Nb. Our comment from the 08/22/2022
The August expiry was even more bullish than we thought/predicted it would be, ending up with a gain of 416.49-points (5.84%) on the EDSP of 7550.62.
And not only was 7550 the settlement price, it is also the closing level for the FTSE.
This is very significant, as the actual real time closing price of the FTSE was in fact 7539.79, down 2.06-points.
So, not only has the auction turned a loss into a gain (so much for transparent and representative market data then) but it has also taken it to a very significant ratio level as well.
For those not sure of the significance of this it is because in real time both the futures and equity market are open, whereas the auction is the preserve of equities only. Therefore, the auction takes place without allowing for any dynamic delta or hedging to take place from the derivative stock index options and futures.
The end result is that today, this index is going to start right on DR ratio, which is a lot, even for a triple.
By the end of a triple, we always say that they can, and frequently do, trade up to the B ratio levels, such is the huge increase in activity in both derivatives and index equities created via stock index options and futures hedging.
But, at the very start of the expiry, DR is a lot of dynamic delta futures selling for a market to absorb.
On top of which, the zone is down at 7300.
Hat’s off to the bulls if they are that committed, but we suspect this will be too much for them to contend with, at least for this week.
Range: 7450 to 7550 or 7550 to 7700
Type: On balance bearish
Nb. Our comment on 08/30/22
And too much for them it certainly was.
A very interesting thing also happened last Monday 22nd as the intraday high was in fact 7550.41 (the previous close and Monday’s open being 7550.37).
We never saw it, don’t think anyone did actually, but it’s there in black and white for all eternity despite it being an anomaly IOHO.
The warning signs were there, as on both Tuesday and Thursday the market got back up to the low/mid-thirties.
And we have said this often in the past, that when the market knows there is a huge futures seller at 7550 and then starts playing “you first”, “no, after you” and “please, I insist” but no one is being brave enough to knock on that door again, it’s always a bad sign. Great if you’re a bear though naturally.
Getting back to the present, and the significance of this market closing below 7450 should not be underestimated.
This is because the next level of support is in fact the zone, the upper boundary still being at 7350.
Of course, London is going to be playing catch-up as it was closed yesterday so still has to account for a chunk of Friday’s drop as well as Monday’s.
But, if the FTSE does test its zone, we will be happy to speculate that when we published our comment on the 22nd mentioning the zone at 7300, not many, if any, probably saw that as a likely target.
Means that our trading range is quite a significant one this time, as 7450 will be a big test for any bulls, whereas if the upper boundary at 7350 doesn’t hold then the lower boundary will very probably come into play.
Range: 7350 to 7450