SPX zone moves up, but big risks remain.

Nb. Our comment from 12/27/19


It is always tricky at this time of year, what with half days and Europe being closed for 2 days but the US for only one.

So, thin markets, which are vulnerable to the Santa rally, or what we refer to as the “Bonus Rally”, but there are aspects already apparent for the Jan expiry, now just a few days old.

The first is how very thin it is, with the highest level of ratio being just R3.

Secondly, how much Y ratio there is around.

Thirdly, where the market is currently in relation to the ratio and zone levels.

However, comparing the 18th to the 27th (right to left in the above table) it is plainly obvious the ratios are building below the zone, and retreating above it, both bullish.

As is the fact the zone should soon start moving upwards.

In opposition, is the fact the index is already in the R2 ratio bandwidth with only R3 above, just over 1% away.

What should be a sobering thought, is that the corresponding R ratios do not even start until 3045, an impressive 200-points away.

It may not get a scare, and like Dec, just keep knocking on that ratio door until it gives way, but you should at least be aware that should the bulls commitment waver there is next to nothing below this market to give it any support, which gets our alarm bells ringing at least.


Range:            3230  to  3280          

Activity:          Average      

Type:              Bearish


Nb. Our comment on 01/07/20


We probably should have said in our last comment that the zone was looking likely to move to where it has, so, to avoid the same mistake, it is also very likely to move to 3195-3205 before the end of this expiry.

This is bullish, as is the fact the ratios have built below the zone and weakened above it.

However, this has to be the case for the zone to move.

What is more important is the manner, in that if the ratio declines from say R1 to allow the zone to move in to that vacated space, then that is far more impressive than it just triumphing over the minimal Y1.

In fact, moving up into Y1 is almost more like osmosis rather than an aggressive takeover.

But credit where it is due, as at least its upwards.

And it is all well and good as things stand, but don’t ignore the fact that this index is extremely vulnerable to a shock, as there is still an absolutely massive Y Ratio bandwidth of 185-points.

Even more if you go from R2, which it has been challenging, down to the corresponding R2, which is 260-points.

As ever, it may not happen, and it could turn out to be one of those that continue to just knock on the retreating ratio door, but that doesn’t mean the risk is not there.

The question perhaps should be, is why there is no ratio building up to support this market?


Range:            3230  to  3255          

Activity:          Moderate      

Type:              On balance only just bearish

January 7th, 2020 by