Nb. Our comment from the 11/29/21
Again, yet another perfect example of why we start by repeating our previous comment (see above) as not only does it act as an aide memoire but, it also saves us having to reference it when our levels are hit.
We are of course referring to 7050, and last Friday the market dropped like a stone, some would even argue hitting terminal velocity it was so quick, all the way down to 7051.24, which remained the intraday low until the last few minutes.
And it was a spectacular bounce off this level, made all the more obvious by being on the end of a very long wick (if you are into candlesticks of course), ending up in a rally of about 70-points.
However, it is the end of the day that counts and so, with little surprise from a ratio perspective, it ended up safely in its zone.
This will make today a very crucial day, and both the upper and bottom boundaries now become very significant.
Of course, there is no way we could have predicted a new mutant variant strain, but in truth what the ratios tell you is what is possible, not the cause. If it wasn’t this it would very probably have been something economical for example.
Obviously, for sanity alone, we would love to see this market excitedly whizz around in its zone for the next two weeks. But, failing this, don’t forget below the bottom boundary it is bear territory, and so, should this market get there, this move will take on an entirely different complexion.
Back above the upper boundary, and we are just back to where we were. Although, there has been quite a shake up in the ratios, so there is a lot more minimal Y ratio around now.
Hopefully we will see soon enough, relax in its zone or will one or the other of the bulls or bears take control?
Range: 6950 to 7050
Type: On balance only just bullish
Nb. Our comment on 12/08/21
Well thankfully we didn’t have to wait very long before the writing was on the wall, as the very day we published (29th Nov) the FTSE finished at 7109.95, comfortably back above its zone.
And, as we pointed out, that now it had a lot more Y ratio above it. In fact, 200-points worth of it back then.
However, it wasn’t very gung-ho last week, as on the Tuesday it closed just above the top boundary, and on Wednesday the intraday low was 7059.35. Furthermore, the next day it never even came close.
Obviously, not out of the woods, but the signs were there.
Apologies for not publishing on our usual Monday, as we will now never know when R1 disappeared at 7250, although it may have provided a speed bump on Monday 6th Dec as the intraday high was 7246.25.
It will be very interesting and revealing how this market will react to R2 at 7350, the first real test it has had for some considerable time. And as such, it may just come as a surprise to the bulls.
However, if they are committed enough to push through it is clear up to R3 at 7450, but we feel we should point out that this is just below the DR threshold, so would be a very tough ask indeed. Then if it does break through this it is just in a world of dynamic delta futures selling that we just can’t see it coping with.
Of course, everything can change rapidly as we approach the rollover and expiry, but as this is next week and will bring its own peculiar pressures to bear, we see a limited upside as things stand.
Still, it has been an absolute corker of an expiry so far, so its nice to see the mighty Dec holding true to form.
Range: 7050 to 7350
Activity: Very poor
Type: On balance not bearish