R3 Ratio rescues the SPX

Classic Ratio stepping-stone decline by the SPX, but can R3 turn the tide?


Nb. Our comment from the 09/20/22


And before you know it, here we are in the October expiry.

Which means we have returned to the intermediary ones, and not only that, but this is a five-week expiry as well.

This can sometimes mean the first week can be a slow-burner, however from the overall level of activity, as well as the daily one, this does not appear to be the case this time.

Reinforcing this, is the change we have seen in the ratios so far this expiry already.

Below the zone, we have seen the appearance of Y1, while at the same time, both R1 and R2 have seen significant dips.

However, the big changes have come above the zone, where in the space of just a few trading days, all the ratios have come in significantly. To the tune of a 100-points, or more.

Admittedly, the zone is unchanged but, the way the ratios are developing, is very bearish.

Of course, October is but two days old, so one shouldn’t jump to conclusions.

On top of which, from R1 to R1, it is now 3795 up to 4205, a whopping 410-points. Not as bad as we have seen, but a widening from September.

Which in itself is not good, as the Y ratio bandwidth has been ridiculously wide for far too long now, and to see the narrowing in Sept now reversed is simply not good.

Unless you are a vol trader that is, as such a wide trading range is certainly not going to hurt your cause any.

For the rest of us, the bearish movement in the ratios is what it is. All it really needs is the confirmation of a move down in the zone.

Or, for the market to break back up over it, and therefore back into bullish territory, which they singularly failed to hold onto in the last expiry, so that’s not a good sign either. All told, not an auspicious start really.


Range:            3795  to  3995           

Activity:          Average

Type:              On balance only just bullish


Nb. Our comment for 09/27/22


The last five trading days has simply been a ratio stepping-stone decline.

We last published on Tuesday 20th. On Wednesday 21st the market intraday low was 3789.49 and close was 3789.93.

R1 was, and still is, at 3795. Of course, this was the day the Fed hiked by 0.75%, but it was the rhetoric that did the damage, so for R1 to even have an influence was pretty amazing. The fact that the market closed just a few points below it, was also rather significant…as we have seen in the past.

Next stepping-stone was R2 at 3745, on the Thursday, and the market duly obliged with the intraday low of 3749.45.

Could this have been pivotal? Obviously not, but as the market gapped down at the open on Friday to 3727.14 this was a moot point anyway.

So, Friday and Monday (yesterday) were all about the next stepping-stone, R3 at 3645.

Fridays intraday low was 3647.47 and yesterdays was 3644.76.

Apologies, we probably should have warned you when R3 fell from 3670 to 3645, sorry.

Anyway, it is still there but, having had two severe battering’s over the last two days, it is understandably weakened. In fact, so much so, it is only just above the threshold, and if the rate of decline continues today then it won’t be for much longer.

Actually, you now have to be looking at the low 3600’s to see the same level of R3 ratio that this market first encountered on Thursday.

Sometimes, strike two can be enough of a confirmation and can turn a market around (especially with the FTSE rebounding so well off 6950, giving it a friend), but please remember that the next time it goes down there, not only is it only just R3 but that would be strike three.

At least the bulls have the dynamic delta batting in their corner now, so the only question that remains is whether or not they want to make use of it?


Range:            3645  to  3745           

Activity:          Poor

Type:              On balance bullish

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September 27th, 2022 by