Nb. Our comment from the 02/10/21
In our last note, please see above, we did mention that despite the market’s recent reactions we were still only talking about Y2 after all.
So, our surprise is not so much that it got over this level, but rather the difficulty it has been having since in coping with it.
And we are fast approaching this seemingly endless market manipulation, where once again we are heading for the situation of the stimulus versus the expiry.
The rollover is now a just a week away (boy don’t these 5-week expiries feel far longer than just 5 extra days) so ordinarily we would be looking for the market to gravitate towards its zone.
However, we have seen this before, and being so sensitive coupled with being encased in the minimal Y ratio, we could easily see a repeat of the zone ending up where the market is.
The weird aspect is that there has been virtually no movement in the ratios at all, and this holds true not only for our last note but also the previous one from the 2nd. Bizarre really, especially when this is particularly true below the zone, where there is more potential for it to do so than we would normally ever see.
Although, the last time, it all started with a click of a switch, and let’s face it, we are only talking about minimal ratios.
Long gone seemingly are the days when this index would happily take on the high R ratios and we would be happy to settle just for the expiry to be in the Y ratio at all.
Considering the lack of any real ratio opposition it is actually a concern that this market isn’t taking more of an advantage, so we have to remind everyone that the overall Y ratio bandwidth is still a gobsmacking 410-points wide
Perhaps the stimulus is not so much bullish motivation, but rather the aircushion supporting?
If so, the bulls better pray there’s no sharp objects in the vicinity.
Range: 3805 to 3955
Activity: Very poor
Type: On balance bearish
Nb. Our comment for 02/17/21
The SPX never did really find any aggression, so as exciting as it was, from our perspective, it was all rather lame.
Y2 did revert back to 3905 last week, but the market was already above it anyway.
And only today has it moved to 3930, so the same still applies.
However, this time the market is very close to it, so here we are on the rollover and we have 3930 as the demarcation line between Y1 and Y2.
It really shouldn’t be making such a meal out of trading in the minimal Y2 ratio, but it obviously is.
And so, we suspect it will be far happier below 3930.
Although Y2 has moved up below the zone, this bandwidth has actually widened, now standing at 260-points.
In the absence of any FTSE-like behaviour where it fancies taking on the R ratios, we can only see it being happy in Y1 and looking for a quiet and peaceful expiry.
This probably means the zone moving up to 3895-3905, but in truth, anywhere in this absolutely minimal level of ratio would do.
With the mighty March expiry just round the corner, we suspect this level of sensitivity is going to come to an abrupt end a lot sooner than later.
Out of interest, an early preview of said March expiry, and the zone is the same as Feb’s, and not looking like there is that much inclination to move either.
Y2 next trip starts at 3855, and R1 at 3955, or at least this is where they are today.
Overall, it is no where near as lopsided, with our delta ratio coming in at 62.7% (Feb’s 42.1%) and below 50% is very bullish, but above 100% very bearish.
However, there is still a lot more ratio below the zone than above it, but this of course should change dramatically as we are now in the rollover and moving rapidly towards the expiry.
Range: 3805 to 3930 or 3930 to 4005