Nb. Our comment from the 04/28/21
We are now well into the second week of this five-week expiry, so the slow away excuse is really no longer valid.
Admittedly, there has been quite a significant amount of upward movement in the ratios below the zone, as there has been in those above it.
Especially if you’re a bull.
But the Y1 ratio bandwidth just decreasing from 285 to 260-points, and the overall Y ratio bandwidth staying the same at 485-points, is really the main story.
The other aspect that may not be so apparent at first glance, is that below the zone R2 doesn’t appear until 3695, and interestingly is the only ratio level not to change, and R3 until 3495.
These are levels that are so far below the current market, that if it went down to test them, then they are not nearly big enough to compete, stem, or even reverse a fall of that magnitude.
However, at least below the zone they have these ratios, as above they are just not there at all.
It is a brave new world, and as such we have no precedent of this, but don’t get fooled into thinking that everything is all right with this world.
Because the simple truth is, that little or no ratio equals little or no business.
Which helps explain its sensitivity (nb. The opposite is also true) but means, that there are literally no support or resistance levels in this market at all.
It is always great when its upwards, but people don’t half squeal when it’s not.
Until a CEO or CFO decides that they don’t want to be part of an index designed for traders, with scant regard for actual fundamentals or a proper orderly market, then this is what you are going to get.
Currently, the sky’s the limit, and looking the other way, well, 10-15% would be a get out of jail scenario.
Range: 4005 to 4205
Activity: Very poor
Type: On balance only just bearish
Nb. Our comment for 05/05/21
A rather fortuitous day to publish our next note on the SPX for two reasons.
Firstly, yesterday we saw one of those skittish days we have been blethering about for so long, meaning that readers should have no excuse for not expecting it.
Secondly, we have at last seen a rise in the zone.
And not before time, so it’s not so much the rise but rather the length of time it has taken to achieve it that is the salient point here.
In fact, we would fully expect it to move up again, this time to 4170-4180, and in truth, we think it would be very surprising if even this was it for this expiry.
However, there are two points to note here, and the first is that the zone is still playing catch-up with the market, so we haven’t seen a zone forcing the pace for a very long time, meaning it is almost by default than design that these moves are happening.
Secondly, the retreat in the ratios above the zone are symptomatic of a final week of an expiry’s life, not one half way through.
Although this weakness has been going on for so long, it really has been from the very outset of this trip, which is even more damming.
Overall, the issue still remains that despite these movements, the Y1 ratio bandwidth is still a very impressive 265-points wide.
And the overall Y ratio bandwidth has actually increased by 25-points, to an eye-watering 510-points, or 12.25%.
We are not saying it’s going to happen, but yesterday’s 64.07-point move (1.53%) could just be a warm-up, or worse, a warning.
Whether you are a bull or a bear, just remember you are skating on very thin ice, and like all ice rinks, it only takes a very little impetus to propel things a very long way indeed, and the potential for whipsaw is ever present.
Either way, with two and a half weeks to go, and no meaningful ratio to speak of, this index has carte blanche to do whatever it likes.
Range: 4105 to 4255