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December 5th, 2018 by Richard
SPX , NDX & DJX Ratio Table 5th December 2018
Not exactly what we expected in the SPX but with so much Y ratio about we are certainly not surprised.
Although, perhaps a bit by the speed of it all, which now makes this expiry a week ahead of schedule.
As we have said so many times before the perfect expiry is when an index moves towards the R ratios (either up or down), interacts and reverses course, then proceeds to interact with the corresponding one on the other side of the zone before finishing in said zone on the rollover.
Of course, this trip we have hit R3 at the start, and now we have hit R1, the difference is that it has taken a week to do what should have taken two.
On Monday the intraday high was 2800.18, which is a few points shy of R1 at 2805 admittedly, but considering this index in just two days was up 64-points then the Vega alone makes this a hit.
But when you consider it had actually travelled 170-points from the intraday expiry low then 4-points is nothing.
All this is made all the more normal because the zone still can’t decide where it wants to be, stopping either side from developing.
Which means this huge Y ratio bandwidth has been virtually unchanged throughout this expiry, so as we said way way back in the rollover (14th Nov) what else would you expect to happen?
Range: 2670 to 2805
Activity Poor
Type: On balance bullish
Goodness only knows what they are trying to achieve in the NDX, perhaps they might have succeeded and this volatility is exactly what they want?
On top of the changes last time, which we referred to “as a major systems overhaul” they have reverted to type and added another whole swathe of what we consider totally unnecessary strikes.
The upshot is that the zone here has reverted to 7075-7125, but really it should have remained unchanged at 6775-6825.
Had it done so, then all three would be back within their respective zones.
We think that is exactly where they want to be, but it’s just the DJX that has achieved it, on the face of it at least.
The SPX because it is so slow to change, the NDX because it’s not so much the goal posts but rather the playing field that’s shifted.
Again, to repeat, this constant tinkering means the zone can’t settle, therefore the ratios can’t develop, and the end result is a colossal Y ratio bandwidth leading to markets that use them in their entirety.
You may or may not enjoy this volatility, but hopefully at least you expected it and know the reasons behind it ably aided and abetted by the politicos fuelling the fire.
Range: 6625 to 7075
Activity: Poor
Type: Neutral
What else can you say about the DJX being back in its zone, apart from perhaps had, or if, the SPX’s zone moved to 2695-2705, as anticipated, then both these indices would now be in their respective zones.
Coincidence, or not.
Basically, exactly the same as what we say above, there is so much Y ratio about what else would you expect?
The big question is whether or not, now it is way ahead of schedule, it will pause for breath in its zone?
The other aspect to consider is the change in the ratio at 23900, which jumps a level, but is witness to an increase in the ratios below the zone, which only strengthens R1 at 24200, and considering the expiry intraday low is 24268 this may be pertinent.
Range: 23900 to 24900
Activity: Very good
Type: On balance decidedly bearish
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December 3rd, 2018 by Richard
FTSE & DAX Ratio Table 3rd December 2018
If you had read what we have been saying so far this expiry then everything the FTSE did last week was totally in keeping and as expected.
The zone should be 6950-7050, and the only surprise is that this is not reflected in the above table, but, again, activity is pitiful.
The unsurprising facts are that the FTSE has traded between 6950 and 7050 all week, especially 7050, which has been the limiting factor all week.
Considering the DJX has added almost 1300-points last week makes this hurdle at 7050 all the more impressive, as in reply to the Street’s 5% gain London has actually lost 60-points.
However, all is not lost, as on Friday the high was 7042.07 and the low was 6965.60, and although not exactly on the nose it is easily close enough considering the past five trading days to call this a zone bandwidth test, so a breakout is very likely.
Having just said that, on Monday 26th November the intraday low was 6952.86 and the high 7050.96, so it’s not the first zone bandwidth test, which is also why we allow a degree of latitude, but also why a breakout is not a given.
It should, and let’s face it 7050 has been sternly tested on every day last week and three times the week before, so it is way past our strike 3 rule.
Range: 6950 to 7150
Activity: Very poor
Type: Bullish
When we last looked at the DAX on the 26th November 11250 was R3 and we pointed out that that was far less a hurdle than 11050 was being DR.
And, right on cue, that very day it gapped up at the open by 123-points, but more importantly above 11250, to 11315.
The following three days the intraday lows were 11264, 11279 and 11275.
As you can see in the above table R3 has now receded to 11150, but really the most important aspect is the appearance of a lot of Y ratio.
This, now makes 11350 as a very significant level.
If it can get over this then it is into the minimal Y ratios, which stretch all the way up to 11850, so buckle up.
Range: 11150 to 11350
Activity: Very poor
Type: Bullish
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November 29th, 2018 by Richard
SPX , NDX & DJX Ratio Table 29th November 2018
It was such a huge day in every respect for the US indices yesterday we thought you might like an update.
Therefore, above is today’s ratio table, but rather than go through each individually we thought it best to do them all together.
One major point to note was the major systems overhaul, mainly on the NDX, but really across the board.
There was, and still is, a slight hiccup in the SPX, but if other people’s systems were not fully switched over then any algo trading would have had an interesting time of it, and let’s face it, where derivatives are concerned what other sort of trading is there?
So, coincidence the big rise or not, who knows.
Basically, all three hit their zones bottom boundary’s early on, causing the first pause.
For the DJX this was at 24900, the NDX at 6775 and the SPX at 2695, which we know is just Y2 in the table but as we have been saying for quite a while now 2695-2705 is very likely the next level.
Ironically, the high in the SPX yesterday was 2744, which is a test of the current zones bottom boundary.
And, yes, where ratios are concerned it does work like that.
Which just goes to highlight for the SPX the absolute minimum ratio between where the zone is and where it should be, so no real surprise that this move happened.
Likewise, for both the DJX and NDX, once over their bottom boundary’s one had 200-points of zero ratio above it and the other 50-points, and being slipstreamed by the SPX, again no surprise.
Furthermore, all three are rather devoid of meaningful ratio above their zones as things stand.
Trading range is the zone bandwidth the respective markets are in.
Finally, it seems a very long time ago all three were hitting the R ratios going southwards and we were saying to take note of how much there was of little or no ratio above them, so it may seem exciting but really it is all as normal and predictable as pie.
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November 27th, 2018 by Richard
SPX , NDX & DJX Ratio Table 27th November 2018
For the poor old SPX, it is beginning to look like death by a thousand cuts as it is taking so long to adjust.
In its defence it has just had Thanksgiving and a half day Friday, so we are not worried yet as the zone has at least started to move and, more importantly, under these circumstances, activity is far higher than we would have expected.
Don’t forget just how massive this expiry is, so producing a level anywhere above “poor” is going some the benchmark is already so high.
We still anticipate the zone moving to 2695-2705, and quite frankly, the sooner the better, as already the ratios below this level are being undermined, but it does make for soggy support levels, which is not good for trading.
Case in point, on Wednesday R2 was at 2670 and the intraday low was 2670.73, but today it is standing at 2645.
This means the low (2631.09) on the half day Friday was way below this level, but on the return to more normal market conditions on Monday the open was 2649.97 which was also the low.
So, R2 is having an effect, it’s just a question of how far can one trust it?
Our answer to that lies with the other indices, as we think its just about enough on its own, but to be really effective it needs a friend.
Range: 2645 to 2695
Activity Moderate
Type: On balance bearish
The NDX is probably the most normal of the three, although rather ironically it started this expiry in the most abnormal position.
However, it has strived to extricate itself and in doing so today we see that the zone has moved again, this time to 6775-6825.
Nevertheless, this is a lot better than where it was back during the rollover, which was a rather staggering 500-points higher.
The good news here was that on Tuesday the intraday low was 6442.36 which was a robust test of R1 then at 6475, and despite the other two on Friday either revisiting their lows or making a new one, here the low was 6524.55.
Although, the NDX has now achieved a more natural looking expiry, there can be no disguising that the Y1 ratio bandwidth alone still stretches for 700-points, so the volatility is very far from being over.
Range: 6500 to 6775
Activity: Moderate
Type: Neutral
The DJX is a funny one this expiry, or to be more precise one we suspect we need to calculate the ratios daily to even stand a chance of analysing it.
On the surface, nothing has changed, but just like a swan, there is an awful lot going on under the surface.
If the SPX’s was impressive activity then here even more so, which underlines the peculiarity of the situation as the ratios are unchanged.
Although, 23900 is only fractionally below the threshold of R3.
And, 24300 to 24600 has started to look like it might just be making a play to being the next zone, but still very early days.
However, our main point of interest was this index’s flight down to its zone on the very first day of this expiry, managing an impressive 100-point bounce off its bottom boundary just to highlight this.
Then, the 400-point opening gap down on the Tuesday changed the whole picture, on top of which the holidays have muddied the waters even further, but we can’t help get the feeling that the DJX really wants the safety and comfort of its zone, but whether the huge recent activity is going to achieve this, or has other anticipations, it is just too early to tell.
Range: 23900 to 24900
Activity: Very good
Type: On balance decidedly bearish
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November 26th, 2018 by Richard
FTSE & DAX Ratio Table 26th Nov 2018
Basically, the last two days in the FTSE are exactly in keeping with what we highlighted in our last comment last Thursday, the 22nd; “As you can see 6950 is now DR, which also hides the threat that 6950-7050 may become the next zone.
This highlights one of the problems with such a massive expiry, as the shoulders either side of the existing zone are so large, they can mask any potential move, and if it does happen this also means it can be rather dramatic.
To us this is also why this index finished at 7050.23, which would be the new zones upper boundary of course”
Now, as you can see from the table above, the zone still hasn’t moved, but it is still very likely to, especially now for two main reasons.
First, the “extra” week is up and we are now into the more normal 4-week timetable.
Secondly, activity was virtually non-existent, and only just managed to achieve the lowest possible level, and this can’t continue much longer.
The market knows what is waiting for it at 6900, and the close at 6952.86 we don’t see as a coincidence, so if the zone does change, and it is acting as if it already has to us, then it is clear up to 7050.
Range: 6950 to 7150
Activity: Very poor
Type: Bullish
For the DAX there has been no problem with its zone, and as we commented last time; “The big question here is also the zone, but here it is trapped a lot higher up.
However, the appearance of 500-points of Y ratio means it will move, and one has to assume to 11450-11550”.
Furthermore, it is just the zone that has moved as around it the ratios are virtually unchanged, despite the impressive level of activity.
The most obvious is the Y ratio bandwidth now flips to above the new zone, but below it the only ratio to change is DR which has slipped from 11150 to 11050.
However, as this has only just occurred, and is therefore just below the threshold, it still represents a considerable “step-up” in the level of ratio, so it will definitely still cause issues with its dynamic delta affect.
But, at the end of the day, 11250 is still the main problem as is what is happening in the US.
However, given a clean run, 11250 is far less a hurdle than 11050 is in the other direction.
Range: 11050 to 11250
Activity: Good
Type: On balance bullish
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November 22nd, 2018 by Richard
FTSE & DAX Ratio Table 22nd November 2018
Well we sincerely hope you were not caught out by the bounce in the FTSE, which was always on the cards after it had tangled with B1 at 6950 yesterday, and was in our rollover table 8 trading days ago.
On which subject, the intraday low of 6904.21 on Tuesday does not do justice to B1, which held the line until the Street opened down 400-points causing the spike down.
As you can see 6950 is now DR, which also hides the threat that 6950-7050 may become the next zone.
This highlights one of the problems with such a massive expiry, as the shoulders either side of the existing zone are so large, they can mask any potential move, and if it does happen this also means it can be rather dramatic.
To us this is also why this index finished at 7050.23, which would be the new zones upper boundary of course.
What happens next is really all down to whether or not the zone changes, as this will change the entire dynamic.
So much so, without even hardly moving, the FTSE could find itself back in bullish territory for example.
At least B1 has established the level of sensitivity, and which is quite normal for the mighty Dec, so for this expiry 6950 (already seen) to 7550 is possible.
Range: 6950 to 7150
Activity: Poor
Type: On balance only just fractionally bearish
The waters are a bit muddier where the DAX is concerned, as back on the 13th in our rollover table B1 was standing at 11150.
11150 was an important level on Tuesday, but as you can see above B1 is now 10950, so at a guess it was probably 11050 on the 20th.
Anyway, it must have been there or thereabouts as the intraday low was 11009 and the close 11066.
The big question here is also the zone, but here it is trapped a lot higher up.
However, the appearance of 500-points of Y ratio means it will move, and one has to assume to 11450-11550.
Irrespective of this it is very significant that the ratios only go as high as R2 above the zone, so no corresponding B ratio, which makes this index exactly the same as in our rollover table, terribly lopsided.
So, the only question is whether this bounce off B1 is going to provide enough momentum, so it might be prudent to also bear in mind where the US indices are in relation to their ratio levels as that market probably presents the greatest risk to this market.
Range: 10950 to 11250 or 11250 to 11950
Activity: Moderate
Type: On balance bullish
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November 20th, 2018 by Richard
SPX , NDX & DJX Ratio Table 20th Nov 2018
The mighty Dec expiry never disappoints, and this is only day 1 of a five week long one.
The SPX has hit its R ratios, with a degree of overshoot, and we are really very unconcerned with that as the momentum built up would always make the small line in the sand that is R1 like trying to stop a stampeding bull, or bear in this instance.
Also, it was not only day 1 but with the zone stuck up at 2795-2805 this needs to adjust, and quickly too, as that will always undermine the support levels until it does.
It is obviously trying, hence the weird and rather unique situation of having 100-points of Y1 ratio below the zone.
In any triple, let alone the biggest of them all, we would not be surprised to see no ratio at all, so with so much below, and even some above, it just reveals how thin it is out there, so unless the DJX’s zone rescues matters it could remain exceedingly volatile.
Range: 2670 to 2695 or 2695 to 2795
Activity Moderate
Type: Neutral
The main problem with the NDX was that from the close of play on Friday it was always going to start the Dec expiry in an awkward or bearish position.
However, in our note we did “expect the dynamic delta to kick in” as when we wrote that R1 was standing at 6670.
But in distinct parallels with the SPX, where the zone hasn’t moved, here it has, but the undermining of the ratios in doing so is all too apparent to see.
As you can see the zone is now 7075-7125, a bit too little too late really, but more importantly R1 has slipped to 6475, a massive drop.
When one considers how high the activity is, and especially the type, then this collapse is even stranger.
Considering Y2 is now 6625 which this index is now only just above, then R1 is its last line of support, not to scare you unduly.
In yet another of those coincidences in may be worth noting that yesterday’s intraday low was in fact 6623.37.
And R1 may be so here, but as the SPX is now into their R ratios, they might just give each other a crumb of comfort.
Range: 6625 to 7075 or 6475 to 6625
Activity: Outstanding
Type: On balance bearish
To be fair if it wasn’t for Apple and Facebook, we doubt the DJX would have moved so quickly on the very first day of the new expiry.
But, the fact that it did, hit the intraday low of 24900, which is also their zones bottom boundary, before bouncing and finishing virtually dead centre of said zone could just be coincidence.
However, we did publish the ratio table with these very levels last week, and today Dec does become the alpha expiry, so at the very least it has to be a very high odds call.
There is not much we can add to the table above, obviously the zone is now critical, but any breach and there is a very long way to go before this index encounters the next level of ratio.
Range: 24900 to 25100
Activity: Moderate
Type: Bearish
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November 16th, 2018 by Richard
NDX Nov to Dec Ratio Rollover Table 16th Nov 2018
Just as suspected the big players haven’t surfaced here in the NDX, but also, they have stopped adding strikes, although having done so ad nauseam there was little space left to cram anymore in.
Our last comment had seen this index bounce off R1 at 6650 and back into its zone, which was then at 7175-7225, in what was a rather stellar recovery.
However, our very words were “so still a stupid amount of Y ratio bandwidth” referring to the 400-points of Y1 remaining below the zone, and although the zone itself has shifted southwards this bandwidth is still 350-points wide.
Furthermore, it is only just Y1, and as the step-up level doesn’t appear until 6775, we don’t think that should this index expire anywhere between this level and 7225 nobody is going to hurt that much.
Well, perhaps almost as much as noticing a fly landing on your arm.
Range: 6725 / (6775) to 7075
Activity: Moderate
Type: Neutral
Now the Dec expiry is a different matter, as the Y1 ratio in evidence here is at the other end of the scale, so rather than just registering it is actually just below the threshold of Y2.
This means that the zone, which is already a very long way above the market will find it a lot harder to move, and if it doesn’t is actually very bullish.
On top of which the market is already deeply in the Y2 ratio bandwidth (6670 to 7075), which is also bullish, so really when this becomes the alpha expiry on Monday it will just be a case of tolerance, as every point below here will result in futures buying courtesy of the dynamic delta.
Furthermore, the Y2 ratio from 6825 and below is just below the R1 threshold, so expect a lively start.
Range: 6670 / (6825) to 7075
Activity: Average
Type: Neutral
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November 15th, 2018 by Richard
DJX Nov to Dec Ratio Rollover Table 15th Nov 2018
The DJX Nov expiry continues to write the record books, but for better or worse we just don’t know.
The knee-jerk reaction is always that something different is bad, so even trying to avoid this preconception we are still left with a real sense of unease at all this, mainly due to the unnaturalness of it all.
Anyway, as one of the biggest expiry’s by sheer volume, especially so as it is just an intermediary, and yet one of the smallest by number of strikes, it is now the proud owner of another record, that of having the widest ever zone.
2000-points is crazy, but as we say we just interpret what the numbers say, so the zone is what the zone is, and never having seen this before any conclusion as to what it might mean is as valid as ours.
Explains the 2% daily moves though, whether it is end of day or the trading range, and, in fact, under these circumstances that is very tame as it could as easily be 3% to 5% or more.
Range: 24500 to 26500
Activity: Very poor
Type: Not bearish
Now, normally the “mighty” Dec would tower over all those that came before it, but as things stand at the moment it is cowering in the shadow of Nov, being less than 30%.
To put this into perspective the SPX Dec expiry is already twice the size of Nov, and don’t forget one hasn’t even started being the alpha, whereas the other is coming to the end of being it, which of course significantly affects activity.
However, it is nice to see the return of the more normal 200-point zone, but as this has been the standard for ever, now this index is way past the 20000 mark, maybe a zone of less than 1% is the new unnatural aspect?
Range: 24900 to 25100
Activity: Average
Type: Neutral
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November 14th, 2018 by Richard
SPX Nov to Dec Ratio Rollover Table 14th Nov 2018
The point of looking at the rollover, here the SPX, is not to say what will happen but rather what is possible, and if you had heeded what we said at this stage regarding the November expiry you should be feeling quite comfortable now.
And, just to prove a point, what we said regarding the zone in our last comment, as you can see in the table above, has happened.
Although, admittedly, we said anywhere down to and including 2700, it seems to have settled on 2745-2755, at least for now, which as it’s the rollover, good as.
If it does manage to spend the rollover, i.e. today, in or around this zone then we could be in for a fantastic grand finale over the next two “grey area” days.
But, please bear in mind that there is still an absolutely staggering 110-points of Y1 ratio bandwidth in play, so it wouldn’t take much at all to set this market off.
Nevertheless, after hitting DR at 2595 with the intraday and expiry low of 2603.54, to even be in with a shout of its zone on this specific day is awesome.
Range: 2695 to 2745
Activity: Moderate
Type: On balance just fractionally bearish
We don’t call it the mighty Dec for nothing, and we will check, but by sheer volume this looks like the biggest expiry ever, and probably by a long way, especially considering how early it is.
Therefore, it is simply amazing that the ratios only go as high as DR and that there is 135-points of Y ratio bandwidth.
The most immediate aspect to note is that the zone is at 2795-2805, probably a hangover, as to get this index to move it is not just like turning an oil tanker, but rather one towing an oil rig into the bargain, so it may yet dovetail with Nov.
However, if it doesn’t it will be fun from the off.
Range: 2695 to 2795
Activity: Average
Type: Neutral
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