Nb. Our comment from the 12/08/20
It was fairly obvious from last Tuesday that the SPX was intent on just battering away at the R ratios door.
Which is not altogether surprising, as what with the vaccine, the election and various other snippets, not least the “Thanksgiving Effect”, the real surprise to everyone seems to be why it is finding it so hard to go better.
Of course, and just like the FTSE, those that know what level of ratio, and hence dynamic delta, also know what the index is having to contend with, and no matter how bullish everyone is, someone still has to mop up all those futures.
Nevertheless, it is doing a great job, easily evidenced by how far the R ratios are, and have, retreated.
Although, we should point out, that the step-up level we mentioned last week, has now become the new R2 level, which is kinda the point of mentioning it in the first place.
We have two big fears, and the first is the rather obvious stubbornness of the zone to move, even though it is still being flagged.
Secondly, and far more of a worry, is the distinct lack of movement in the ratios below the zone.
Naturally, these two are connected, but in whatever passes for normal these days, it is the rising Ratios below the zone that should create the pressure thereby allowing the market to rise.
So, rising ratios below, falling above is bullish.
One without the other, is not that normal, and strikes us as something more akin to blinkered self-conformation, especially as it has been one-way traffic throughout this expiry, so far at least.
However, like London and Brexit, here a stimulus package, or similar, just like the start of QE, can catapult fundamentals into the driving seat, demoting derivatives to just riding shotgun, which, in truth, doesn’t happen very often, but is a risk.
Range: 3655 to 3705
Activity: Poor
Type: Neutral
Nb. Our comment for 12/11/20
The decisive day came when we last published, Tuesday 8th December, when R2 was standing at 3705, and the SPX hit the intraday high of 3708.45.
This was a continuation of its war with the R2 ratio, as it just kept battering away, evidently still a bit perplexed as to why there were so many futures coming out into the market.
Wednesday saw another attempt to blast through, with the intraday high of 3712.39, which was a bit in isolation, as for most of the time it didn’t get past 3710.
Obviously, yesterday, it didn’t have any further attempts, so, the $100 question, is whether or not they have now had enough.
Ironically, although they won’t know it, they have actually won this battle, as R2 is now 3755, leaving plenty of room for another step-up.
But and this is quite a biggie, yesterday they bounced, or gained support, from R1, which was then at 3655, the intraday low being 3645.18.
Which, over these two days, is a bandwidth test, which incidentally, was also our trading range.
The biggie in question however, is the fact that today R1 has slipped to 3705, meaning that this market is now back in its Y ratios.
And, as we always say, this means volatility and whipsaw.
The Y ratio bandwidth is now a staggering 410-points, btw.
The real issue is will, or can, the zone move in time, as the closer we get to expiry, and the rollover next Wednesday, the more it will bring its influence to bear.
Interestingly, 3645-3655 AND 3695-3705 are now making moves that could see them claim the crown.
What a bizarre expiry is all we can say, although it was weird from the very start with so much Y ratio present, but our trading range (Y ratio bandwidth) essentially says it all. Good luck.
Range: 3295 to 3705
Activity: Poor
Type: Neutral
