Nb. Our comment from the 01/24/22

We don’t think we can get away with not mentioning the end of the Jan expiry, especially as there was such a huge battle going on between derivatives and equities. And, we were anticipating a move up in the zone to 7350-7450 but, in the end, what we got was 7450-7550. So, the valiant R3 at 7550 that was such a thorn in the equities side in the final fortnight, did eventually capitulate, ending up as the upper boundary of the zone as well as R1. Meaning the EDSP of 7528.28 was actually in the new zone.

Furthermore, the huge levels of activity have continued on into the Feb expiry, so much so it has almost doubled the overall exposure that had been present, and in just one week. Which was rather fitting for an expiry that produced a 3.63% gain over the five-weeks of its length.

Therefore, it comes as no great surprise that the zone in Feb has ended up matching the Jan one, albeit one was at the end of its tenure while the other is just at the start of theirs.

How long will the market stay in its zone, who knows. But we hope it will be for this first week at least, if only just to let the dust settle.

If it doesn’t, then worth noting on the upside 7550 is now just Y2, so in reality, the fact it is the zones upper boundary will probably carry more weight than the level of dynamic delta produced by a Y ratio. The serious levels don’t start until 7650, and if it continues to be as aggressive as last week, then R3 doesn’t kick in until 7700.

On the downside, then what with the recent move up in the zone, it has left a huge amount of Y ratio below it, so the serious levels here don’t start until 7250. So, if you are a bull, then a week in its zone would be very beneficial as it might allow for the ratios down here to build up a bit.

Worth noting also Feb is the more regular four-weeks trip, and Jan also started their trip in their zone, although back then (20/12/2021) this was 7150-7250.

Range:            7450  to  7550       

Activity:          Outstanding

Type:              On balance only just bullish

Nb. Our comment on 01/31/22

Well, what can one say about last week? Well, quite a lot actually.

Monday was a remarkable day, as it is not often that London loses 200-points. And although the intraday low was 7283.38 and R1 was then at 7250, when you take into consideration not only the magnitude of the fall but also the velocity of it, then that is close enough for us.

And if Monday wasn’t enough for you, then Tuesday was all about Y2, then at 7350.

And the last three days have all been about the zone, 7450 and 7550. And, although the official close on Thursday was 7554.31, that was down to the auction as the real time close was 7550.15, right on the upper boundary.

Which makes the range on Friday, from this intraday high to the intraday low of 7420.20 coupled with the close of 7466.07 (real time 7472.04) a zone bandwidth test. And we did check the honest open, not the official it is the same as the previous days close, and it was circa 7550. Which normally means a breakout the next trading day.

Of course, when we said above that it might be beneficial to the bulls if this market spent the first week in its zone and, although this was the case for most of it, this did not take into consideration the extreme start to the week and then the ensuing no quarter battle to get it back in there.

Therefore, it is scant surprise that there has been considerable change in the ratios. Naturally necessitated by continued high levels of activity.

The changes can be seen above but what is not so evident is the fact that the zone could easily move down to 7250-7350 and, should this happen, it would materially change the entire dynamic of this index for the rest of this expiry.

Otherwise, the main takeaways are the disappearance of all the Y ratio above the zone, and the fact there is now 200-points of the minimal Y1 ratio below it. So, for us, keeping this market in its zone will be hard enough, but if it in itself falls, then a really tough ask, despite the zone bandwidth test on Friday.

Range:            7450  to  7550       

Activity:          Good

Type:              On balance only just bullish