Nb. Our comment from the 05/30/2022
Having fun yet?
Well, we certainly hope so but, and apologies for being the bringer of bad tidings, the FTSE is caught up in bit of a ratio nightmare for the next few weeks.
Last week was all about the zone, which it jumped straight back into on the Monday. Tuesday was all about staying in it. Whereas the Wednesday and Thursday were all about breaking out above it.
With the intraday low on Friday being 7542.78, or the zones upper boundary (7550), we saw resistance turn into support.
But and this is where it gets a bit problematic, as travelling up through the 100-points of the zone, where there is no ratio at all, is the easy bit.
Now the FTSE is in a 100-point bandwidth of R1 ratio. Not impossible to negotiate, especially for a triple. But, nevertheless, a level of ratio that will still produce a degree of futures selling onto the market that will have to be absorbed for it to progress.
The problematic part, is that from 7650 upwards there are some considerably weightier levels of ratio, where even a triple may have difficulty in coping with those quantities of dynamic delta.
In contrast, we saw the SPX’s zone dive down to 4000 but, the side effect of this, was to leave only the minimal Y ratio above it…all the way up to 4605.
And that is the issue in a nutshell. The S&P 500 has 15% of blue skies above it, whereas the FTSE hits the dynamic delta storm after about just 1%.
Of course, the ratios change daily, and significantly so, especially in regard to the lower levels but, even so, where we are concerned, if you are a bull, Stateside is where you need to be and not in London.
Range: 7550 to 7650
Type: On balance only just bearish
Nb. Our comment on 06/06/22
Very short week last week courtesy of the Jubilee, but none the duller for it.
Monday was all about finding its feet in the R1 ratio bandwidth it was in. Testing the water as it were.
Tuesday, having got used to it, saw it push ahead to the next point of resistance. Namely R2, and exactly where we had put the top of our trading range, for this very reason. So, when we saw the intraday high of 7648.26, we hoped you too had noticed and were aware of its significance.
Interestingly, on the Wednesday (the last trading day of last week), we saw the intraday high of 7639.21. This was not another test of R2, but something more valuable, as it is a good sign of everyone opening the door for someone else to go through first.
By this we mean, when you know there is a large futures seller at 7650, having just been there and seen the tip of the iceberg, if you are not a futures buyer, then it is only natural to let, or want to let, someone else go first. And if everyone is of a like mind, then you get a stalled market just below said ratio level.
Finally, the close was back inside its zone.
Nice, safe and cosy for the very long weekend.
Nevertheless, it was over 100-points drop from Tuesday’s high.
For this week, you now know that the market knows that above 7550 it is R1, and at 7650 there is a large futures seller. Otherwise, it is back inside its zone, where there is no ratio at all for the 100-points that this comprises. And something to watch out for, especially as we are only half way through this expiry, is that at the other end of the zone it is only Y ratio.
Range: 7450 to 7550
Activity: Very poor
Type: Not bullish