Nb. Our comment from 11/21/22

What we didn’t know when we last commentated on the final week of the November expiry, was the fact that the mighty Dec expiry’s zone was about to move up.

And as you can see in the above table, not insignificantly, as it jumped from 7200 all the way up to 7400.

Rather interestingly, in the Nov expiry, that zone actually ended up at 7250-7350, so both headed north during the week.

Anyway, we call it the “mighty” expiry as triple witching ones are by their very nature far far bigger than the intermediary ones. And, Dec, is the biggest of these big ones.

Already it is about four times the size of November’s, and that is also when one is at the start of being the near month whilst the others journey is over.

What this means in a practical sense, is all forms of activity get a sizeable boost.

Which also means, a lot of misinterpretation as to what is causing it. With a lot of the Fourth Estate very often ascribing it to various news items, rather than derivatives.

Of course, the fact the market is going to start in its zone is good but, once everybody gets acclimatised, R2 shouldn’t hold much fear.

In fact, triples routinely challenge the DR and B levels of ratio, especially the FTSE, by the end.

Enjoy the excitement, and make a note of where the ratio levels are.

Range:            7350  to  7340      

Activity:          Poor

Type:              Bearish

www.hedgeratioanalysis.com

Nb. Our comment on 11/28/22

Well, the first week was indeed all about the zone but, by the end, it also seems R2 did indeed hold no fear.

Although, we have to admit, judging by the lack of movement, the market evidently found it very difficult coping with the ratio. Bit like walking waist deep in mud, having to deal with the incessant futures selling, if you’re not really up for it.

On Monday last week the FTSE tested the bottom boundary (7350) of its zone with the intraday low of 7343.37.

The Tuesday saw it test the upper boundary (7450), firstly in the morning when it just touched it before getting repelled 30-points, and then again in the afternoon, with the intraday high of 7458.88.

The following two days saw it struggle in R2 above the zone but, on both days, it came down to test the upper boundary for support, or confirmation, with the intraday lows of 7452.84 and 7443.46 respectively.

The end result of all this, is that you now know that the market certainly now knows where the safety of its zone is.

Looking ahead, and there haven’t been many changes in the ratio, and most of those are below the zone, so the ratio situation is very plain to see this expiry.

7550 is now critical for the FTSE and, although it is only DR, it is that level for the market which is coming from R1.

That is a huge leap, 3 entire levels, and don’t forget these are exponential, so this should be like running into a wall, albeit a wall of futures selling.

Also, don’t forget, B1 is also lurking there at 7600, giving it some serious backup.

Looking a lot further ahead and, very much dependant on what happens in the next fortnight, we can see the zone being 7450-7550 in the final week.

Range:            7450  to  7540      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com