Good expiry for the SPX going down to the R Ratio and back again.
Nb. Our comment from 10/10/19
Well you have no excuse whatsoever to claim surprise at the recent market gyrations, as it is exactly as we forecast back on the 27th September (please see above).
In fact, and contrary to popular opinion, we see this as very normal, as the market has done exactly as expected.
Had it not transversed it’s Y ratio bandwidth, then that, would be weird.
The only question, at the time, was whether R1 or R2 would be needed to stem the tide.
As it turned out it needed R2, which interestingly hasn’t budged, so having been at 2845, the expiry intraday low is 2855.94, on the 3rd Oct, which was most definitely a test.
We are more than happy to claim this, simply because the market had fallen from 2990, or 4.42% in just three days, which caused a vega spike, but even without this, a fall of 140-points over this timescale means a fast market, so the ratios will always pre-empt contact under these conditions.
Anyway, having stated this exact point, a week in advance, only a certain person would quibble about a mere 10-points under these conditions.
More importantly, looking forward, and it is basically more of the same as the Y ratio bandwidth below the zone expands, which in itself will very probably move down to 2945-2955.
With the expiry next week this market still has a Y ratio bandwidth stretching from 2870 all the way up to 3035, so anything remains possible, just don’t believe what story the papers may attribute any move to, as move and whipsaw violently it will continue to do.
Range: 2870 to 3035
Type: On balance bearish
Nb. Our comment on 10/17/19
Well we didn’t get the (probable) move down in the zone to 2945-2955.
However, the very day we published pretty much took that off the table anyway.
To set the scene, the market was still below this potential move down, despite having recovered 44-points in the previous two days, when it gapped-up at the open, to, the very significant, 2963.07.
Above the level of where the zone move might be, and as this was also the intraday low, it changed the dynamic somewhat.
The move could still have happened of course, but considering where it closed Tuesday (2995.68), in time for rollover Wednesday, it was obvious the zone hadn’t changed at all.
The ratios have improved below the stationary zone, hardly surprising under the circumstances, but there is still a lot of very minimal Y1 ratio around.
Under these conditions it is hugely impressive that this index has performed a near perfect expiry.
Only nearly perfect, as at the start, it only tested the upper boundary of its zone (24th Sept intraday and expiry high 3007.98), rather than the R ratio.
Nevertheless, had you known where the ratios were, you would have seen this all the way down to R2, arguably R1, which was at 2870, so taking that, you could have had a 130-point round trip, or 8.7%, in just 4-weeks.
Really looking forward to the November expiry, so will post the ratios for that early next week hopefully.