Category: Uncategorized
October 12th, 2018 by Richard
SPX , NDX & DJX Ratio Table 12th Oct 2018
Memo to the next President: When you are in debt and need to borrow a lot more don’t piss off your Banker, and more importantly don’t start a trade war with them.
Having said that we would like to extend a sincere welcome back to normal markets.
Basically, the last couple of years have been in a vacuum of reality and under normal market conditions we would fully expect this, the SPX, or any other index to trade between the high R ratios.
Although, to be fair, we would not expect them to be so far apart, so what we have been seeing this year is a direct result of complacency borne of stale bulls.
Does make it exciting though, and it has certainly stimulated activity, and now we are back to a trader’s market the ratios are in the table above.
However, the dynamic delta produced is a direct consequence of activity, so in fast markets you will get rapidly changing ratios.
Nevertheless, it is going to be one humdinger of a rollover and expiry next week for sure.
Range: 2715 to 2745
Activity Average
Type: Neutral
In our opinion the NDX deserves exactly what it gets.
Sadly, however, no sign of any of the big players wading in this trip so they have come away unscathed.
But even under these conditions they continue to add strikes like they were going out of fashion, why defeats us as we can’t see anybody needing over 300 of them on an index that is just 7000-points, truly bizarre.
If they stimulated activity then fair enough, but as the ratios haven’t changed at all and they only go as high as R1 then the answer is clearly no they haven’t.
Perhaps it may be worth considering that the lack of activity in what can only be described as perfect markets for derivatives is because of all this….
Range: …. to 7175
Activity: Good
Type: On balance bearish
Exactly what we said above in the SPX is even more pertinent here in the DJX, which actually rather neatly exemplifies perfectly what we are saying.
Essentially it is all Y ratio, and don’t forget the 300-point wide zone.
We first saw this wide zone used when the upper boundary was at 27000 (intraday high 26951) and the very next day the trading range was 357, but more importantly it closed below the bottom boundary.
The zone then reverted back to where it was, and now is, but stayed at 300-points wide, making the bottom boundary 26500.
The Friday last week the close was 26447 and on Monday 8th it was 26486, both below the bottom boundary and both warnings.
But by now it had fallen two zone widths, or 600-points, and significantly the first R ratio didn’t appear until 25400, and the last two days tell their own story.
The astute may have noticed yesterday, when R2 here was at 25100, the intraday low was 25125 before it rallied all the way up to almost a plus 100-points, before ending worse of course.
But by its very actions it shows the bulls were biting, and reacting to the dynamic delta, so it may not be as bad as it seems.
However, at the end of the day, we can’t do anything about how wide the Y ratio bandwidth is here, or anywhere for that matter, so just enjoy the ride.
Range: 24400 to 25200 or 25200 to 26500
Activity: Moderate
Type: Bullish
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October 10th, 2018 by Richard
SPX , NDX & DJX Ratio Table 10th Oct 2018
The trouble in the SPX started last Thursday, with a fall of 41.59-points taking it below its zone.
However, the fact it closed back inside it meant that it was still clinging on.
So, the trouble may have started Thu, but it was Fri that put this index in trouble, with the close of 2885.57, below the bottom boundary.
It still had its chances, especially on Tuesday with the intraday high of 2894.83 knocking on the door of their zones bottom boundary asking to be let back in.
With that rejection, and just like Europe, it needs to find support, or in other words the R ratios, and they don’t now start until 2845, which it would be well worth noting is up from 2840, so a little bit of leeway may be necessary.
Range: 2845 to 2895
Activity Moderate
Type: On balance bearish
Again, what has happened in the NDX should have held no surprise, our last comment was “overall, especially under these circumstances, we would be bullish, but this time the lack of desire across all three does raise a significant concern, as no matter what the circumstances being so timid as to react to just Y2 makes it very susceptible to anyone, or anything, saying boo”.
This makes where the market is very significant indeed, as the ratios on both sides have continued to come in towards the zone, so now Y2 below the zone is at 7375.
It has come from 7325, and as we say below, we just don’t know when, however as Friday’s intraday low was 7327.44, so we have to suspect sometime this week.
Actually, it’s not just a significant level for trading, but as this market was so unceremoniously slapped back from Y2 at 7700 with the intraday high of 7700.56, which is also currently the expiry high, then if Y2 holds below the zone it will give this index a shot at getting back to its zone for the rollover and a perfect expiry.
It is very emotive out there though, and Monday’s low was 7267.02, so it might need a friend, which judging by the table above would mean the SPX and their R1.
Range: 7200 to 7375 OR 7375 to 7475
Activity: Average
Type: On balance just fractionally bearish
To be honest what has happened recently should have come as no surprise had one been following the DJX’s ratios this trip.
From “it is no wonder this index is making all the large moves, and there certainly isn’t any ratio around to change that at the moment” is one example from our last comment.
At that time the top of the zone was 27000 and the intraday high, and high so far this expiry, is 26951, and as we said then that left it with 300-points of no ratio below it.
Unlike the SPX on last Thursday this index did not regain its zone, finishing at 26627, having been down 357-points.
As you can see the zone is still 300-points wide, but has also now reverted back to its old level, albeit a lot wider.
Sadly, we do not compile these ratios every day anymore, so we don’t know exactly when this change actually occurred, but it does now make 26500 a very significant level, and the last two days intraday highs have been 26529 and 26539, so we guess it was Monday.
As we said from the last rollover that this lack of ratio here could always end up resulting in markets such as this, and like last time, no change there.
Range: 25900 to 26500
Activity: Average
Type: Bullish
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October 9th, 2018 by Richard
FTSE & DAX Ratio Table 9th Oct 2018
And we didn’t have to wait for very long in the FTSE as the day after our last comment it broke their zones bottom boundary.
Sadly, this of course meant an end to the 100-point trading range that had been in force for the previous two weeks, but the low and close on that Thursday 4th Oct really did not do justice to the titanic battle that this index had with 7450.
But, once broken, that was the writing on the wall, and although 7350 was, and still is R1, it is barely above the threshold, so at best a very weak R1.
The real test was yesterday, at R2, and the market did bounce 15 to 20-points after its initial encounter, but once that failed and it was tested for just the second time it crumbled.
This is not good news for the bulls as that was rather pathetic for R2, which really should have put up much more of a fight.
Next up is R3 at 7150, and as this is an intermediary expiry we are now getting into some serious ratio, so hopefully it will put up a bit more of a battle.
Range: 7150 to 7250
Activity: Very poor
Type: On balance bearish
The change in the DAX ratio table above looks a lot more dramatic than they actually are.
As essentially all that has happened is R1 has become Y2.
There are two ramifications of this, and the first and most important is that it makes R2 at 11950 a very significant level.
Secondly, it means that the Y ratio bandwidth below the zone is now a very impressive 400-points wide.
So, if R2 holds then the rebound could be more spectacular than the fall, so the open today is going to be critical.
It is a very close call, and just 3-points on a 12000-point index is virtually insignificant, but it really does not leave any room for error.
At least here it put up a decent fight.
All in all, it is looking like it is going to be a very exciting rollover and expiry next week.
Range: 11700 to 11950 or 11950 to 12350
Activity: Poor
Type: On balance definitely bullish
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October 4th, 2018 by Richard
SPX , NDX & DJX Ratio Table 4th October 2018
It is bit of a slow-grind in the SPX at the moment, and it doesn’t seem to be coping particularly well with even the lowly Y2 ratio.
On Monday it looked to us the wind was taken out of its sails by both the DJX and NDX, of which more below, and then on Tuesday the intraday high was 2931.42 and although a bit better yesterday it still finished below it.
However, the ratios continue to climb below the zone, bullish, and recede above it, also bullish, so it’s just a question of getting the desire.
Activity remains low, and as this is an intermediary expiry that does mean low, so until that perks up we can’t see things change dramatically here, although it is crying out to test R1 and stimulate something.
Range: 2905 to 2955
Activity Poor
Type: On balance bearish
The NDX has similarities with both the SPX (above) and the DJX (below).
The most striking of which was their own encounter with Y2, then at 7700, on Monday, although here the intraday high of 7700.56 does do justice to it.
Basically, it was slapped back unceremoniously as if it had run into a brick wall.
The other similarity with the DJX is that although the zone hasn’t moved up here it is about to.
In respect of the similarity with the SPX that is the strength in the ratios below the zone and the weakness in them above it.
Perhaps another similarity might be the lack of desire to go back to where Y2 once was.
Overall, especially under these circumstances, we would be bullish, but this time the lack of desire across all three does raise a significant concern, as no matter what the circumstances being so timid as to react to just Y2 makes it very susceptible to anyone, or anything, saying boo.
Range: 7525 to 7725
Activity: Moderate
Type: On balance decently bearish
There have been very significant changes in the DJX, and we suspect Monday was the catalyst.
That was the day of the trade agreement so this index bolted out of the door, opening up 140-points, but then, as we published, the top of their zone was lurking at 26700 to ambush it.
The intraday high of 26737 does not do justice to how it stopped such a rampant market in its tracks and basically held it there all day, and although it gave up 86-points from its high it still closed up almost 200-points.
Today, we see the changes, but we suspect these happened a couple of days ago, and the most obvious of which is the move up in the zone.
Second, is the fact this zone now covers 300-points.
Thirdly, and perhaps the most important, is that most of the ratio above the zone has gone, with it reverting back to where it was in the first week of this expiry, with just the minimal Y1 present.
Basically, it is no wonder this index is making all the large moves, and there certainly isn’t any ratio around to change that at the moment.
Range: 26700 to 27000
Activity: Good
Type: Bearish
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October 3rd, 2018 by Richard
FTSE & DAX Ratio Table 3rd October 2018
Since our last comment in the FTSE on Thursday 27th September you could be mistaken for thinking it has been quite boring, especially as it has only moved 37-points.
However, last Thursday and Friday saw two very good test of this index’s zones upper boundary at 7550, with intraday highs of 7552.02 and 7548.36 respectively.
Although Thursday’s was the best as it got knocked back twice before a sly attempt in the closing auction.
Then yesterday, Tuesday 2nd October, the market nosedived down to the bottom boundary at 7450, recovered, then went back for a more concerted effort, which resulted in the intraday low of 7444.80.
That’s just over 100-points, so perhaps not so boring after all.
The ratios have changed but it’s still all about the zone, and when it does break there is still a decent amount of Y ratio either side, so there should still be some excellent trading yet to come.
Range: 7450 to 7550
Activity: Moderate
Type: On balance not bullish
Essentially the DAX has carried on from what we highlighted last time, “here this index is not showing quite the same resilience”.
Although, in total, it has probably had as many tests of its upper and lower zone boundaries, the market movement overall has been much more extreme.
The first three days last week were all about the bottom boundary with intraday lows of 12349, 12322 and 12329, and then on the Thursday the upper boundary with the intraday high of 12456.
Since then it has been south of its zone, with Y2 at 12250 playing quite a big role, although it did try and break back up into it on Monday with the intraday high of 12373.
With such a wide Y ratio bandwidth this is hardly unexpected, but it is worth noting that both the R1 levels have come in quite a bit, so this bandwidth is definitely narrowing.
Range: 12150 to 12350
Activity: Average
Type: Neutral
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October 1st, 2018 by Richard
SPX , NDX & DJX Ratio Table 1st October 2018
We did get sort of a decision in the SPX, but perhaps one that was not as definitive as we would have liked.
Basically, the intraday low last Wednesday 26th Sept was 2903.28 so a good and solid test of their zone upper boundary, and as we said the first line of support.
The fact it held is bullish, however the next two days were all about Y2 at 2920 with the intraday highs failing to break back through even this meagre amount of dynamic delta hedging, or futures selling, which is not so good.
Activity also suggests there is a lot of fence-sitting going on, and the only ratios to move today are both Y2 levels.
Considering this is week 2 of 4 to still have so much Y ratio about is the main factor, not so much where Y2 starts, and as this bandwidth is 125-points wide it wouldn’t take very much to get this market jumping or whipsawing around by 1%+ daily.
Range: 2905 to 2945
Activity Poor
Type: Neutral
Hardly any change in the NDX ratios, below the zone they have come in a bit which is all.
The story here is the very impressive Y ratio bandwidth still in existence, and basically the market is acting just like we would expect under these conditions.
After the extended zone bandwidth test last Monday the close did give the clue to its direction, but this doesn’t tell the full story.
As almost every day where there has been little change the trading range has been very decent, as epitomised by Wednesday 26th September close of -0.11-points masking a daily range of 84.36-points.
Unless, or until, the ratios change we can’t see this change either.
Range: 7525 to 7700
Activity: Very good
Type: Neutral
In our last comment on the DJX we did say its zone “the zone may trap it for a while, but just the slightest of nudges would see it escape”, so we were half right.
It did take only the slightest of nudges but that very day, the 25th September saw it close at 26492, or 8-points below the bottom boundary.
Very close call, but 8-points is perhaps all it needs sometimes, despite it being such a large index as this is only 0.03%.
The following day it did get back to the middle of its zone intraday, but for Thursday and Friday the intraday high was the bottom boundary, which is never good.
However, this does put it on strike 3, so if it goes there again it should break back up into its zone, but at the end of the day it is in bear territory and so the next line of support is at Y2 down at 25900.
Range: 25900 to 26500
Activity: Good
Type: Neutral
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September 27th, 2018 by Richard
FTSE & DAX Ratio Table 27th Sept 2018
After all the excitement in the FTSE in September we are seeing a very calm and collected start to the October expiry.
And having spent almost the entire previous expiry below its zone it is nice to see it having a degree of resilience this time round.
The intraday low on Monday was 7450.53 and on Tuesday 7455.22, so two very solid tests of the bottom boundary of the zone, which hasn’t changed since the rollover.
Of course, we would like to see a test of the upper boundary, but don’t forget the bottom one is now on strike 3.
Also, this expiry we have returned to a more normal ratio alignment, and we have seen good increases in them, both above and below the zone.
As things stand we would expect the zone to hold the market, and to see a test of 7550 before it decides if, or which way, it wants to break out of it.
And if, or when it does, there is still some Y ratio either side, so 7350 to 7600 is still a very plausible trading range for the rest of this expiry.
Range: 7450 to 7550
Activity: Good
Type: On balance fractionally bullish
The DAX is in a remarkably similar situation to the FTSE as it has also spent the first three days of this expiry in its zone.
However, here this index is not showing quite the same resilience as rather than just two tests of the bottom boundary of their zone here it has been three days in a row.
The intraday lows were 12349, 12322 and 12329 on Monday, Tuesday and Wednesday respectively, and although it managed to recover and stay inside on each day it must be getting weaker and weaker all the time.
If, or when, it does break free of its zone then there is still quite a lot of Y ratio, either side, but as things stand it looks like the only support it has is the bottom boundary, and that must be wafer thin by now.
Range: 12350 to 12450
Activity: Average
Type: Neutral
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September 25th, 2018 by Richard
SPX , NDX & DJX Ratio Table 25th Sept 2018
Rather ironically the ratios above the zone in the SPX look unchanged, but both R1 and R2 were at 2940 and 2955 on Friday.
This is worth knowing as the intraday high on Friday was 2940.91, so even though R1 is now 2945 the market will now anticipate it 5-points earlier.
The fact the close yesterday was right on Y2 is also not a coincidence, to us at least, and means the market, only in its second day of this expiry as well, now knows what ratio is where.
Means today is a decision day, which is good as it means this expiry is already looking active and meaningful.
However, there is no disguising the fact the R ratios are very close to where the market is currently, which leaves 100-points down to the corresponding level.
Still very early days and there is also the zone as support before we get into bearish territory, so the party is far from over, just the risk went up a couple of notches.
Range: 2905 to 2945
Activity Very good
Type: Neutral
The NDX has seen its ratios come in considerably, but, being frank, you could still drive a convoy of bus’s through them.
Anyway, at least it’s a start, but what is slightly troubling is that overall, especially for an intermediary, the activity is ok, so this huge Y1 ratio bandwidth under these circumstances tells its own story.
At least we very much doubt that the market is going to wait for the ratios as yesterday the intraday low and high was 7447.23 and 7554.95.
This is 25-points either side of their zone, so an extended zone bandwidth test, which is also symptomatic of high aggressiveness, which tends to increase rather than dissipate, so should be a fun ride, and the fact it chose to close above gives that the direction of choice.
Range: 7525 to 7700
Activity: Very good
Type: Neutral
When we last looked at the Oct DJX then the zone was 26100-26300, so it has already moved up a bit.
And despite activity being high, which is really just a manifestation of a little going a very long way in the absence of anything much, this move hasn’t really altered the picture very much.
The big difference is Y2 below the zone has jumped considerably, but what allowed the zone to move in the first place was the dearth of any ratio above it, and that remains the case.
There is a step-up at 27000, but in the grand scheme of things that’s a step in a dolls house rather than a flight of stairs.
The fact that the high yesterday was 26709, or the upper boundary, is more worrying than rewarding, as there is so little ratio there this is a sign of ultra-sensitivity.
Basically, the zone may trap it for a while, but just the slightest of nudges would see it escape, and if it does then unlimited upside with plenty of scope below, so it could start acting like the NDX with 1%+ moves commonplace.
Range: 26500 to 26700
Activity: Strong
Type: On balance only just bearish
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September 21st, 2018 by Richard
NDX Ratio Rollover Table 21st Sept 2018
Whatever is going on in the NDX we have unfortunately lost track of it, but it will go down, to us at least, as one of the strangest on record.
Considering how seldom we have commented on this index in this expiry it has still managed to achieve our fourth incarnation of spreadsheet, which is high in any expiry let alone one we have only looked at probably that same number of times.
This aside, the real oddity is that overall it seems to have shrunk, and that’s a first.
Monday’s fall of 110.77-points took it back to the top of its zone, but that was as close as it got.
Yesterday’s high was 7582.43, which was a test of Y2, meant it has been happily playing in its Y1 ratio bandwidth all week, and we can’t fault it for that.
Range: 7425 to 7575 or 7575 to 7675
Activity: Average
Type: Bearish
Please don’t forget that we are dropping down from a triple to an intermediary, and on top of that we revert back to the more usual 4-week format.
Otherwise, no great surprises in October’s ratio alignment, scant in a word, as usual in another.
The biggest attribute we can discern is the fact that the ratios in the Y1 ratio bandwidth either side of the zone is barely registering, so it is actually a very close call whether or not we were going to call the zone 7300 all the way up to 7650.
Which in English means virtually no ratio at all for 350-points, so the potential for huge moves and severe whiplash is certainly there, so hang on tight.
Range: 7525 to 7750
Activity: Average
Type: Neutral
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September 19th, 2018 by Richard
SPX Sept to Oct Ratio Rollover Table 19th Sept 2018
And twitch the SPX obviously has and exactly what we said back on the 11th September “then 2845-2855 for the zone is very likely, as is 2895-2905 now, which would be a massive game-changer” has come to pass.
There is no doubt that a considerable risk remains, as there is no disguising a 100-points of Y ratio still below the new zone, but as things stand it looks like a very compliant end to the Sept expiry.
Basically 3 out of the last 4 closes were 2904.18, 2904.98 and 2904.31, with the last one being yesterday, which means rollover Wednesday and this index will start in its zone, and you just can’t ask for more than that.
The good news for volatility lovers is that having the rollover in its zone means the shackles are off for the next two days, so we may well get a decent “grey area”.
Range: 2895 to 2905
Activity: Moderate
Type: On balance bearish
At this point in time for the August rollover 5-weeks ago we commented that September would be a rare triple that would be contained by just the R1 ratios, and it very nearly was.
And from the very first day all the way back to the 20th August this index was at war with R1, initially at 2865 and as it receded it did have a go at R2, when it peaked at 2916.50 in the second week, but after that the fight had gone and it has just been a case of waiting for their zone to play catch-up.
How will October pan out then? This is a difficult one, as always, as R1 to corresponding R1 is 2795 up to 2945, so left to its own devices then it has a potential 150-point trading range.
However, a lot will depend on the other indices, especially the DJX, so before one rushes to a decision it would be best to see how their respective ratios are aligned as we strongly suspect that with so much wriggle room here they will be happy to just go along with someone else’s agenda, assuming they have one.
If we do get a decent grey area however, then by Monday the situation for this expiry could easily be decided for it.
Range: 2895 to 2905
Activity: Average
Type: Neutral
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