Nb. Our comment on 05/30/23
All we can say is that we hope you did take notice of the ratio levels before the start of last week.
Monday and Tuesday last week were all about the bottom boundary of the zone, 7750.
The intraday low on the 22nd was 7750.53 and on the 23rd 7747.09.
Quite often these tests can result in a reciprocal test of the other boundary but, if it is evident that this desire is lacking, it can also be an early warning sign.
Either way, the Wednesday saw strike three of 7150, so we would not have expected it to hold anyway, and sirens should have been going off now anyway.
After that it was simply a case of waiting for the market to traverse the Y ratio bandwidth below the zone.
We are not calling the intraday low of 7569.17 on Thursday a test of R1 at 7550, although it wasn’t very far away at all, the market having dropped 200-points at that stage, so the Greeks were spiking a bit.
However, the intraday low of 7556.92 on Friday definitely was. This also resulted in a rather nice, and confirming, bounce of 70-points.
Looking ahead, 7550-7650 is still a very likely candidate to be the next zone and, although it hasn’t actually changed, this means the “bearish implications” we mentioned last week are not so much in play anymore, as the market has made the move already.
Nevertheless, it would be best to follow very closely any activity around 7550 and 7650 this week.
Other than that, although 7550 is still R1, it has only just made the threshold, so do treat even a strike two with suspicion. A far more solid ratio level is R3. Otherwise, it has a huge Y ratio bandwidth to play around in now.
Range: 7550 to 7750
Activity: Poor
Type: On balance just bullish
www.hedgeratioanalysis.com
Nb. Our comment from 05/22/23
Welcome to the June expiry, the second triple witcher of ‘23.
In the end it was a very interesting battle last week for the finish of the May expiry, especially on rollover day, Wednesday 17th, when the market spent almost the entire day flip flopping either side of 7750 before losing 27-points and closing down at 7723.
As one can see in the table, the market did indeed close in its zone on the Friday, albeit only just. However, the settlement price was 7779.57, so very much inside its zone for when it counted (literally).
All told, the FTSE lost 159.39 points over the course of the May expiry, which was essentially all at the very start, way back on the 24th April, when it had the temerity to get close to R1 at 7950.
So, apart from the obvious hard work it took to keep the market in its zone and looking just at the closing price, 7756.87, it would have appeared to be an “easy and peaceful” expiry as the index only moved a whopping 2.25-points in the entire week.
Looking ahead to June and the most obvious aspect is that the zone is the same as May’s was, 7750-7850. However, what the table here doesn’t show, is that 7550-7650 has made a very strong move towards being the next zone.
No need to tell you that this would have quite significant bearish implications.
It is also probably no coincidence that the R ratios start at 7550 below the zone.
Above the zone it is worth noting that 7950 has gone from R2 up to R3, and as these ratios are exponential, this is a huge jump from the minimal Y ratios should the bulls feel so inclined to chase it back up there. Interestingly, the DAX reached a new all-time intraday high on Friday, while London’s record stands at 8047.06 now.
Whichever way the market does go, there is Y ratio either side of the zone (400-points in total), so the FTSE could have a very decent trading range this expiry.
Range: 7750 to 7850
Activity: Poor
Type: On balance only just bullish
www.hedgeratioanalysis.com
