Nb. Our comment on 06/05/23
Again, another good week for those if they had taken note of the ratio levels.
In the first instance, the fragility of 7550 that we suspected proved to be well founded.
On the first trading day back, post the Bank Holiday, Tuesday 30th May, the FTSE did bounce off 7550, and managed a small rally that lasted for about 20 minutes. However, that was all it could muster and it soon caved in once it got tested again, which really wasn’t a great surprise.
Then the Wednesday and Thursday saw the market attack R3 at 7450, in what we referred to last week as “a far more solid ratio level”. It certainly had its work cut out, as on the 31st the market tested it first thing in the morning and it then promptly rallied 65-points where it remained for most of the rest of the day before coming back for another bite right at the close.
Thursday 1st saw the market open up about at about 7478 (usual moan about the idiotic official open being the previous day’s close) and it wasn’t until the late afternoon that saw three spikes down to test it, with one resulting in the intraday low of 7445.30.
So, Friday’s rally was exactly what should have happened.
The other aspect to note is that the zone has moved, so this rally also took the market back into this.
We are now at the half way point of this expiry, so after this week we then get the rollover and expiry, so volatility could actually increase.
Also, there are signs that the zone could also move down again, to 7450-7550, so there is plenty of life left in these final two weeks and something we will have to keep a close eye on. Otherwise, if the zone remains static the market could just stay inside it if it wants a peaceful week, meaning that 7550 and 7650 are the critical levels to watch in the next few days.
Range: 7550 to 7650
Activity: Moderate
Type: Bullish
www.hedgeratioanalysis.com
Nb. Our comment from 05/30/23
All we can say is that we hope you did take notice of the ratio levels before the start of last week.
Monday and Tuesday last week were all about the bottom boundary of the zone, 7750.
The intraday low on the 22nd was 7750.53 and on the 23rd 7747.09.
Quite often these tests can result in a reciprocal test of the other boundary but, if it is evident that this desire is lacking, it can also be an early warning sign.
Either way, the Wednesday saw strike three of 7150, so we would not have expected it to hold anyway, and sirens should have been going off now anyway.
After that it was simply a case of waiting for the market to traverse the Y ratio bandwidth below the zone.
We are not calling the intraday low of 7569.17 on Thursday a test of R1 at 7550, although it wasn’t very far away at all, the market having dropped 200-points at that stage, so the Greeks were spiking a bit.
However, the intraday low of 7556.92 on Friday definitely was. This also resulted in a rather nice, and confirming, bounce of 70-points.
Looking ahead, 7550-7650 is still a very likely candidate to be the next zone and, although it hasn’t actually changed, this means the “bearish implications” we mentioned last week are not so much in play anymore, as the market has made the move already.
Nevertheless, it would be best to follow very closely any activity around 7550 and 7650 this week.
Other than that, although 7550 is still R1, it has only just made the threshold, so do treat even a strike two with suspicion. A far more solid ratio level is R3. Otherwise, it has a huge Y ratio bandwidth to play around in now.
Range: 7550 to 7750
Activity: Poor
Type: On balance just bullish
www.hedgeratioanalysis.com
