Scary times in the SPX

Nb. Our comment from the 04/24/20

Actually, this is the first sensible thing this index has done in a while, and we don’t just mean closing inside its zone.

When we say sensible, we probably mean normal, as under “normal” conditions, if an index missed its zone for their expiry, the quite common trait is for it then to gravitate towards it immediately thereafter.

Which is what has just happened, as, let’s face it, with virtually no ratio around it to speak of, it could have easily pinged one or two hundred points in either direction.

And this remains the case, as under these current ratio conditions, we hardly think it is going to stay zone-bound, although, back in the day, we have seen this index stay inside its zone for an entire expiry.

On the 21st we mentioned the chance the zone may change to 2695-2705, which it obviously hasn’t, even when this index hit the intraday low of 2727.10.

It still could, very easily, but the fact it didn’t, would have helped to see this market recover over the last two days.

So, the risk is still there, albeit slightly mitigated, but as Y1 stretches all the way down to 2690, this has always been the case.

Overall, it is very disappointing to see so little change in the ratios, after all, they are so low, it’s not as if it would take very much.

However, perhaps every little helps, and so, for us, the most significant moves are in the R1 ratio levels, both above and below the zone, even if, this just goes towards narrowing a still gargantuan Y ratio bandwidth.


Range:            2795  to  2805     

Activity:          Poor      

Type:              On balance fractionally bearish


Nb. Our comment for 04/29/20

Sadly, this is just the scenario we are afraid of.

Basically, the market isn’t going up because everybody believes the crises is over, it’s going up because there is no ratio to oppose it.

Again, the regulators should be aware of market dynamics, and take great pains to avoid exactly this sort of situation, as it only leads to false, and therefore misleading, interpretations.

The fact of the matter is, R1, above the zone, still does not kick in until 3205.

Where this is a distinct improvement from 3305 (on the 24th), what it means in practice, is that this index could easily recover back up to the 3300’s.

And that, to us at least, is dangerous, as it will be as if nothing has happened, and even the most isolated person in the world, knows that this is just not the case.

Take into consideration that we were looking for a 10% contraction anyway, this being how overstretched it had become, means that if this is the case, then there has been no adjustment for the economic impact that we have witnessed in the last 6-weeks at all, which is madness.

The astute may want to take note of the fact the corresponding R1 ratio does not appear until 2595, so this could most easily become a two-way street.

However, this time, there is no B1 at 2195 to come to the rescue.

It may be worthwhile comparing this index to the FTSE, as at least that has some ratio, and is reacting to it, so, you know, that there is money, and therefore, belief, backing that move.

Contrast that to the activity registered here, and perhaps worth knowing that yesterday, it was “moderate”, so hardly representative of players falling over themselves to get involved.

Hopefully, we are wrong, but this is just the sort of move, that screams beware to us, as it should, but won’t, to the regulators.


Range:            2805  to  3205         

Activity:          Only just registered 

Type:              On balance bullish

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April 29th, 2020 by