Is the SPX hinting it wants a new zone?

SPX good bounce off Y2, weekended in its zone, now decision time


Nb. Our comment from the 09/25/20


Volatility and whipsaw, as we say, are still the name of the game.

However, and we must hold our hand up here, these ridiculously wide Y ratio bandwidths are a new phenomenon, so we don’t have much, if any, precedents to draw from.

In the past we have had wide bandwidths, but generally only for one, or even part of one, expiry, and almost always due to a lack of involvement.

This lack of involvement, or fence-sitting, could always be traced to all the market participants essentially not knowing what to do, for a particular reason, and, rather ironically, quite often because of a looming election.

So, under the current circumstances, there is an element of this, but there is also something new now in the mix.

And that is the crash-down, and as we warned, the crash-up.

Make no mistake, because there was no ratio, or no resistance, then the market essentially vacuumed itself skyward, leading to new all-time highs.

There is a large element of this being a direct result of all the money injected, and we did see this in Germany, when they last announced their huge QE programme a few years back, the DAX rocketed up, through very high levels of ratio as the wall of money was just so vast.

Was that a natural market move, of course not.

Is this a natural market move, of course not.

What this means is the $100 question, and looking at the way the ratios are aligned, this market could/should easily trade from 3100 up to 3500, in the next three weeks.

The problem is, if it does, will the momentum be stopped by just R1? Rather unlikely in our opinion.

Is this proper market regulation and supervision? Possibly, if they get away with it, but just like back in March, the risk is there, and plain to see, so no excuse.

Don’t forget the new recent all-time high was a titanic struggle against R2.


Range:            3095 (3195)  to  3295         

Activity:          Average

Type:              Neutral



Nb. Our comment for 09/29/20


Hopefully this week will be as fascinating as last week.

As we saw the market dip down to meet Y2, before staging a great comeback, to end the week at 3298.46.

This meant it spent the weekend nicely in its zone. No coincidence for us.

The slightly troubling aspect, and we are fully aware that we constantly say the intermediary expiries are far more sensitive than the triples, but, even so, Y2?

Still, very early days, but it is something one should be very aware of, as in the land of nothing, even a few futures can have an impact.

Nb. Although activity is “poor”, it only just made that threshold.

Which is also what we say about Y1, as it is like the market is on ice, frictionless, and a just a little impetus can result in a big move.

Do not forget, this Y1 ratio bandwidth alone, goes from 3195 all the way up to 3405.

In normal times, a 210-point, or 6.3% range would be more than enough to keep everyone happy.

And, if it is a textbook expiry, then it moves to test one end, before reversing to test the other, before ending in the zone, which is a two-way trip, so if timed correctly can result in 12.6% in those 4-weeks, which is more than enough for equities, let alone derivatives.

Again, another “no coincidence for us” that last nights close was 3351.60, which is virtually the same as September’s settlement price (or its zone) and which may still harbour aspirations for this expiry.

If 3245-3255 does want to become the next zone, ordinarily we would expect the market to hover in its vicinity, if for nothing else but to establish its credentials, but, being in so much Y1 ratio, we can’t see that happening easily.

So, for us, over the next day or so, the battleground is going to be between its existing zone, 3295-3305, and Y2, at 3405.

Obviously, whichever one wins, will go a long way to deciding what will happen next.


Range:            3305  to  3405         

Activity:          Poor

Type:              Neutral


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September 29th, 2020 by