Nb. Our comment on 07/24/23
Well, that battle with R3 at 7250 seems like it was ages ago, but it was in fact, just over a week ago, on the 10th and 11th of July.
So, since then we have seen the FTSE rally from R3 all the way up to the top boundary of its zone at 7650. A very impressive 400-points, or 5.52%. Brilliant.
And to top it all off, the timing couldn’t have been better, as on rollover Wednesday the market manged to get its fingertips above the bottom boundary at 7550. And if that wasn’t enough (which it would have been for us considering the journey it had to make) this also resulted in the final two days of the July expiry being spent inside its zone. A win: win, literally.
If you hadn’t guessed by now, obviously the zone didn’t move.
Also, we make no apology for our lack of bravery in not calling this last week as, exactly as stated, we need to be calculating the ratios daily to be able to do that with any degree of accuracy during generally tumultuous expiry weeks.
However, it does, very succinctly and graphically, reveal the importance of the zone.
This is now the problem however, as we now enter the August expiry.
As the zone here is still at 7350-7450, which is a long way from where the market had to get to for the expiry of July.
On top of which, having closed at 7663.73, means the FTSE will wake up today in the R2 ratio bandwidth. Which is not good news for the bulls.
We must also point out that in the ratio table it shows R3 starting at 7750 but, at 7700, it is only just below the threshold. So, please bear this in mind should the market get there, especially as that may be its first rude awakening as to how much dynamic delta it will now be facing in the August expiry.
Hope you managed to ride the rally up from R3 but, unless the ratios change, August looks like one for the bears.
Range: 7650 to (7700) 7750
Activity: Very good
Type: On balance only just bullish
www.hedgeratioanalysis.com
Nb. Our comment from 07/17/23 (Nb. The July expiry)
Yet another great week for the ratio watchers.
Monday was as expected and, although the official open was 7256.94, in everyone else’s world it was in fact around 7238.
This is important, as this means the market actually opened below R3 at 7250. Although, this does not alter the fact that the dynamic delta would still kick-in immediately. So, just like the previous Friday, which we spoke about last week (please see below), the FTSE wanted to go easier, the trouble was this persistent and significant futures buying going on.
It did stay below 7250 for the first half hour or so but, after that, it never really looked back. Significantly, the intraday low was 7238.72.
On the Tuesday, we did get another test of R3, but since then it has managed to put on 200-points, or 2.76%, which is not a bad rebound from R3.
Now, it has been a very good four weeks for those that knew where the pertinent ratio levels were for the FTSE, so we can’t rally moan. Sadly however, this final week is very unclear. In fact, we would really need to be calculating these ratios daily to stand any chance of working out what might happen next.
In a nutshell, there has been some very decent activity, especially in the calls so, although the zone hasn’t changed, it could very easily do so.
As things stand, 7250-7350 is the front-runner but, as this final week gets going, a lot could happen, making this very difficult to call. On top of which, in August, the zone is at 7350-7450, just to muddy the waters even further.
However, the real problem is that the Y2 bandwidth now stretches from 7250 all the way up to 7550 so, in reality, the zone could end up anywhere in here, assuming of course that it will move. After having had 20 trading days being spot-on, we are therefore ducking this last week, sorry.
Range: 7250 to 7550
Activity: Average
Type: Bullish
www.hedgeratioanalysis.com
