R1 Ratio stops the SPX dead.

R1 stops the SPX dead.


Nb. Our comment from the 01/05/21


It is a shame we can’t also include what we said the time before above, as our comment from the 23rd December may well be as pertinent today as they were back then.

Essentially, we have got the move in the zone, as anticipated.

And, yet again, in one of those coincidences that happen far too often, the market finishes as close to the middle of it as is practically possible.

Which actually means, a new year and now, a fresh start.

As in, it moved into its zone just as its zone moved there, so it has zeroed the clock to all intents and purposes.

Which brings us round to our comment before last, which basically pointed out that should the zone move before the market rose, the market could find itself by default in bear territory, or in our definition, below its zone.

This is a serious position, as the entire dynamic changes when the bears rather than the bulls are in charge, and for any market participants this should be worth knowing.

Now being in its zone, this index has a totally free choice now. Bulls equals above 3705, bears in charge, below 3695, simple stuff.

But worth bearing in mind, very few will have known the zone has moved (or perhaps the significance of this) so over the next day or so it will be a journey of discovery, not design.

But before you get all gloom and doom, don’t forget a rising zone is bullish (although this is now just where the Dec expiry ended), as is rising ratios below, which is perhaps not so evident in the tables, but there is definitely a groundswell going on.

Also bullish is falling ratios above, which is true, but very pedantically, so certainly not convincing.

Finally, and although this index has been surprisingly sensitive to just Y2 ratio so far this expiry, even this bandwidth stretches for 260-points, and, so far, the only tests of it have been above the zone.


Range:            3695  to  3705        nb.Y2 to Y2 is 3495  to  3755           

Activity:          Very poor

Type:              Bearish



Nb. Our comment for 01/08/21


And there we have it, the first test of a R ratio this expiry.

Which is very surprising, as the SPX is seldom this timid.

It is therefore a good idea to remind everyone exactly how much difficulty this index had with coping with just Y2 ratio, first at 3705 in the first week, then 3730/3745 in the second, and until yesterday, the current level at 3755.

So, what wasn’t a surprise, was the fact that this index camped out just below where R1 was yesterday, 3805.

If you knew it was there, then you understood what was happening, namely the market reaction to the dynamic delta.

The fact it has slipped a bit today has been coming, as we have persistently mentioned that the ratios above the zone have been falling, albeit “pedantically”.

Furthermore, in our last comment (above) we said it had “zeroed the clock”, so when it closed that day above 3705, this should have told you the bulls were back in charge, and an attack on R1 was more than likely.

What happens now is the big question, and as you can see in the above table R1 has slipped to 3815.

By Monday this in all likelihood will become 3830.

But, for a market that struggled against the lowly Y2, from 3805 up to 3830 is what we would now refer to as a step-up, so could easily still cause some reluctance among the bulls.

On top of this, we are already about to enter the rollover and expiry, so the zone should start to exert a gravitational pull, which is not to say it can’t or won’t move again, but we can’t see it get higher than 3745-3755 as things stand.

It wouldn’t be the first time this index just kept battering away on a retreating R ratio door, tediously repetitive in fact, but please don’t lose sight of that ginormous Y ratio bandwidth below this market, as that should scare even the most hardened bull.


Range:            3705  to  3815           

Activity:          Moderate

Type:              On balance bearish


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January 8th, 2021 by