Oct

2022

October 24th, 2022 by Richard

We could be in for a very volatile start to the FTSE Nov expiry as there is so little ratio present.

Nb. Our comment from the Oct expiry

We thought it might be a good idea to have one last comment on the October expiry which finished on Friday.

The settlement price was 6875.96, so below the zone and by some considerable margin.

In fact, despite the appearance of Y1 below the zone, the expiry actually finished in R1 ratio, which would have cost someone a bob or two.

Which was a bit careless as the market closed on Thursday at 6943.91, just a fraction below the zone. So, all they had to do was to either get the market up by 6-points to get it into its zone or, failing that, keep it above 6900, and therefore in the minimal Y1 ratio.

Not managing to do either in the very short time frame left would not have been the preferred choice, and which therefore reveals that there was a lot more going on than just the expiry.

The fact that the market actually closed back in its zone somewhat masks the reality that the Oct expiry was expensive for someone despite the best efforts right up until the final few hours.

Range: 6950 to 7050

Activity: Moderate

Type: On balance bullish

Nb. Our comment on 10/24/22

Partly the reason for explaining the closing few hours of the Oct expiry is that it also sheds some light on this, the Nov expiry.

And as one can see in the table above the ratios are so underdeveloped in Nov that this may be a problem for the next few weeks.

Admittedly, this is one of those times that we are going from an intermediary expiry to another intermediary one, so activity is always thinner but, even taking this into consideration, the ratio levels are dangerously low.

At least the R ratios start a bit closer below the zone, at 6850, but this is only R1, and you have to go all the way down to 6250 before you get the next level.

Above the zone, the R ratios don’t kick-in until 7350, but at least the next level is slightly closer, only being a further 300-points away.

Despite these huge ranges, don’t miss the fact that the highest the ratios even go in either direction is just R2, which is very low and will not provide that much support or resistance.

But it is the 500-point wide Y ratio bandwidth that is the most concerning.

From 6850 all the way up to 7350, and with no ratio to speak of then it could get very volatile indeed.

And because of the distance involved, if the market does build up a head of steam, then R1, or even R2, are going to struggle to make a difference.

Hopefully, the circumstances that are evidently keeping the players on the side-lines, will dissipate and normal conditions will return but, in the meantime, best fasten those seatbelts nice and tight.

Range: 6950 to 7050

Activity: Average

Type: Neutral

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: FTSE, Markets

Oct

18

2022

October 18th, 2022 by Richard

After the huge bounce off R3 at 3495 on Thu 13th the SPX now needs help with the actual expiry.

Nb. Our comment from the 10/12/22

The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.

Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.

On Friday 30^th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.

However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.

For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.

The real issue now, is the zone.

Especially as next week is the rollover and expiry.

So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.

First the rate of decline in the ratios below the zone, especially R3, has to be arrested.

Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.

This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.

The trick will be in the timing.

Range: 3495 to 3645

Activity: Poor

Type: Neutral

Nb. Our comment for 10/12/22

Well, you didn’t have to wait long, so we sincerely hope you managed to get your timing right.

The very day after we last published, we saw the inflation figures and the market plummeted…all the way down to R3 at 3495 with the intraday low of 3491.58.

We then saw an almost 200-point bounce before the market trimmed its gains to finish up 177 from its low, but only up 92.88-points from the previous day.

The next day, Friday 14^th, was essentially all about trying to get back into the Y ratios. Which to most actually meant trying to get a close above 3695.

It did get up to 3712.00, so it had a chance, but couldn’t quite cement the deal.

Now we are into the rollover and expiry, things are going to get a little tense, especially as the zone has stubbornly refused to move.

Furthermore, the ratios above it haven’t moved, so are applying no pressure at all.

However, below the zone, the ratios are now in freefall.

This can be both good and bad. Good, as it may see the zone move, and 3800 & 3750 are the current frontrunners here. Although don’t rule out 3700 as an outside shot.

Bad, because it further dilutes what little ratio support there was down there. As you can see in the above table all the R ratios have slid back, and by a considerable amount as well.

Basically, this market needs the ratios above the market to lend a hand in determining where the correct zone should be, and not just leaving it down to where the undermining finishes when the music stops.

After all, the Y ratio bandwidth below the zone, is now 350-points wide all on its own.

And that, just has volatility written all over it, large.

Range: 3645 to 3995

Activity: Moderate

Type: Bullish

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, spx

Oct

18

2022

October 18th, 2022 by Richard

As the FTSE enters the Oct expiry rollover derivatives have a chance.

Nb. Our comment from the 10/10/2022

Despite the fact that R3 had retreated to 6850 last week, it seems the market hadn’t realised.

As R2 at 6950 evidently produced enough dynamic delta to achieve the same result, with the intraday lows on Thursday and Friday being 6961.10 and 6960.36 respectively.

If the market should go back there again even R2 has retreated, back to 6900 now but, with another drop in the zone, this now makes 6950 not only R1 but also the bottom boundary of this new zone.

Again, a falling zone coupled with falling ratios below and rising above are all bearish signs.

And don’t forget this market has already tested R3 (when it was at 6950 on 26^th Sept with the intraday low of 6937.40), so the fact it is now at 6800 means that this market is not out of the woods yet.

However, if it can stabilise in its fallen zone, and the ratios either side can also stop, or change, their direction of travel then it might give a chance to the bulls.

Especially as we now have only two weeks to go in this expiry.

And with the way this expiry has evolved, above the zone you now have 300-points of just the minimal Y ratio. A level of ratio that should hold no fear for an index that has been messing with R3 and R2 levels already.

Of course, so far this expiry it has been one-way traffic, don’t forget the “opening” price on day 1 was 7236.68, and back then the zone was 7250-7350 and all the Y ratio was below it.

Almost the mirror image of what it is now, and back then, on the 20^th September, did you think that the market would go down through all that Y ratio until it hit the R ratios?

Range: 6950 to 7050

Activity: Moderate

Type: On balance definitely bullish

Nb. Our comment on 10/10/22

The only day we are sure what the ratios were last week was on the actual day we published, Monday 10^th.

On the 10^th 6950 held firm, with the post auction close of 6959.31 and the real time close at 6972.15.

After this we have no idea when the ratios changed but, as you can see in the above table, they have roughly slipped 50-points below the zone. Whereas, above it, they are unchanged apart from the appearance of R1.

The other aspect that also hasn’t changed, is the zone, which is good news, for the bulls at least.

And for derivatives, as on Friday the intraday high was 6976.30, tantalisingly back inside it just in front of this, the final week of this expiry.

Sadly, it couldn’t hold onto it, leaving R2 at 6850 to reprise its support role from the previous day again.

From the very first day of this expiry, it was always likely to be messy, one for the bears, the way the ratios were aligned.

The trouble is, now we are entering the rollover and expiry, if derivatives want to keep control and get it to expire in its zone, they have their work cut out for them such is the level of emotion inherent now.

The zone isn’t far away, so eminently achievable, as witnessed by Friday’s price action.

So, the only question that remains, for us at least, is whether or not derivatives can trump the BoE, interest rates and whatever the new Chancellor happens to spring on us next?

Range: 6850 to 6950

Activity: Moderate

Type: Bullish

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Oct

12

2022

October 12th, 2022 by Richard

The SPX continues with its ratio stepping-stone decline, but will the rollover and expiry rescue it?

Nb. Our comment from the 09/27/22

The last five trading days has simply been a ratio stepping-stone decline.

We last published on Tuesday 20^th. On Wednesday 21^st the market intraday low was 3789.49 and close was 3789.93.

R1 was, and still is, at 3795. Of course, this was the day the Fed hiked by 0.75%, but it was the rhetoric that did the damage, so for R1 to even have an influence was pretty amazing. The fact that the market closed just a few points below it, was also rather significant…as we have seen in the past.

Next stepping-stone was R2 at 3745, on the Thursday, and the market duly obliged with the intraday low of 3749.45.

Could this have been pivotal? Obviously not, but as the market gapped down at the open on Friday to 3727.14 this was a moot point anyway.

So, Friday and Monday (yesterday) were all about the next stepping-stone, R3 at 3645.

Fridays intraday low was 3647.47 and yesterdays was 3644.76.

Apologies, we probably should have warned you when R3 fell from 3670 to 3645, sorry.

Anyway, it is still there but, having had two severe battering’s over the last two days, it is understandably weakened. In fact, so much so, it is only just above the threshold, and if the rate of decline continues today then it won’t be for much longer.

Actually, you now have to be looking at the low 3600’s to see the same level of R3 ratio that this market first encountered on Thursday.

Sometimes, strike two can be enough of a confirmation and can turn a market around (especially with the FTSE rebounding so well off 6950, giving it a friend), but please remember that the next time it goes down there, not only is it only just R3 but that would be strike three.

At least the bulls have the dynamic delta batting in their corner now, so the only question that remains is whether or not they want to make use of it?

Range: 3645 to 3745

Activity: Poor

Type: On balance bullish

Nb. Our comment for 10/12/22

The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.

Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.

On Friday 30^th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.

However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.

For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.

The real issue now, is the zone.

Especially as next week is the rollover and expiry.

So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.

First the rate of decline in the ratios below the zone, especially R3, has to be arrested.

Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.

This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.

The trick will be in the timing.

Range: 3495 to 3645

Activity: Poor

Type: Neutral

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, Futures, spx

Oct

10

2022

October 10th, 2022 by Richard

Fascinating evolution of the FTSE ratios this expiry, means there's a lot left to come.

Nb. Our comment from the 10/03/2022

As we said last week it certainly was a fantastic battle the market had with R3 at 6950, and it was on the Monday as well.

In fact, we thought it might just have been a case of job done when the market bounced right back int the 7000’s, and held there on the Tuesday.

Wednesday was the crunch day, and although the official open (always the previous days close) was 6984.59, in the real world it was nearer 6918.

What this meant was that is gapped down at the open to below R3 at 6950, if it was even still there in fact.

As you can see from the above table 6950 is now R2, having lost a third of its potency. The trouble is that we don’t know when that changed, and it could easily have been on Wednesday.

The fact that R3 is now 6850 and the last three intraday lows have been 6836.28, 6829.29 & 6840.07 does tend to suggest this as well.

Without calculating the ratios daily, we have no way of knowing, sorry.

So, apart from the ratios below the zone all looking weak, the other big news is the zone itself.

And it is not a small drop either, but a 200-point fall.

The upside, is perhaps that come the rollover and expiry, that this might be far more attainable but, the not so good news, is that there is still three weeks left in this expiry.

Obviously, falling ratios coupled with a falling zone are both bearish, as is the rising ratios above the zone. However, R3 does still seem to holding its own.

Plenty of upside now, the only question is will 6850 remain at R3 to give some downside protection?

Range: 6850 to 7050

Activity: Good

Type: On balance just bullish