Nb. Our comment from the 12/21/21
We have to start with the recently ended Dec expiry and, boy did they try hard to beat Y2 at 4705, with the ultimate failure resulting in an expiry nearer 4600 than 4700. However, this was still in the middle of the absolutely minimal Y1 ratio.
So, no problem, and just to add some icing on the cake the Jan expiry has its zone at 4600, so all in all a win: win situation.
That’s pretty much it for the good news though…unless you’re a vol trader that is.
The respective Y ratio bandwidths are actually slightly wider this expiry (Y1 = 235 & overall 435) but what is different is that they are almost evenly spaced out on either side of the zone.
This makes today very interesting for this expiry, as currently they are below their zone and therefore in bear territory.
To put this into perspective, yesterday in the FTSE it opened very weak, then went below its zone, but once it recovered from this dip it traded for the rest of the day right in the middle of its zone, around 7200 for those that don’t know.
So, for the SPX, the first target for today should be to regain its zone, then after that to hold onto it. Should it be particularly confident then it could even reclaim the bullish territory above its zone.
Considering what’s happening covid-wise at present, we think this is actually a very positive outcome considering. The question is whether it is just as a result of the market rebalancing itself post the Dec expiry (which gets our vote) or the bulls are back in town and have their sights still set on a Santa rally.
Of course, it could be a combination of these factors or something else entirely, but whatever it is then, you won’t get any ratio support until 4495 or resistance until 4730, so best plan accordingly.
Range: 4495 to 4595
Type: On balance decently bearish
Nb. Our comment for 01/05/2022
A lot has happened since we last posted, both in the ratios and in the market.
Although a Santa rally, or what we like to call the year end performance bonus rally, was not the hardest call to make.
Way back on the 23rd December this market hit Y2, then at 4730 (please see above) with the intraday high of 4740.74 and a close at 4725.79.
This set the tone, as such a deep incursion into Y2 was quite the hint, and the very next trading day saw Y2 capitulate, and over the next few days we saw it slide from 4755 down to 4805.
The three intraday highs last week of 4807.02, 4804.06 and 4808.93 tell their own story, and so, when it came to yesterday’s 4818.62 it was already on strike 3.
Also, we would be very surprised if Y2 remains at 4805 much past today.
Talking of today, only now has the zone moved, standing at 4695-4705, meaning it has taken just over two-weeks to get back to where it was in the Dec expiry.
And, we very much doubt it is going to stop here either.
All in all, quite a few changes, but none of which that can take us away from the fact that this year looks like picking up from where most of last year ended.
Basically, knock, knock knocking on the retreating ratio door. The big question is which door, Y2 or R1?
In the meantime, the Y1 ratio bandwidth has gone from 235 to 285-points, while the overall Y ratio bandwidth has gone from 435 to 460-points.
This is not symptomatic of hugely committed bull market, but rather more like one stuck in automatic, while all the time there is the potential for a blink of the eye 10% correction.
Range: 4705 to 4805
Activity: Very poor