It is still all about R3 Ratio for the FTSE

With the rollover and expiry looming the FTSE's zone becomes more significant.

Nb. Our comment from the 01/10/22

As suspected R1 at 7400 didn’t last the night, leaving 7450 to take up that mantle.

And last week R2 was at 7500, and between these two levels they pretty much controlled what was happening in the FTSE.

The Tuesday and Wednesday showed just how desperate this market was to catch up with the rampant US markets, and on both days the market made deep incursions into R2 (above 7500) and even closed just north of it, but it was very plain to see that they really didn’t know how to cope with the persistent futures selling brought about by the R2 amount of dynamic delta.

Thursday was all about 7450, and the actual real world intraday high that day was 7498, not the aberration official 7516 caused by their weird policy. Whilst on this subject the real time close of the FTSE on Tuesday was actually 7497.42, it was the auction that took it to 7505.15, which is a cheat in our book.

Anyway, to more pressing matters, and this week the zone has moved up. Not expected, but also not surprising, and as there are still two weeks to go not that important last week anyway.

The real battle has been with R2, which is now gone, although we are sure 7500 will have legacy impact.

The important level is now 7550, which goes straight to R3 from R1, so will be all the more impactful for that. But, if this market couldn’t really cope with R2, and these levels are exponential, we just can’t see it handling this even greater number.

So, in our view, there is now very limited upside, and if the UK wants to follow the US and run for cover in its zone, then at least that has now moved closer. Nevertheless, the upper boundary is still 150-points south, so not insignificant.

This means 7450 and 7550 are the critical levels this week.

 

Range:            7450  to  7550       

Activity:          Good

Type:              On balance only just bullish

 

Nb. Our comment on 01/17/22

All we can say is that we hope you read last week’s comment (above), as if you did then literally everything that happened last week should have made sense.

The first two days were all about R1 at 7450, the market at that time being in the R1 ratio bandwidth of 7450 to 7550.

Had 7450 failed, then we would have been looking at a rather rapid retracement back to the zone.

But, it held, which meant that the market should then test the other end of this bandwidth, namely 7550.

The trouble here was that it wasn’t just the next level up in the exponential ratio scale, R2, but rather R3.

Which is a very significant increase in the number of futures selling bought about by the dynamic delta.

The fact that the market managed to eke out three new all-time-highs was very impressive under these conditions. The fact that two of them were by just a point or so was therefore all the more understandable.

And we must say it, but over the last three days of last week, on any chart timescale it was increasingly blatant that 7550 was a very serious level of resistance, such was the constant interaction with it and the repeated use of the closing auction to try to influence matters.

So, the bulls are going to be rather dismayed to learn that even after all that constant battering, R3 is still there.

And, to make matters worse, this week it is the rollover and expiry, so the zone is going to be ever more influential.

The good news is that it is looking likely that this will move up to 7350-7450.

But if you thought last week’s battle with R3 was intense, then this final week should just raise the stakes even more. What fun.

 

Range:            7450  to  7550       

Activity:          Very poor

Type:              On balance only just bearish

 

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January 17th, 2022 by