SPX R1 was 3280 yesterday, today 3290, but still critical.
Nb. Our comment from 01/23/20
Well if we thought the Jan expiry was thin, then this Feb one has got even thinner.
In fact, it’s virtually opaque.
Please don’t read too much into the fact the zone has moved down to 3145-3155, as rather than being a bullish or bearish signal (down is bearish btw), this movement is really as a result of it being so thin.
Or, to put it another way, devoid of any ratio.
More significant, is the fact that R1 below the zone has not moved at all, which is highly unusual in the first week of a new expiry.
Furthermore, above the zone, R1 has moved in, but only by 20-points, which is nothing considering.
Another very unusual fact, is this expiry is the first of two back-to-back 5-week expiries. One is unusual enough, but we would need a historian to tell us the last time we got two together.
At the end of the day, the really important factor is the immense amount of Y Ratio present, a staggering 260-point bandwidth worth.
So, same as last expiry, it may not happen, but don’t be complacent as the risk of a massive move is there.
In fact, the risk is heightened, and 3% moves are extremely possible, which in cold numbers, is 100-points, so be very aware.
Obviously 3320 and 3280 are the crucial levels.
Range: 3320 to ….
Type: On balance bearish
Nb. Our comment on 01/29/20
As we said in our last comment, please do not read anything into the zone move, this is not because of directional forces, but rather because it is so ridiculously thin out there.
Anyway, it is just back to where it started.
The really important ratio to watch is R1 below the zone, which has risen 25-points to 3045.
Pathetic, in a word, even more so considering how far and how fast the market has fallen.
Doubly so, when one factors in the fact the “type” of activity is bearish, which, to us, means an awful lot more puts traded than calls.
In fact, our Delta Ratio level is standing at just 40.7%, which is very bullish, but, under these conditions, not so much, because of where the market is already, and the colossal amount of Y ratio around.
Admittedly, R1 above the zone has conceded some ground, but the enormous risk is still the 245-points on minimal Y ratio bandwidth.
R1 above the zone was 3280, so, for us at least, it was no coincidence that yesterday the SPX spent a lot of time trying to break back up through it.
For the record the intraday high was 3285.78 yesterday.
Obviously, 3290 is now a critical level, as above it is back into the R1 ratio bandwidth.
If it remains below it, the next support level is the nomadic zone.
But, more to the point, if this index remains in the Y ratio bandwidth then the recent volatility will soon appear as if it was just the hors d’oeuvres.