Nb. Our comment from the 10/10/2022
Despite the fact that R3 had retreated to 6850 last week, it seems the market hadn’t realised.
As R2 at 6950 evidently produced enough dynamic delta to achieve the same result, with the intraday lows on Thursday and Friday being 6961.10 and 6960.36 respectively.
If the market should go back there again even R2 has retreated, back to 6900 now but, with another drop in the zone, this now makes 6950 not only R1 but also the bottom boundary of this new zone.
Again, a falling zone coupled with falling ratios below and rising above are all bearish signs.
And don’t forget this market has already tested R3 (when it was at 6950 on 26th Sept with the intraday low of 6937.40), so the fact it is now at 6800 means that this market is not out of the woods yet.
However, if it can stabilise in its fallen zone, and the ratios either side can also stop, or change, their direction of travel then it might give a chance to the bulls.
Especially as we now have only two weeks to go in this expiry.
And with the way this expiry has evolved, above the zone you now have 300-points of just the minimal Y ratio. A level of ratio that should hold no fear for an index that has been messing with R3 and R2 levels already.
Of course, so far this expiry it has been one-way traffic, don’t forget the “opening” price on day 1 was 7236.68, and back then the zone was 7250-7350 and all the Y ratio was below it.
Almost the mirror image of what it is now, and back then, on the 20th September, did you think that the market would go down through all that Y ratio until it hit the R ratios?
Range: 6950 to 7050
Type: On balance definitely bullish
Nb. Our comment on 10/10/22
The only day we are sure what the ratios were last week was on the actual day we published, Monday 10th.
On the 10th 6950 held firm, with the post auction close of 6959.31 and the real time close at 6972.15.
After this we have no idea when the ratios changed but, as you can see in the above table, they have roughly slipped 50-points below the zone. Whereas, above it, they are unchanged apart from the appearance of R1.
The other aspect that also hasn’t changed, is the zone, which is good news, for the bulls at least.
And for derivatives, as on Friday the intraday high was 6976.30, tantalisingly back inside it just in front of this, the final week of this expiry.
Sadly, it couldn’t hold onto it, leaving R2 at 6850 to reprise its support role from the previous day again.
From the very first day of this expiry, it was always likely to be messy, one for the bears, the way the ratios were aligned.
The trouble is, now we are entering the rollover and expiry, if derivatives want to keep control and get it to expire in its zone, they have their work cut out for them such is the level of emotion inherent now.
The zone isn’t far away, so eminently achievable, as witnessed by Friday’s price action.
So, the only question that remains, for us at least, is whether or not derivatives can trump the BoE, interest rates and whatever the new Chancellor happens to spring on us next?
Range: 6850 to 6950