The FTSE carried on for the first week of the Dec expiry exactly where it had ended the last, namely, with the same anomaly as either the high or low being the same as the open.
Of course, our view is that the opening price is the anomaly, and this just goes to prove how untrustworthy this data really is.
Especially when the difference is just -0.08 of a point, when everyone else knows the trading open was at the very least 10 full points above that.
Anyway, it has taken a week and a half, but eventually the FTSE has tested 7450.
Mighty impressive it was too, with at least three peaks, of about 20 minutes each, banging on that particular ratio door, but to no avail.
Of course, and as you can see by comparing the two tables above, 7450 has slipped from DR to R3, which is quite a big fall to be fair.
However, the market, is coming at it from Y2, and that is a far bigger difference.
The rest of this week is also weird, what with the American holidays, so R3 shouldn’t capitulate, but it’s always a difficult call in such thin markets.
We also fully expect to see the zone move to 7150-7250 before long, so really our trading range should be 7250 to 7450, which please bear in mind.
Whether it is 7450, or 7550, the market bullies its way to, at the end of the holidays, there is no doubting it that London is extremely top-heavy, with the best-case scenario for us, a target of 7200.
Quite often London participates in the “Thanksgiving Rally”, then pulls back, only to attempt our own “Christmas Rally”, so it will be a very interesting few weeks ahead, if it sticks to the plan of course.
Range: 7100 to 7450
Activity: Very poor
Type: Bearish
Nb. Our comment on 12/06/19
Well we sincerely hope you all had your fingers poised over the red button when the intraday high on the 27th November was 7446.00 (DR/R3 @ 7450), as you would have received a rather early Christmas present.
And actually, 7450 has returned to DR, not that it was ever far off.
Of more interest however, is the rise to R1 at 7250.
The reason being that there was a potential move in the zone to 7150-7250, which added greater weight to the Y2 Ratio level it was.
The fact the market blasted past it on Tuesday this week told us that the zone hadn’t moved, although, with two weeks still to run on this expiry, it is not an impossibility yet.
Especially towards the end, when things get a lot friskier.
Obviously 7100 is now a critical level, although we wager there were not many of you back on 18th, or even the 28th of last month, that even considered our zone, standing at 7000-7100, being a possibility, let alone a target.
Obviously, 7000, irrespective of it being a round number, is our first support level, assuming it does indeed get inside its zone.
The fact it is the bottom boundary of the zone as well as being R3, should provide more than enough futures buying, or dynamic delta, to provide a very strong level of support.
However, for the last two weeks London has been exhibiting some strange characteristics, although not never seen before, they are normally very rare and occur singly, not daily.
What we are referring to is the situation where the open is also the same as either that day’s high or low.
This is made all the more peculiar when one appreciates that in London, and only London, the open is the same as the previous day’s close.
So, on Monday the 4th the open was 7302.42 and that day’s intraday low was 7302.42.
Tuesday it was 7369.69 and 7369.61.
Just a normal day on that Wed, then 7396.65 and 7396.00 and on Fri 7406.41 with the high 7406.83.
Then similar for the first four days of last week.
The significance of this is that the next day’s open is never going to be exactly the same as the previous day’s close, the reason why only London chooses to adopt this is a mystery.
When the open is the same as either the high or the low means that the market only went in one direction, and that therefore the opening price was never a real one.
Therefore, when you see a differential of 0.08, see Tues 5th, and you know the open is fictional, then this differential is impossible.
Therefore, the only conclusion possible, is that two of that day’s benchmark index markers are false.
If this is the case, and how can’t it be, then this pulls into question every valuation or calculation that uses them, especially trading systems, HFT’s and technical analysis, to mention but a few.
Looking at the ratio table for Dec the big level is obviously going to be 7450.
The other main issues are that while the zone is way below the market now, it is odds on that it will move in the next day or so to either 7150-7250, or 7250-7350.
Obviously which one it moves to will change the overall picture considerably.
Range: 7100 to 7450
Activity: Very poor
Type: Bearish
Nb. Our comment on 11/26/19
The FTSE carried on for the first week of the Dec expiry exactly where it had ended the last, namely, with the same anomaly with either the high or low being the same as the open.
Of course, our view is that the opening price is the anomaly, and this just goes to prove how untrustworthy this data really is.
Especially when the difference is just -0.08 of a point, when everyone else knows the trading open was at the very least 10 full points above that.
Anyway, it has taken a week and a half, but eventually the FTSE has tested 7450.
Mighty impressive it was too, with at least three peaks, of about 20 minutes each, banging on that particular ratio door, but to no avail.
Of course, and as you can see by comparing the two tables above, 7450 has slipped from DR to R3, which is quite a big fall to be fair.
However, the market, is coming at it from Y2, and that is a far bigger difference.
The rest of this week is also weird, what with the American holidays, so R3 shouldn’t capitulate, but it’s always a difficult call in such thin markets.
We also fully expect to see the zone move to 7150-7250 before long, so really our trading range should be 7250 to 7450, which please bear in mind.
Whether it is 7450, or 7550, the market bullies its way to, at the end of the holidays, there is no doubting it that London is extremely top-heavy, with the best-case scenario for us, a target of 7200.
Quite often London participates in the “Thanksgiving Rally”, then pulls back, only to attempt our own “Christmas Rally”, so it will be a very interesting few weeks ahead, if it sticks to the plan of course.
The trouble with the “Thanksgiving Effect” is it skews the start of the next expiry, or at least can do.
And, this is exactly what has happened here, as it has forced the Dec expiry to start in R3 ratio.
There is no doubt at all that it doesn’t want to be battling this many futures this early on, and this now places derivatives firmly against equities.
Equities love the Thanksgiving rally, but in derivatives, when every step is met with an R3 level of dynamic delta, it’s not so easy.
You have to be really bullish to want to buy that many futures.
The fact that the ratios are significantly underdeveloped, reveals that people are not so convinced, after all, and not that long ago, it was extremely rare to see any Y ratio at all in one of the big expiries, and definitely not the biggest of the big.
Will equities allow for any pullback before, or even after, the 28th?
We doubt it, entirely because they haven’t in the past, and this scenario is no stranger.
But this is one weird Presidency, where every day something’s new, so when we say the above, we do so with a conviction ratio in the low teens.
Obviously, 3105 and 3155 are incredibly significant levels, and the first one to break will tell you all you will need to know about the conviction and desire in this market.
However, please do bear in mind, that the corresponding R3 ratio level is way down there at 2845, and if players were truly bullish then these ratios would be climbing, as would the zone itself.
Both may well do so, but also don’t forget how thin the US markets get next week, and are therefore notoriously volatile, as well as somewhat gung-ho.
Obviously, we are bearish, but in light of where we are in the calendar, a reappraisal post the holidays is the sensible suggestion.
Range: 3105 to 3155
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment on 11/26/19
Looks like “post” the holiday it is.
There was always that risk, and to be fair, Wednesday and Thursday last week were the deciding days.
On Wed it closed at 3108.46, having had the intraday low of 3091.41, which was hugely significant considering our range was 3105 to 3155.
Holding back in the R3 bandwidth showed remarkable resilience, which they needed again the very next day, with the intraday low of 3094.55 and the close of 3103.54.
It could have gone well for the bears at that point, but, as we said last week, its best not to underestimate the “Thanksgiving Effect”.
Looking forward, and it always gets a bit, well ok, a lot, silly in the thin market’s tomorrow and Friday, so unless you are of that temperament best to look towards next week now.
The ratios are building below the zone, which is bullish.
The fact the zone hasn’t moved is not.
The ratios above are slipping, also bullish, but considering where this market is in relation to them, this may just have the effect of taking away the support.
So, we maintain our stance, that this index is walking on very thin ice, but it is a situation it is not unfamiliar with at this particular point in time.
If previous years are anything to go by, sanity doesn’t return until late Monday, sometimes Tuesday or later, and so where this index is then in relation to the ratios will be the issue, not for the remainder of this week.
A bit like “shields are at 30% Captain, but holding, just”.
We did not publish anything about the December expiry, our last comment was on the 14th Nov in respect of the Nov expiry, which did extremely well just to stay inside its Y ratio for it.
The settlement price was 3110.52, so it just continued “knock, knock knocking on that R ratio door” right to the bitter end.
What we call the Thanksgiving Effect.
Range:
Activity:
Type:
Nb. Our comment on 11/19/19
The trouble with the “Thanksgiving Effect” is it skews the start of the next expiry, or at least can do.
And, this is exactly what has happened here, as it has forced the Dec expiry to start in R3 ratio.
There is no doubt at all that it doesn’t want to be battling this many futures this early on, and this now places derivatives firmly against equities.
Equities love the Thanksgiving rally, but in derivatives, when every step is met with an R3 level of dynamic delta, it’s not so easy.
You have to be really bullish to want to buy that many futures.
The fact that the ratios are significantly underdeveloped, reveals that people are not so convinced, after all, and not that long ago, it was extremely rare to see any Y ratio at all in one of the big expiries, and definitely not the biggest of the big.
Will equities allow for any pullback before, or even after, the 28th?
We doubt it, entirely because they haven’t in the past, and this scenario is no stranger.
But this is one weird Presidency, where every day something’s new, so when we say the above, we do so with a conviction ratio in the low teens.
Obviously, 3105 and 3155 are incredibly significant levels, and the first one to break will tell you all you will need to know about the conviction and desire in this market.
However, please do bear in mind, that the corresponding R3 ratio level is way down there at 2845, and if players were truly bullish then these ratios would be climbing, as would the zone itself.
Both may well do so, but also don’t forget how thin the US markets get next week, and are therefore notoriously volatile, as well as somewhat gung-ho.
Obviously, we are bearish, but in light of where we are in the calendar, a reappraisal post the holidays is the sensible suggestion.
Nb. Our comment from the 11/11/19 (Dec not published)
However, we should point out that the November expiry was full of incident.
On the Thursday the market had bounced off the zone’s upper boundary during the day with the intraday low of 7296.24.
Desperate to get back within its zone for the expiry for us it was no coincidence that the real time close was 7301.82.
Then the closing auction took over, resulting in the published close of 7292.76.
Which was also the new low for the day.
The expiry was just as challenging, but the end result was 7298.82.
Range: 7300 to 7400
Activity: Poor
Type: Bearish
Nb. Our comment on 11/18/19
However, for the last two weeks London has been exhibiting some strange characteristics, although not never seen before, they are normally very rare and occur singly, not daily.
What we are referring to is the situation where the open is also the same as either that day’s high or low.
This is made all the more peculiar when one appreciates that in London, and only London, the open is the same as the previous day’s close.
So, on Monday the 4th the open was 7302.42 and that day’s intraday low was 7302.42.
Tuesday it was 7369.69 and 7369.61.
Just a normal day on that Wed, then 7396.65 and 7396.00 and on Fri 7406.41 with the high 7406.83.
Then similar for the first four days of last week.
The significance of this is that the next day’s open is never going to be exactly the same as the previous day’s close, the reason why only London chooses to adopt this is a mystery.
When the open is the same as either the high or the low means that the market only went in one direction, and that therefore the opening price was never a real one.
Therefore, when you see a differential of 0.08, see Tues 5th, and you know the open is fictional, then this differential is impossible.
Therefore, the only conclusion possible, is that two of that day’s benchmark index markers are false.
If this is the case, and how can’t it be, then this pulls into question every valuation or calculation that uses them, especially trading systems, HFT’s and technical analysis, to mention but a few.
Looking at the ratio table for Dec the big level is obviously going to be 7450.
The other main issues are that while the zone is way below the market now, it is odds on that it will move in the next day or so to either 7150-7250, or 7250-7350.
Obviously which one it moves to will change the overall picture considerably.
Exactly as we said back on the 5th “and they could just continue knocking on a retreating R2 ratio door for sure”.
The intraday high on the 5th, when R2 was at 3080, was 3083.95.
On the 6th it was 3078.34.
Yesterday, when R2 had moved to 3095, the intraday high was 3097.77.
And, as you can see in the table above, today it is at 3100.
However, there are two huge facts you now need to bear in mind.
Firstly, it is the rollover next week and the zone remains stubbornly at 2995-3005.
Secondly, R1 has slipped to 3075, so a close anywhere below that, and this index is back into the Y ratios.
Of course, the ratios retreating above the zone and building below it are bullish, but one also has to be aware of the rate of change of these ratios.
And above the zone they are retreating, but hardly rapidly.
Whereas, below the zone, R1 climbing to 2935, is hardly going to excite anyone.
Scalp away on the pullbacks from the retreating R2 for sure, but, and again, just as we said back on the 5th “that if it really gets a fright, the corresponding R ratios are now 180-points away”, although admittedly the gap is “only” now 150-points, but that is to R1, to R2 it is actually 190-points.
This expiry is very far from over.
Range: 3075 to 3100
Activity: Moderate
Type: On balance bearish
Nb. Our comment on 11/14/19
Luckily for the SPX it never got its scare, so it just kept on knocking at that retreating R ratio door.
Made for a particularly tedious market, as on Monday 4th November it closed at 3078.27, so in virtually two weeks it has gone nowhere.
Mind you, the bulls would argue, that is a lot better than going back below 3000, which was a very real threat.
Although, a while back, we did mention the “Thanksgiving effect” and it is absolutely amazing how often the US indices hit new highs at this very time of year, magically all those aspects that people like to think drive markets, such as economics, results, technical and all that “fundamental” stuff combine at this exact point in time year after year, truly a wonder of Christmas.
Back in the real world, this rollover and expiry is definitely one for equities, and all-in-all derivatives have been bit of a no show.
Of course, they have played their part, the intraday high of 3102.61 on Tuesday, when R2 was at 3105, being the perfect case in point.
In the end, although granted it doesn’t appear in the table above, it is the derivatives that have given way, and the zone will move to 3070-3080, such has been the rate of change.
Whether that will impact come Friday, we doubt it, as for us, this lethargic derivative market, seems more than happy to see this index end Nov in Y ratios.
Don’t forget, December is the biggest of the big expiries, so everything just gets ratcheted up very considerably.
We have said it before that the ratios need to be calculated daily, and as they are not, you must be very aware that they do evolve.
Thankfully, in the FTSE case, this has not been very much.
Last Monday, the 28th October, the intraday high was 7346.92, making this the second test of R1 at 7350.
This basically dictated the rest of the week, along with the upper boundary of the zone at 7300.
Therefore, it was no surprise yesterday’s third test saw it break through, and the fact the ratios have weakened above the zone only going to make this more likely.
7350 is still R1 admittedly, but it is now only just above the threshold, so we would fully expect that to become Y2 shortly, leaving 7400 as R1.
However, the real test will be 7450, as this has remained as R3, so this is now towering above R1.
And judging by how difficult this index has found R1, we just can’t see it making any headway at all against the hugely bigger R3.
Finally, don’t forget next week is the rollover, so it could start getting quite animated towards the end of the week, and below the zone the ratio has hardly strengthened, so it’s still sitting atop a chasm this market.
Range: 7350 to 7450
Activity: Moderate
Type: Bearish
Nb. Our comment on 11/11/19
Last Monday the FTSE closed at 7369, and on Friday, 7359, so what an exciting week that was.
Although, for us at least, it was all according to expectation, and as you can see above, our trading range was indeed 7350 up to 7450.
7350 came into play three times, with intraday lows on the 5th, 6th and 8th of 7369.61, 7363.55 and 7349.12 respectively.
7450 came into play only the once, and you’ve guessed it, on the 7th, with the intraday high of 7431.94.
Sure it’s 18-points shy of the exact figure, but from the intraday low the day before of 7363.55, the fact it is a seven thousand point index, and as we expressly pointed out in our last comment, that 7450 was a huge jump in ratio, to the massive R3, then this is easily close enough to call a hit.
Of course, it is the rollover and expiry this week, so the zone, still steady at 7200 to 7300, will now come into play.
But probably more importantly, 7350 has now changed to Y2.
This has resulted in 7400 assuming the R1 role, otherwise the ratios are unchanged above the zone.
The most significant consequence of this is the change in our trading range, please see below.
It still has its work cut out for it, to get back to their zone, but this has just made this an awful lot easier.
When we last commented on the SPX (28th Oct) it was all about R1, then at 3045.
And, blowing our own trumpet unashamedly, the next 4 intraday highs were 3044.08, 3047.87, 3050.10 and 3046.90.
Friday saw the deadlock broken, and very interestingly, it took a gap-up at the open, to 3050.72, to achieve what they had struggled to all week.
Of course, once the dam had broken, it was always going to then be about R2.
Back on the 28th this was at 3070, whereas today it is 3080, and although we now have no way of knowing exactly when it did change, we suspect slipping 10-points over Friday and Monday looks about just right.
So, the point being, is although the ratios are slipping above the zone, this index is now battling R2 ratio from here on up.
Don’t forget the rollover starts next week, so the gravitational effect of the zone will come to bear towards the end of this week.
Furthermore, the ratios below the zone have not built to any great degree, and in fact, with R1 static at 2895, the huge, no enormous, Y ratio bandwidth, with its inherent risk, remains in place.
It is timidly making all the right moves, for the bulls anyhow, and they could just continue knocking on a retreating R2 ratio door for sure, but whatever you do, don’t lose sight of the fact that the zone remains at 2995-3005, and the rollover is now just over a week away, and, that if it really gets a fright, the corresponding R ratios are now 180-points away.
Range: 3055 to 3080 or 3080 to 3130
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment on 11/08/19
Exactly as we said back on the 5th “and they could just continue knocking on a retreating R2 ratio door for sure”.
The intraday high on the 5th, when R2 was at 3080, was 3083.95.
On the 6th it was 3078.34.
Yesterday, when R2 had moved to 3095, the intraday high was 3097.77.
And, as you can see in the table above, today it is at 3100.
However, there are two huge facts you now need to bear in mind.
Firstly, it is the rollover next week and the zone remains stubbornly at 2995-3005.
Secondly, R1 has slipped to 3075, so a close anywhere below that, and this index is back into the Y ratios.
Of course, the ratios retreating above the zone and building below it are bullish, but one also has to be aware of the rate of change of these ratios.
And above the zone they are retreating, but hardly rapidly.
Whereas, below the zone, R1 climbing to 2935, is hardly going to excite anyone.
Scalp away on the pullbacks from the retreating R2 for sure, but, and again, just as we said back on the 5th “that if it really gets a fright, the corresponding R ratios are now 180-points away”, although admittedly the gap is “only” now 150-points, but that is to R1, to R2 it is actually 190-points.
It looks like we are going to get our wish of this index testing its R ratios above the zone.
However, what we should have mentioned on the 22nd, was that the Delta Ratio here was just 33%
And, today, it has hardly changed, being 33.7%, and anything below 50% we see as bullish.
Hence, our wish to see a test of the R ratio, still at 3045.
In fact, the ratios above the zone have strengthened, most notably R3 which has come in from 3125 to 3105.
More noticeable though, is the utter lack of movement below the zone.
However, the first real test of the bullish commitment will come with R1 at 3045, and then at 3070.
Although, we would like to point out, that there is a step-up in the ratios at 3055, as this is where they switch to being close to the top of the R1 band, rather than being at the bottom.
Of course, please don’t forget the corresponding R1 ratio level does not appear until you get all the way down to 2895.
Looks like the Nov expiry is just getting started.
Range: 3005 to 3045
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment on 11/05/19
When we last commented on the SPX (28th Oct) it was all about R1, then at 3045.
And, blowing our own trumpet unashamedly, the next 4 intraday highs were 3044.08, 3047.87, 3050.10 and 3046.90.
Friday saw the deadlock broken, and very interestingly, it took a gap-up at the open, to 3050.72, to achieve what they had struggled to all week.
Of course, once the dam had broken, it was always going to then be about R2.
Back on the 28th this was at 3070, whereas today it is 3080, and although we now have no way of knowing exactly when it did change, we suspect slipping 10-points over Friday and Monday looks about just right.
So, the point being, is although the ratios are slipping above the zone, this index is now battling R2 ratio from here on up.
Don’t forget the rollover starts next week, so the gravitational effect of the zone will come to bear towards the end of this week.
Furthermore, the ratios below the zone have not built to any great degree, and in fact, with R1 static at 2895, the huge, no enormous, Y ratio bandwidth, with its inherent risk, remains in place.
It is timidly making all the right moves, for the bulls anyhow, and they could just continue knocking on a retreating R2 ratio door for sure, but whatever you do, don’t lose sight of the fact that the zone remains at 2995-3005, and the rollover is now just over a week away, and, that if it really gets a fright, the corresponding R ratios are now 180-points away.
If the last week of the November expiry was all about the zone, then this has transferred across to the October expiry in its first week.
On the very first day, Monday 21st, the intraday high was 7197.53, providing the first test of the zones bottom boundary at 7200.
The next day saw the market close at 7212.49, after what was a good tussle with it throughout the day.
Wednesday saw a retest of it, confirmation if you like, with the intraday low of 7194.13.
And Thursday saw it blast through the upper boundary, which is rather aggressive of the FTSE to say the least.
Therefore, it is prudent to mention how the ratios have evolved this week, and while we have seen a little strength below the zone, with R1 replacing Y2 at 7050, this still leaves a scary 150-points of Y1.
Above the zone, 7300 has moved up from Y1 to Y2, and 7350 from Y2 to R1, meaning 7400 has gone from R1 to R2.
At the start of an expiry there is a natural tendency to build, so it’s more about the degree, and there is no contest over the fact that resistance wins.
The big question is whether the intraday high yesterday of 7338.87 was a test of R1?
Only 0.15%, so it’s a tough call.
But, at the end of the day, it is all down to your tolerance, and as things stand the FTSE is now facing R1, R2 & R3 in quick succession, with nothing below it until 7050.
There are no prizes for guessing our stance, and at the very least, everyone else should have very tight stops.
Range: 7200 to 7300 or 7300 to 7350
Activity: Very good
Type: On balance just fractionally bullish
Nb. Our comment on 11/05/19
We have said it before that the ratios need to be calculated daily, and as they are not, you must be very aware that they do evolve.
Thankfully, in the FTSE case, this has not been very much.
Last Monday, the 28th October, the intraday high was 7346.92, making this the second test of R1 at 7350.
This basically dictated the rest of the week, along with the upper boundary of the zone at 7300.
Therefore, it was no surprise yesterday’s third test saw it break through, and the fact the ratios have weakened above the zone only going to make this more likely.
7350 is still R1 admittedly, but it is now only just above the threshold, so we would fully expect that to become Y2 shortly, leaving 7400 as R1.
However, the real test will be 7450, as this has remained as R3, so this is now towering above R1.
And judging by how difficult this index has found R1, we just can’t see it making any headway at all against the hugely bigger R3.
Finally, don’t forget next week is the rollover, so it could start getting quite animated towards the end of the week, and below the zone the ratio has hardly strengthened, so it’s still sitting atop a chasm this market.
