Nb. Our comment from the 09/27/21
Again, we have to harper on about the data, and if you believe the muck that is the official stuff then all we can say is more fool you.
Last Monday was all about R1 at 6950, and the official open was 6963.64, which is blatantly rubbish (we are finding it hard to be polite btw) as it was nearer 6883, which means R1 didn’t really have a chance. Or more importantly, the dynamic delta, which in this instance would have been futures buying, didn’t even have a chance to kick-in.
Then again, on the Tuesday, the official open was 6903.91, but back in the real world it was actually nearer 6945. Which again, is highly significant, as that is right on R1.
Once that had been “recaptured” then it was all going to be about the zone. The intraday high on the 21st was 7004.88 for example. Then we were again back into the realms of fantasy, with the open on the 22nd officially being 6980.98, but in fact it was nearer 7034, which puts it firmly back inside its zone.
The intraday high of 7090.48 providing the first test of its zone’s upper boundary, and by definition this also meant it was a zone bandwidth test (both ends in a day).
Normally, this means a breakout the next day, which it almost achieved, getting as high as 7131.43, but for some reason then capitulated.
This was bit of a surprise to us, as above 7100 it is only the minimal Y1, which is in fact so minimal we could easily see it becoming the next zone, so it really doesn’t carry much dynamic delta at all. If fact so little it would be hard to distinguish from normal everyday futures activity.
But, the zone itself is a safety haven, and we suspect this is what it is all about, and on twitter we have been mentioning synchronicity a lot, as the SPX also ended the week in its zone having followed a very similar path to the FTSE in its first week of the Oct expiry. Naturally “safety” also equals undecided, which is the natural place for a market to gravitate to should there be no great desire to take a side. So, this week, will be all about whether or not it wants to take a view, or just happily languish.
Range: 7000 to 7100
Activity: Very good
Nb. Our comment on 10/04/21
And “happily languish” it was, as the FTSE stayed zone-bound practically all week.
The first four days were all about the upper boundary, and on Thursday so much so we actually checked to see if the zone had moved to 7050-7150, as this is still very much on the cards (please see our last note above).
It hasn’t, but the hedge ratio is so small we are seriously considering making the zone 7000-7150, and although we haven’t, it is perhaps worth thinking of it as such.
On Friday, it was all about the bottom boundary, where it has in fact dropped to Y1 from Y2, and had done so for that day as well.
But the market opened weak, again please ignore the “official” 7086.42, as it was almost 100-points below that…misleading or what, but as they say in system (aka algo) trading about data, “crap in crap out”, and the intraday low of 6989.64 was just after the open. The fact it was now contending with just Y1 meant the support the market received was all the more impressive, as it never looked back or even suggested it was going to test the bottom boundary at 7000 again.
Of course, the market could continue to “languish” in its zone, by which we mean 7000 up to 7150 but this would be a real waste of a great opportunity, especially as we are just at the half-way point of this expiry.
Naturally, we are referring to the fact that R1 above the zone still does not kick in until 7250, and as the market has already tested this ratio level below the zone it is only appropriate that it should test this corresponding ratio at the other end.
It is the easiest path to a new all time high this market has had all year, so it would be almost criminal to waste it, but at the same time understandable as it got such a bloody nose trying this in the Sept expiry.
Of course, only time will tell, and October is always a strange month, but what a chance it has so it really would be a shame to waste it.
Range: 7000 to 7100 (7150)
Type: On balance bearish