Nb. Our comment on 03/27/23
What a week that was.
And we just hope you had taken note of the ratio levels prior to Monday’s opening bell.
The real world open on Monday 20th was about 7257, not the official 7335.40 (ridiculous differential, and utterly misleading), which meant London was already deeply into the DR ratio bandwidth.
We, and hopefully you, could see the confusion generated by the considerable number of futures buying generated by the DR level of dynamic delta from the outset.
The confusion didn’t last that long as we witnessed a 219-point rally off the back of it.
The market did exceptionally well in those first few days, getting as high as 7585.57, so into the R1 ratio bandwidth.
This is where we hit our perennial problem, as the ratios have changed, and significantly so, but we just don’t know when exactly.
To explain, had the ratios been as they now are last Thursday, then the FTSE would have actually achieved the Y ratio bandwidth.
Anyway, there are still going to be a lot of nerves out there, and there is still a bit of bedding-in for the ratios as well we suspect.
But as it stands, the immediate levels to watch are 7350 (R3) and 7450 (R2), and how the market reacts to the dynamic delta at either, or both, levels will tell you a lot about the strength of the current emotions.
Looking at the bigger picture, getting back into the Y ratios, or above 7550, is the critical point. And as there is now 500-points of the Y Ratio bandwidth, the volatility from the first week could end up looking like just the appetiser.
Range: 7350 to 7450
Activity: Average
Type: On balance only just bullish
www.hedgeratioanalysis.com
Nb. Our comment from 03/20/23
Obviously, the weight (in every sense of the word) of the banking sector was no match for the derivatives trying to keep the market in its zone.
Although we did not mention it, DR by Friday had slipped to 7300. Which made it nice and symmetrical at least, as it went from DR at 7950 all the way down to its corresponding level below the zone at 7300. Small consolation perhaps.
For the record, the EDSP was 7460.14, so they just managed to get it into the R2 ratio bandwidth. Which, under the circumstances, was a good effort, but still expensive for someone. Also, slightly ironic, as we suspect the last thing any bank needs right now is another department booking a loss.
Turning our attention towards April, and as you can see in the ratio table the zone has already moved.
However, the most important aspect about the zone is not that, but rather the fact that it is way up there at 7850.
The other big factor to take note of, is the fact that DR in April is now at 7300 as well.
Also, don’t forget we are now back to the intermediary expiries. On top of which, this is a five-week one as well.
Obviously, we have no way of knowing what is going to happen in the banking sector but, this aside, just like we were saying this was not a market to be long of when it was banging its head on DR ratio at 7950, now we would say this is not a market to be short of as it stamps its feet on DR ratio at 7300.
Range: 7300 to 7450
Activity: Outstanding
Type: On balance only just bullish
www.hedgeratioanalysis.com
