Good win for the SPX vs R2 Ratio, but can it win the war?

Can the SPX maintain this aggression esp now vs R2 Ratio


Nb. Our comment from the 08/31/20


Well the SPX has shown it has a bit of strength behind it at last, and all very predictable in that it has taken a triple to get the juices flowing again.

Ordinarily, we would expect an index to trade between very high levels of ratio, DR and the B’s, in a triple, but as one can see, the ratios only go as high as R3.

Which just goes to highlight how weird the overall situation is, as this is, and there is no other word for it, pathetic levels of activity produced ratios.

In the last few expiries this index has quite happily marched upwards through retreating ratios, but has struggled when it came up against, sometimes just Y2, but definitely R1.

So, it hasn’t really been tested properly in four to five months, so facing off against R2 is bit of an unknown.

Sadly, how it beat R1 is not much of a help either, as when we last published, on the 25th August, that very day this market hit 3444.21, and closed at 3443.62.

Which was all well and good, as R1 was at 3445, but the next day it gapped up at the open to 3449.97, leapfrogging R1 altogether, so it didn’t really answer any questions as that is sort of a cheat really.

If it does get over R2, then it has plenty of room before encountering R3, but, and this is a big but, back in the March expiry (the first triple of 2020 hem hem) R1 was at 3385 and R2 3405, however the then all-time high had just been hit the week before,3393.52.

Out of curiosity, the corresponding R1 (i.e. Below the zone) was at 3195, giving a Y ratio bandwidth of just under 200-points, whereas today, this bandwidth stands at 485-points, so please don’t make the mistake of thinking this is a risk-free market.

The similarities are uncanny, but this time we know what we are dealing with, at least disease-wise, although the jury may still be out economically speaking.


Range:            3480  to  3510         

Activity:          Moderate 

Type:              Neutral



Nb. Our comment for 09/03/20


At least we now know how the SPX reacts to R2, as on the very day of our last comment (31st August) it had a good go at it.

The first attempt saw the upper shadow just touching it, before beating a hasty retreat.

Then we had two more attempts, just touching 3510, before being repulsed.

A couple more in the afternoon, again just touching it, before a more concerted attempt, resulting in the intraday high of 3514.77, and lasting about 10 minutes, before it too got knocked back, resulting in the close at 3500.31.

Tuesday saw the market test the new R1 level, at 3495 (intraday low 3494.60), before it rallied, eventually testing the new R2 level, at 3530, with the intraday high of 3528.03.

This was also a ratio bandwidth test, which normally results in a breakout.

Which is exactly what we got Wednesday, and R2 was now at 3555, which the market again just touched with an upper shadow, then established the intraday low before going back for the breakout.

The point of all this is to underline the fact that this index really needed to go through the entire playbook before it could breach R2, a level of ratio that was backpedalling fast, going from 3510 to 3555 in just three days,

And, is now, holding at 3555, but just look at how much ground R3 has conceded.

It was a hard-fought victory over R2, so hat’s off to the bulls, but how happy they will be within the R2 ratio bandwidth remains to be seen.

Eventually, the ratios below the zone must move up, as must the zone itself, but as it stands it is almost as if the retreating ratios above the zone are the only influence, and just simply sucking the market up after it.

This is all well and good, but sometimes the real battle is holding on to the ground you have just won, as the dynamic delta is there now every step of the way.

And the risk remains, as the Y ratio bandwidth is now an excruciating 510-points wide.

Also, there are just over two weeks to go, so those bulls really have their work cut out for them.


Range:            3555  to  3805         

Activity:          Moderate 

Type:              Neutral



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September 3rd, 2020 by