SPX Ratio Table update.

What we said last time:

Obviously, the zone has exceeded expectations, albeit had we published in the last ten trading days this further move would have been apparent, it now being at 2745-2755.

Needless to add, with the zone moving, the R ratios had to recede.

The real question is looking forward, and it is all about R1 now, as it held yesterday (intraday high 2803.12) but was severely tested on Monday with the intraday high of 2813.49.

So, it has held, but under huge pressure, and next visit would be strike 3.

Furthermore, don’t forget this is a triple, and in these biggie’s R1 doesn’t normally carry too much weight.

Having said that, the fact that this is a triple and we only go as high as R3, on both sides, is very alarming, as historically, if this index gets trending, it takes at least DR to act as moderator, and again, this holds true for both directions.

The fact that the R ratios are receding and the zone is climbing is bullish, but what we would really like to see is the ratios below the zone climbing, which they have, a bit, but the Y ratio bandwidth is still 185-points.

This is what it was back on the 13th Feb.

The fact this expiry is so underdeveloped coupled with such a ludicrously wide Y ratio bandwidth means we are exceedingly nervous.

The trading range below reflects the zone, as that should offer support.

Our only surprise is that this index isn’t whipsawing around by 2% or 3% on a daily basis, which makes us suspect that one of the other two must be interacting with their ratios.

Range:            2755  to  2825

Activity:          Moderate

Type:               On balance only just bearish

As it turned out both the other two were interacting with their ratios, but probably most notable was the DJX with R1 at 26200.

Also, as it turned out, a 50-point whipsaw on Monday neatly summed up our last comment.

The reversal on Monday was attributed to trade talks, but we see this so often that logically the common denominator over the last 10 years has been the ratios, as the market opened up 10.68-points, inched a bit higher, then fell 50-points.

Now, was it the futures selling generated by the dynamic delta as this index hit R1 (nb. Exactly the same applies to the DJX and 26200) that caused the market to come off and the story was added after as the explanation, or really, did the trade talks contain that much new news or a surprise, and at that precise moment when it turned?

You will find, every time, the answer is no.

People need to have a reason for the futures selling, it really is as simple as that.

Eventually, hopefully, they will realise these ratios and dynamic delta exist.

Back to the matter in hand, and the Y Ratio bandwidth is now 160-points, so the risk remains.

The appearance of Y1 above the zone means it may move up again.

So, bullish, but not very committed, and the downside risk is eye-watering.

To add a little bit more spice to it all, it’s the rollover next week as well.

Range:           2755  to  2805 / 2830

Activity:         Poor

Type:              Neutral

March 6th, 2019 by