1 ratio, so there is actually a case for arguing the zone itself could be 3150 all the way up to 3230.
With just over two and a half weeks still to go this trip, there is still plenty of life left in the Feb expiry.
And, although, it is good to see the ratios building below the zone, they have also done so above it, so both bullish and bearish.
But, at the end of the day, there is still just over 200-points of Y ratio bandwidth, which is colossal.
So, for us at least, volatility is still the name of the game, as is the risk, as please don’t forget the corresponding R ratios below the zone don’t kick in until 3070, so the main course could still be to come.
“So, 7550 remains “a massive level””, was our mantra from the Jan expiry, and guess what, it’s the same for the Feb one.
It is a terrible shame we didn’t publish on the 20th, as all the action in the FTSE so far this week would have made perfect sense.
Monday saw the intraday high of 7682.77, but ultimately the market closed right on their zone’s upper boundary after this test, at 7651.44.
We do bang on about the auction, but the real time close on the 20th was 7649.90, so, for us, that is a close exactly on the boundary, but still inside by a whisker.
Tuesday saw an intraday high of 7651.44 and an intraday low of 7550.47, which was not only a bandwidth test, but a zone bandwidth test.
Normally, these signal a breakout the next day.
However, the FTSE was too timid, or uncertain, and traded inside its zone with no further boundary tests, with the intraday high of 7637.35 and low of 7563.52.
Regardless of this indecision, a breakout was still the signal, which obviously came yesterday, with a bit of a nudge from the Street.
You can see the ratio levels in the table above, so no need to repeat them here, but it is perhaps worth reminding, that below the zone means the market is in bearish territory.
Which, to put it another way, means the bears are in control.
Range: 7450 to 7550
Activity: Strong
Type: On balance just fractionally bullish
Nb. Our comment on 01/31/20
It seems like the bears had one more battle, as on the very day of our last comment, the FTSE catapulted itself back into its zone, which to us means above 7550.
The official open was 7507.67, the previous days auction close, so not even the real time one, but to market practitioners, what we shall call, the tradable open, was more like 7564.
Madness really.
Same story really, just in reverse (as in the tradable open being below 7550), on the Monday, the day it closed down 173.93-points.
The Tuesday saw the FTSE test R1 at 7450 first thing, got a bloody nose, but felt confident enough to go back and camp out there for 90 minutes, before a benign Street helped it enough to get above it.
Wednesday, was also all about 7450, but this time it was acting as support.
Yesterday, we were back to the official open bearing no resemblance to the tradable one, but suffice it to say 7450 didn’t even get a look-in.
Today, we can see quite a few changes in the ratios, and very significantly, there is a lot more Y ratio about now.
Interestingly 7350 hasn’t changed, so is now also a very significant level.
But the real deciding factor may now well be R1 having now shifted from 7450 to 7400.
This is because the intraday low on Thursday was 7357.62, and that was at the end of a 126-point fall, we have no doubt or hesitation in calling that a test of R2.
If R2 can hold, and now R1 is not that far away, it could easily get back int the Y ratio.
Either way, it is now in a very narrow bandwidth, so it will have to decide one way or the other soon.
Well if we thought the Jan expiry was thin, then this Feb one has got even thinner.
In fact, it’s virtually opaque.
Please don’t read too much into the fact the zone has moved down to 3145-3155, as rather than being a bullish or bearish signal (down is bearish btw), this movement is really as a result of it being so thin.
Or, to put it another way, devoid of any ratio.
More significant, is the fact that R1 below the zone has not moved at all, which is highly unusual in the first week of a new expiry.
Furthermore, above the zone, R1 has moved in, but only by 20-points, which is nothing considering.
Another very unusual fact, is this expiry is the first of two back-to-back 5-week expiries. One is unusual enough, but we would need a historian to tell us the last time we got two together.
At the end of the day, the really important factor is the immense amount of Y Ratio present, a staggering 260-point bandwidth worth.
So, same as last expiry, it may not happen, but don’t be complacent as the risk of a massive move is there.
In fact, the risk is heightened, and 3% moves are extremely possible, which in cold numbers, is 100-points, so be very aware.
Obviously 3320 and 3280 are the crucial levels.
Range: 3320 to ….
Activity: Good
Type: On balance bearish
Nb. Our comment on 01/29/20
As we said in our last comment, please do not read anything into the zone move, this is not because of directional forces, but rather because it is so ridiculously thin out there.
Anyway, it is just back to where it started.
The really important ratio to watch is R1 below the zone, which has risen 25-points to 3045.
Pathetic, in a word, even more so considering how far and how fast the market has fallen.
Doubly so, when one factors in the fact the “type” of activity is bearish, which, to us, means an awful lot more puts traded than calls.
In fact, our Delta Ratio level is standing at just 40.7%, which is very bullish, but, under these conditions, not so much, because of where the market is already, and the colossal amount of Y ratio around.
Admittedly, R1 above the zone has conceded some ground, but the enormous risk is still the 245-points on minimal Y ratio bandwidth.
R1 above the zone was 3280, so, for us at least, it was no coincidence that yesterday the SPX spent a lot of time trying to break back up through it.
For the record the intraday high was 3285.78 yesterday.
Obviously, 3290 is now a critical level, as above it is back into the R1 ratio bandwidth.
If it remains below it, the next support level is the nomadic zone.
But, more to the point, if this index remains in the Y ratio bandwidth then the recent volatility will soon appear as if it was just the hors d’oeuvres.
“So, 7550 remains “a massive level””, was our mantra from the Jan expiry, and guess what, it’s the same for the Feb one.
It is a terrible shame we didn’t publish on the 20th, as all the action in the FTSE so far this week would have made perfect sense.
Monday saw the intraday high of 7682.77, but ultimately the market closed right on their zone’s upper boundary after this test, at 7651.44.
We do bang on about the auction, but the real time close on the 20th was 7649.90, so, for us, that is a close exactly on the boundary, but still inside by a whisker.
Tuesday saw an intraday high of 7651.44 and an intraday low of 7550.47, which was not only a bandwidth test, but a zone bandwidth test.
Normally, these signal a breakout the next day.
However, the FTSE was too timid, or uncertain, and traded inside its zone with no further boundary tests, with the intraday high of 7637.35 and low of 7563.52.
Regardless of this indecision, a breakout was still the signal, which obviously came yesterday, with a bit of a nudge from the Street.
You can see the ratio levels in the table above, so no need to repeat them here, but it is perhaps worth reminding, that below the zone means the market is in bearish territory.
Which, to put it another way, means the bears are in control.
Well if we thought the Jan expiry was thin, then this Feb one has got even thinner.
In fact, it’s virtually opaque.
Please don’t read too much into the fact the zone has moved down to 3145-3155, as rather than being a bullish or bearish signal (down is bearish btw), this movement is really as a result of it being so thin.
Or, to put it another way, devoid of any ratio.
More significant, is the fact that R1 below the zone has not moved at all, which is highly unusual in the first week of a new expiry.
Furthermore, above the zone, R1 has moved in, but only by 20-points, which is nothing considering.
Another very unusual fact, is this expiry is the first of two back-to-back 5-week expiries. One is unusual enough, but we would need a historian to tell us the last time we got two together.
At the end of the day, the really important factor is the immense amount of Y Ratio present, a staggering 260-point bandwidth worth.
So, same as last expiry, it may not happen, but don’t be complacent as the risk of a massive move is there.
In fact, the risk is heightened, and 3% moves are extremely possible, which in cold numbers, is 100-points, so be very aware.
The zone has indeed moved up again, and to exactly where we expected it to.
Likewise, the market has just “continued to knock on the retreating ratio door”.
However, now there are different factors added to the mix, being the rollover and expiry.
Therefore, we must point out that the upward move in the zone may not be over, as there is a distinct possibility of it moving to 3220-3230.
There is also an outside chance of seeing 3245-3255.
Either way, for us to see a conventional expiry, we need to see a pullback of at least 30-points, and quite possibly 50-points by the end of this week.
But, apart from the fact it’s the end game for this expiry, it’s all rather bullish, what with the rising zone and the ratios rising and falling either side of it.
Nevertheless, it has hardly been emphatic, and the risks remain, as that Y ratio bandwidth is still a staggering 180-points wide, so still very susceptible to a scare in our view.
It has done exceptionally well to avoid, or nullify, any bears out there, but it is never good when any market has blinkers on, and therefore only sees and hears what it wants to.
Needless to say, 3280 is now the critical level.
Range: 3280 to 3305
Activity: Average
Type: On balance bearish
Nb. Our comment on 01/17/20
The bulls never even glanced back.
In fact, on the day of our last comment the markets intraday low was 3277.19, a direct challenge of the bottom boundary of the R1 ratio bandwidth it was in, and so, naturally, the bottom of our trading range.
So, when the close was 3283.18 the writing was on the wall.
The ratios have continued to build below the zone, and retreat above it, so much so it has created a vacuum into which the zone has risen.
The end result is the zone finishing at 3270-3280, still quite some way behind the settlement price of 3326.19.
This means it stayed in its R1 ratio bandwidth right to the very end.
So, a miss, and a costly one, but being R1 not too punitive, but certainly enough to smart.
However, it is the nature of the miss, as it never visited its zone once during the entire expiry, and that is bad news.
In fact, we would go as far as to say, unnatural.
When markets get this blinkered, and this one-sided, there is only ever one outcome.
The only question is when?
As, this sense of invulnerability can last for quite a while, it may well take a triple witching expiry to force some sense back into it, and the next biggie is not until March.
We probably should have said in our last comment that the zone was looking likely to move to where it has, so, to avoid the same mistake, it is also very likely to move to 3195-3205 before the end of this expiry.
This is bullish, as is the fact the ratios have built below the zone and weakened above it.
However, this has to be the case for the zone to move.
What is more important is the manner, in that if the ratio declines from say R1 to allow the zone to move in to that vacated space, then that is far more impressive than it just triumphing over the minimal Y1.
In fact, moving up into Y1 is almost more like osmosis rather than an aggressive takeover.
But credit where it is due, as at least its upwards.
And it is all well and good as things stand, but don’t ignore the fact that this index is extremely vulnerable to a shock, as there is still an absolutely massive Y Ratio bandwidth of 185-points.
Even more if you go from R2, which it has been challenging, down to the corresponding R2, which is 260-points.
As ever, it may not happen, and it could turn out to be one of those that continue to just knock on the retreating ratio door, but that doesn’t mean the risk is not there.
The question perhaps should be, is why there is no ratio building up to support this market?
Range: 3230 to 3255
Activity: Moderate
Type: On balance only jut bearish
Nb. Our comment on 01/14/20
The zone has indeed moved up again, and to exactly where we expected it to.
Likewise, the market has just “continued to knock on the retreating ratio door”.
However, now there are different factors added to the mix, being the rollover and expiry.
Therefore, we must point out that the upward move in the zone may not be over, as there is a distinct possibility of it moving to 3220-3230.
There is also an outside chance of seeing 3245-3255.
Either way, for us to see a conventional expiry, we need to see a pullback of at least 30-points, and quite possibly 50-points by the end of this week.
But, apart from the fact it’s the end game for this expiry, it’s all rather bullish, what with the rising zone and the ratios rising and falling either side of it.
Nevertheless, it has hardly been emphatic, and the risks remain, as that Y ratio bandwidth is still a staggering 180-points wide, so still very susceptible to a scare in our view.
It has done exceptionally well to avoid, or nullify, any bears out there, but it is never good when any market has blinkers on, and therefore only sees and hears what it wants to.
