Nb. Our comment from the 10/12/22
The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.
Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.
On Friday 30th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.
However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.
For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.
The real issue now, is the zone.
Especially as next week is the rollover and expiry.
So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.
First the rate of decline in the ratios below the zone, especially R3, has to be arrested.
Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.
This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.
The trick will be in the timing.
Range: 3495 to 3645
Activity: Poor
Type: Neutral
Nb. Our comment for 10/12/22
Well, you didn’t have to wait long, so we sincerely hope you managed to get your timing right.
The very day after we last published, we saw the inflation figures and the market plummeted…all the way down to R3 at 3495 with the intraday low of 3491.58.
We then saw an almost 200-point bounce before the market trimmed its gains to finish up 177 from its low, but only up 92.88-points from the previous day.
The next day, Friday 14th, was essentially all about trying to get back into the Y ratios. Which to most actually meant trying to get a close above 3695.
It did get up to 3712.00, so it had a chance, but couldn’t quite cement the deal.
Now we are into the rollover and expiry, things are going to get a little tense, especially as the zone has stubbornly refused to move.
Furthermore, the ratios above it haven’t moved, so are applying no pressure at all.
However, below the zone, the ratios are now in freefall.
This can be both good and bad. Good, as it may see the zone move, and 3800 & 3750 are the current frontrunners here. Although don’t rule out 3700 as an outside shot.
Bad, because it further dilutes what little ratio support there was down there. As you can see in the above table all the R ratios have slid back, and by a considerable amount as well.
Basically, this market needs the ratios above the market to lend a hand in determining where the correct zone should be, and not just leaving it down to where the undermining finishes when the music stops.
After all, the Y ratio bandwidth below the zone, is now 350-points wide all on its own.
And that, just has volatility written all over it, large.
Range: 3645 to 3995
Activity: Moderate
Type: Bullish
