Nb. Our comment from the 05/24/21
Well, the FTSE has a very big decision to make, and right at the very start of this the triple witching June expiry.
This can be a good thing, as it should set the tone for the remaining four-weeks, so a baptism by fire can quite often get everyone up to speed quicker than normal.
By this we mean by closing just above 7000 it will now find itself in a very narrow 50-point R2 ratio bandwidth, with R1 below it, and R3 above.
And the R3 above is a very robust R3, being only marginally below the threshold of being DR, and please don’t forget, as these ratios are exponential then this is a significant amount of ratio even for a “biggie”.
It is not unheard of for triples to be very aggressive, and in the past, we have seen them trade between the B ratios, however it would be quite a leap for everyone to suddenly turn on that particular tap for two reasons.
Firstly, it is very early on in the expiry, literally day1, and secondly, although it has been acting aggressively recently, it baulked severely at R3 when it hit it at 7150 the other day.
In fact, such was the reaction it went all the way down to the bottom boundary of its zone, at 6800.
Which is a real shame for those chasing a new all-time-high, as practically every 50-points above R3 is a significantly higher level of ratio, which means an awful lot of futures are going to have to be absorbed before they can track higher.
Not impossible, but unlikely, we think.
But, either way, it should certainly be an exciting start to this, the second biggie of the year.
Range: 7000 to 7050
Activity: Moderate
Type: On balance only just bearish
Nb. Our comment on 06/01/21
Resilient or stubborn, difficult to tell really, but either way the inescapable truth is the FTSE desperately wants to go higher.
The problem is R3 at 7050 standing in its way.
In our last note we mentioned that this level was only just below the DR threshold, so although it hasn’t actually changed in classification, it has changed numerically, and is now just above the mid-point of the R3 range, rather than at the top.
Which is hardly very surprising, considering the absolute battering it has taken all week.
Literally every day the market tried to get past the dynamic delta at this point, and last Friday just typified the daily efforts, with at least three peaks running up to and just kissing 7050, before pulling back.
Not too sure why they don’t do their normal trick, which is to close in real time just below 7050 (or whatever is the problem level), then use the auction to get above it, which of course generally works as the futures market is closed when this auction takes place.
The U.S. take an entirely different approach, as they tend to use the opening gap up, as witnessed last Friday, which allowed them to get over Y2 at 4205.
Obviously 7050 is still key, but please note the other end of our trading range, R2 at 7000, which has seen two tests, with the intraday lows of 6998.19 and 7008.53 on Wed and Thu respectively.
So, one more would make that strike 3.
The other main point to make you aware of, is the appearance of some Y ratio below the zone.
As it is highlighted in the above table it is difficult to miss, but what may not be apparent at first glance, is that this bandwidth is a whopping 400-points wide.
Range: 7000 to 7050
Activity: Poor
Type: On balance bullish
