Nb. Our comment from the 08/12/21
Bang on the money, or probably more appropriately, still banging on that Y2 ratio door.
As one can see from the above table, that this particular door is now standing at 4455.
We haven’t calculated the ratios this week until today, but last Friday Y2 was 4430, so the market essentially forced the door ajar and got a foot on the other side.
The start of this week was effectively the market waiting for the ratios to catch up.
But now they have forced the changes, then the dominoes keep falling.
OK, the ratios below the zone have hardly shifted, but they are certainly building up to it.
In the meantime, the zone will move up again, to 4395-4405, and we suspect the only limiting factor to further moves is that it is the rollover and expiry next week, so time.
Of course, Y2 is very likely to continue to retreat, and we suspect R1 will start doing so before long as well.
So really, the only main concern is the fragility of it all, as the Y1 ratio bandwidth increases to 260-points, whereas the overall Y ratio bandwidth narrows to 390-points, both still ridiculously wide.
It is the most amazing market we have come across, as it continually powers to new highs, but at the same time, overall, the level of ratio is abysmal as are the daily levels.
This means that this bull run and resultant new all-time-highs have been achieved without very many bulls at all.
The saving grace has really been that there have actually been fewer bears than the miserly number of bulls out there, but, hey, who’s to say that’s not wrong, it’s just that previously the numbers have just been far bigger but the split remains the same.
Range: 4355 to 4455
Nb. Our comment for 08/18/21
The zone did move up, the very next day in fact, to 4395-4405 and, as we said, the only aspect limiting further moves up is time.
It is the rollover today, and when the SPX was heading south yesterday and down almost 62-points at around 4417 we figured it was heading for its zone.
When it reversed, managing to finish where it did, we then figured that the zone had made the next move up.
As one can see, it turns out that neither are the case.
And this in a nutshell, is what the problem is at the moment, to us at least, as with so little ratio it is all so very thin and fragile that it doesn’t know what is happening next.
Which is a nice little lead-in to what is happening next in the big picture, and we don’t mean the upcoming triple witching September expiry, but the end of tapering. As, should that ever end, then excluding the last decade or so, and markets return to normal, it would be great to see them act naturally to the dynamic delta once again.
Getting back to the soon to end August expiry and, interestingly, Y2 has remained at 4480, where it was when this market’s intraday, all-time and expiry high hit 4480.26 on Monday.
Which if it stays like this, would be its own triple, albeit in an intermediary expiry.
For the record, Y2 here has actually strengthened from yesterday, but is still down a little bit from where it was on Monday.
So, to keep up the analogy, the door remains closed.
However, the ratios have started to move below the zone, and although narrowed the Y ratio bandwidths are still a gargantuan 235 and 385-points respectively.
Therefore, it is much the same as it has been all expiry really, Y2 at 4480 is the closed door, the zone could be anywhere in the Y1 ratio bandwidth really, but currently the favourites by a very small margin are (obviously) 4400 and possibly 4450, or anywhere in-between, while a chasm remains below a QE inflated market.
Range: 4405 to 4480
Type: On balance bearish