SPX and the consequences of so much Y Ratio

The SPX and the consequences of having such a massive Y ratio bandwidth.


Nb. Our comment from the 09/03/20


At least we now know how the SPX reacts to R2, as on the very day of our last comment (31st August) it had a good go at it.

The first attempt saw the upper shadow just touching it, before beating a hasty retreat.

Then we had two more attempts, just touching 3510, before being repulsed.

A couple more in the afternoon, again just touching it, before a more concerted attempt, resulting in the intraday high of 3514.77, and lasting about 10 minutes, before it too got knocked back, resulting in the close at 3500.31.

Tuesday saw the market test the new R1 level, at 3495 (intraday low 3494.60), before it rallied, eventually testing the new R2 level, at 3530, with the intraday high of 3528.03.

This was also a ratio bandwidth test, which normally results in a breakout.

Which is exactly what we got Wednesday, and R2 was now at 3555, which the market again just touched with an upper shadow, then established the intraday low before going back for the breakout.

The point of all this is to underline the fact that this index really needed to go through the entire playbook before it could breach R2, a level of ratio that was backpedalling fast, going from 3510 to 3555 in just three days,

And, is now, holding at 3555, but just look at how much ground R3 has conceded.

It was a hard-fought victory over R2, so hat’s off to the bulls, but how happy they will be within the R2 ratio bandwidth remains to be seen.

Eventually, the ratios below the zone must move up, as must the zone itself, but as it stands it is almost as if the retreating ratios above the zone are the only influence, and just simply sucking the market up after it.

This is all well and good, but sometimes the real battle is holding on to the ground you have just won, as the dynamic delta is there now every step of the way.

And the risk remains, as the Y ratio bandwidth is now an excruciating 510-points wide.

Also, there are just over two weeks to go, so those bulls really have their work cut out for them.


Range:            3555  to  3805         

Activity:          Moderate 

Type:              Neutral


Nb. Our comment for 09/09/20


We sincerely hope you took heed, as this is exactly the result the market was extremely vulnerable to.

In fact, we think it did exceptionally well to hold in the R2 ratio bandwidth for just over a day.

We did tweet yesterday the fact the zone had changed, as it eventually, and expectedly, moved up to 3345-3355.

Which, had you been aware, would have made interpreting yesterday’s market movement very interesting, as the low after the initial burst of selling was 3345.

Or, to put it another way, the first support it found, was the bottom boundary of its new zone.

Decent rally ensued, before it spiked down again, and again, right on 3345.

Considering that this also represented a drop of 81-points, meant that this was despite the considerable impetus it had.

After that the market rallied, to the intraday high, before the final capitulation in the closing stages.

But, significantly, closing below its zone.

So today is sort of the last chance saloon for the bulls, well, for a bit at least.

The good news is that all the ratios are better below the zone, and R1 down here now starts at 3095.

The bad news, is that this is now the target, unless the bulls use the support generated by the zone to stage a fightback.

Both good and bad news, is that the entire Y ratio bandwidth, having started at 435-points wide, went out to 510, but is now just 425.

So not nearly so bad, but still excruciatingly wide, the consequences of which we have just seen.

Therefore, the bulls hope the zone’s support works, but bears not, simple as.


Range:            3095  to  3345         

Activity:          Poor 

Type:              On balance only just bearish



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September 9th, 2020 by