FTSE & DAX Ratio Table 6th August 2018
That has to be a new record for the FTSE as on Wednesday 1st August the high was 7751.10 which was a test of the ever present R1 at 7750.
Then on Thursday 2nd August the low was 7549.34 which was a test of R1 below the zone.
For the FTSE a 200-point move in 24 hours is extreme and coincided with a half point hike in the rates.
We of course don’t know what news will come when, or how the market will react to it, but all we can do is point out where dynamic delta (futures buying and selling) will occur and to give you an idea of the amount of futures involved.
Obviously, one can draw their own conclusions, but for us this does show how thin it is out there, primarily due to how the market reacted almost instantaneously to what is in effect a relatively small amount (R1) of futures activity.
However, and this is more speculative, how and what derivative activity there has been, and the resultant change in the ratios, can reveal what may happen next.
The fact that the ratios have risen below the zone and fallen above it are two bullish signs, and the fact it has been outside either side of its zone, means that this should be no impediment from now on, and with the half way point passed we can see another (and very probably successful) assault on 7550 next week.
Range: 7600 to 7700
Activity: Moderate
Type: Bearish
For the DAX there have been small tweaks in their ratios, but essentially, they are unchanged.
Of course, here last week was all about R1 at 12850, and they were very stubborn over it, unlike London, testing it on three consecutive days.
On Monday the high was 12848, then 12860 on Tuesday before finally 12833 on Wednesday.
Rather coincidentally these were the exact same days that the DJX was testing its zones upper boundary with consecutive highs of 25500, 25490 and 25488 respectively.
When the party was over it was a rather spectacular fall of 190-points, but at its worst it was off 244-points, and perhaps more revealing was that this was right to the middle of its zone, with the close right on the upper boundary at 12546.
This tells us the bulls are aggressive, just not committed, or have shallow pockets, but should this situation change and it went on like London to test its corresponding R1 ratio, then don’t forget this doesn’t appear until 12150.
Otherwise, the DAX looks like it’s mirroring the DJX, so it is probably worth seeing how it will cope with its zones upper boundary at the fourth time of asking having closed Friday tantalisingly just below it.
Range: 12550 to 12850
Activity: Moderate
Type: Bearish
As an aside, and we do sometimes feel obliged to weigh in on current issues, we looked on in amusement with the headlines of what makes Apple a trillion-dollar company.
Well the answer to that is quite obvious; it doesn’t pay any taxes.
This was just rubber-stamped by Amazon revealing the pathetic amount it pays.
Of course, one can’t talk about US companies without mentioning the Trump word, and it has obviously escaped his attention that this direct subsidy is just that.
Subsidy or tariff, tomAto or tomato, same thing.
The solution is very simple.
Rather than respond to Trump’s trade war trumpeting just impose a direct 20% sales tax on US companies instead of corporation tax.
However, with this sales tax there will be issued a tax credit note that will allow all US companies to offset the amount of sales tax they pay over here against their domestic corporation tax liability, in line with current international tax agreements.
Then suddenly his generosity in reducing US company’s corporation tax level to this current level may not look so clever if these tax credits result in a zero-tax liability Stateside for the Apple, Amazon, IBM and Microsoft’s of this world.
