Nb. Our comment from the 11/08/21
Well, we certainly didn’t get the retreat back to its zone but, there is definitely no doubt now that wants to go better. It’s just a question of will the ratios let it.
This time last week, Monday 1st, saw the intraday high of 7303.39 giving us the first definite test of R3 at 7300.
We then had to wait until the Thursday 4th before the market ventured back there again, this time with the intraday high of 7292.96.
The next test would be strike 3 and anyway we are 99% certain that by Friday 7300 had dropped to R2. Don’t forget the last time we saw R2 it was at 7250, the level that had such an influence on this market in the second week of this expiry, so it is no pushover in itself.
This is probably why the market hovered around 7300 for most of that Friday but, R2 is obviously a lot less of a hurdle than R3.
And if there was any doubt as to how much activity there must have been to bring about such a change, then all you need to see is that B1 has now gone.
The problem for the FTSE is that it hasn’t really got rid of its R3 problem, it has just pushed it back to 7350 now.
It does mean though that everyone is hitting new all-time-highs, with the FTSE managing a rise of 0.91% on the week. However, with the ratios holding it back this a very poor comparison to the DAX, CAC and SPX which managed 2.33%, 3.07% and 2.00% respectively.
There is still two weeks to go in this expiry but towards the end of this week the rollover and expiry will start to play a more important role, and this is across all markets. On top of this, next up is the mighty Dec expiry, the biggest of the big, so it’s no bad thing the markets are getting used to dealing with higher levels of ratio but, at the end of the day, one or the other will have to give way.
Range: 7300 to 7350
Activity: Moderate
Type: Bearish
Nb. Our comment on 11/15/21
Well, you can’t fault the bulls for giving it everything they have got, and Wednesday and Thursday last week were the really important days.
Monday basically saw it camp out at 7300, then Tuesday finished at 7274.04 so we thought “job done” but, Wednesday was important because the market reclaimed R2 at 7300, ending at 7340.15.
Thursday was important because (and we checked it still was) the market got above R3 at 7350, although it was plain to see it really did struggle with that amount of dynamic delta.
But credit where credit is due, and they did manage to close above it but, this only made Friday hugely significant, and the fact the market closed at 7347.97 says it all really.
This week the FTSE now faces the rollover on Wednesday and the expiry on Friday.
Throughout the zone hasn’t changed, and the upper boundary remains 200-points to the south, which is going to hurt should the market want to get there for the final reckoning. In the meantime, obviously 7350 remains significant, but now 7300 takes on a whole new importance. As below that it is now just Y2 ratio, which will seem like an absolute dawdle having mixed it with R3.
We have no doubt that there will still be a few more twists and turns in this expiry yet but, as it draws to a close it will become far far harder for equities to ignore derivatives. But it is great they have given it a go, as with the mighty Dec expiry up next, they will certainly welcome the step up in activity.
And having mentioned the Dec expiry, which is already three times the size of this one although, which you may find surprising, this is somewhat disappointing, the zone is actually currently below where November’s is currently, but we fully expect it to match it by the time it becomes the front month. Still sobering though.
Range: 7300 to 7350
Activity: Moderate
Type: Bearish
