Sep

2024

September 11th, 2024 by Richard

The SPX goes from R1 to R1 traversing the entire 260-point Y ratio bandwidth.

Nb. Our comment for 10/09/24

We do sincerely hope you paid heed to what we said last week, as that was quite some ride.

We didn’t need to have worried about whether or not Thursday 29^th August was or was not another test of R1 at 5655, as the market never went there again. So, whether that was two or three tests is now a moot point.

However, there is no denying that the SPX is “still maintaining its rather unhealthy relationship with R1”.

As Wall St. was closed on Monday 2^nd September, it only took three-days to traverse across the entire Y ratio bandwidth to go from one R1 to the other corresponding R1 at 5395.

Albeit with a pitstop on the Tuesday, after it bounced off Y2 at 5495 with the intraday low of 5504.33.

Friday saw the intraday low of 5402.62, clearly getting considerable support from all the dynamic delta from R1 at 5395, as it spent a very considerable time there throughout the day.

So, no surprise to us at least, with the bounce this week but, the real question, is what’s next.

The problem here, is that there have only been a couple of changes in the ratio table (R3 & DR below the zone), and they were at least four-days ago.

This means there has been virtually no movement and so no clue as to which way the pendulum might now be swinging.

On top of which, there is still two-weeks to go, so all this is about a week too early to get the perfect expiry, which would now be to see the settlement in the zone. As the market is still entrenched in its Y ratio bandwidth it could whizz around very easily with minimal interference. The best outcome, would be for it to get back to its zone and then decide.

Range: 5395 to 5655

Activity: Only just registered

Type: Not bullish

www.hedgeratioanalysis.com

Nb. Our comment for 03/09/24

Can’t quite make up its mind, but in the meantime the SPX has still maintained this rather unhealthy relationship with R1.

Apologies for not posting last week, especially as we now realise that this is the first you would have realised that R1 above the zone has moved to 5655.

In fact, it did this way back on the 21^st August, which gave the market the green light to move past 5605 of course.

It was a very significant change as well, as had you known that R1 was standing at 5655 then you would have appreciated why the SPX topped out where it did on three of the five trading days last week.

The exceptions being the Tuesday and Wednesday when it only got to 5631.18 and 5627.03 respectively.

Other than this, there have been a few other changes, easily seen in today’s table, but none nearly as impactful.

Looking ahead, and obviously R1 at 5655 is the critical level and it has now been tested thrice, although there is bit of a question mark over Thursday, so it’s now just a question of how resilient it can be.

The problem for us, is that the intraday lows last week were 5602.34, 5593.48, 5560.95, 5583.71 and 5581.79, which were all in the Y ratio bandwidth, and by some considerable margin.

The point being, is if the bulls were that committed it wouldn’t pull back that far, but rather keep knocking on R1’s door.

If it can get past R1, then there is 70-points before R2 but, worth noting, there is a considerable step-up in the ratios at 5705.

However, the real aspect to be very aware of, is that the corresponding R1 level doesn’t start until 5395. It’s your risk profile but, for us, that’s too rich.

Range: 5555 to 5655

Activity: Poor

Type: Neutral

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, SP500

Jul

29

2024

July 29th, 2024 by Richard

After the FTSE's zones bottom boundary saves the bulls last week, the ratio shoe is now on the other foot.

Nb. Our comment on 29/07/24

Just to keep us on our toes, the zone hasn’t moved to 7950-8050 as we thought it might last week, but has fallen to 8100-8200 instead.

This didn’t affect what happened at the start of last week, but very probably had an impact on what happened on Friday.

At the start of the week, it was indeed all about the bottom boundary of the zone at that time, 8150.

Monday saw the intraday low of 8155.72, whereas on the Tuesday it was 8151.46. That Tuesday test was truly spectacular, as it spiked down at 09:00, touched 8150 and promptly rebounded 80-points. Amazing really. However, as if that wasn’t enough, it retrenched all the way back down to 8150, touched it again at 15:00 before rallying into the close.

On the Wednesday, which was also strike three, we thought the dam would burst, but it recovered to close just above it and back in its zone.

Then on Thursday, the bears attacked again but, yet again, it recovered to close back inside its zone. This really set the field for Friday’s gains, helped no doubt by the upper boundary being no longer at 8250.

Looking at today’s ratio table, we rather doubt the fun is going to stop this week either.

Primarily because R1 now awaits this index at 8300. The question that we need to answer is whether or not the intraday high of 8290.33, coming at the end of a 100-point jump, was a test or not.

We have to go with yes it was, but this week should be more definitive, we are sure.

If the market can cope with the dynamic delta released by this level of ratio, and 8300 has only just crept above the threshold this week so this is entirely possible, then it might just fall to 8350 to provide the real test.

If the bulls can pass that test, then there is a huge jump in the ratios at 8450 and, don’t forget these ratio levels are exponential, that waits in ambush. Our preferred outcome is for it to wallow in the Y ratios of course.

Range: 8200 to 8300 / 8350

Activity: Average

Type: On balance bullish

www.hedgeratioanalysis.com

Nb. Our comment from 22/07/24

The settlement price for the FTSE July expiry was 8174.94, which was in a very weird trading day that was seriously affected by the worldwide IT outage.

Although, with the caveat of whether to trust the data under such circumstances, it seems the FTSE had a whopping trading range of almost 70-points during the expiry auction period, which was fun to watch but perhaps not to be part of.

In the end the July zone didn’t move to match August’s, but anywhere below 8200 was absolutely fine, being in the Y1 ratio bandwidth.

Furthermore, it was probably for the best that the July expiry ended last week, as 7800 was making a play to be the next zone.

So, in a rather bizarre twist, here we are in the August expiry, and the zone has held steady at 8200, meaning this trip starts off in its zone.

However, if you compare the ratios from a week earlier to today’s, you will clearly see the ratios above the zone have strengthened.

The most obvious is the appearance of R1 at 8350, but DR has also moved in a very considerable way.

Below the zone, it’s the exact opposite, with Y2 disappearing as has DR.

More to the point, we are seeing 7950-8050 making a move towards being the next zone.

All three aspects are bearish and, as it is all now Y1 from 8150 down to 7950, there is precious little support.

This means the current bottom boundary of the zone, 8150, will be crucial.

Our only concern, is what with all the problems on Friday, this may not be the correct reflection we are seeing, and it may take a day or so to sort out what might have been affected by last week’s outage.

Range: 7950 to 8150 or 8150 to 8250

Activity: Good

Type: Bullish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Jun

23

2024

June 23rd, 2024 by Richard

After fun and games in the June expiry, the FTSE starts July in an interesting position.

Nb. Our comment on 24/06/24

Rather bizarrely, the zone in June never did actually move, but what we said about 8150 and 8250 being the critical levels for last week was spot on.

8150 was the centre of attention at the start of the week, whereas it was the turn of 8250 at the end of the week.

However, the most impressive moment came at the moment of the actual expiry, when the FTSE dropped 50-points in a heartbeat to achieve the settlement price of 8200.74.

The zone may not have moved physically but, there is absolutely no doubt, that for all intents and purposes it was in fact at 8200.

Now, if you look at the ratio table you will see we have included what the July ratios looked like back on the 17^th, when June was still the front month.

The reason for this, is because it is worth knowing that the zone back then in July went from 8000 all the way up to 8150.

Not only that, but the Y ratio bandwidth stretched from 7750 all the way up to 8250.

The point of being aware of this, is that the zone in July has already moved down.

On top of which, the Y ratio bandwidth still goes from 7800 all the way up to 8250, so hardly any change at all.

Another point to mention, is that although the ratio at 8250 is R1, it is only just below the threshold of being R2. Which starts at 8300 anyway.

Considering the market closed on Friday at 8237.72 then there are no prizes for guessing which way is the path of least resistance.

And, it’s a very long path as well.

From a ratio viewpoint, then this should be one for the bears, at least at the start.

The only fly in this ointment, is whether or not they are still desperately trying to prove this index isn’t controlled by derivatives and is therefore as good to list in as any other market. Good luck with that is all we can say.

Range: 8050 to 8250

Activity: Good

Type: On balance only just bearish

www.hedgeratioanalysis.com

Nb. Our comment from 17/06/24 (NB. The June expiry)

It really does seem an age ago that the FTSE hit the intraday high of 8451.64 thereby experiencing the force of all that dynamic delta generated by R3 level ratio.

Since then, it has been a weekly progression of this index hitting the stepping stones of different ratio levels until it has reached where it is today.

So, and being true to form and as mentioned last week, the first three days of last week were all about R1 at 8250.

The respective intraday highs were 8245.37, 8261.74 and 8243.22 but, and significantly, none of the closes on those days were above 8250. The closest was on the Tuesday when the market closed at 8147.81.

However, the best test came on the Wednesday, with the market at 8200 it spiked up to the intraday high, near enough 44-points, before finishing at 8225 on a 5-minute bar. More impressively, it never got close to that high again for the rest of the day.

Anyway, more importantly, is what about the week ahead, especially as it’s the rollover and expiry.

Looking at the zone first and 8200 hasn’t made any further progress this week, which doesn’t rule it out of course, but it does mean it has its work cut out for it as it has it all to do in just a few days now. 7900 has also now pretty much ruled itself out of the picture, courtesy of it now being R1.

The intriguing aspect is the activity, and we suspect it is that low due to the simple reason that those opening positions have been matched equally by those closing theirs. What this means in reality, is that there is no agenda in play. At the moment at least, as rollovers tend to change this situation dramatically.

Also, don’t forget, this index is now down 200-points (2.4%) so far on this expiry. OK, it was ridiculously high to begin with, taking on R3, and it tried to get back above 8250 and failed, so both facts combined say to us that the trend is down.

Probably, the best-case scenario is that the zone moves to 8200, which would make 8150 and 8250 the critical levels for this week.

Range: 8050 to 8250

Activity: Only just registered

Type: Bullish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Apr

15

2024

April 15th, 2024 by Richard

The Ratio levels dominated the FTSE100 last week

Nb. Our comment on 15/04/24

Again, the last five trading days were dominated by our ratio levels.

On Monday the intraday high was 7953.16, whereas on Tuesday it was 7962.78. The market peaked twice 12-points above 7950, once in the am then again late afternoon but, aside from those twin spikes, the bulk of the days price action was on or around 7950.

On the Wednesday, which was also strike three incidentally, the market pushed through 7950 and went on to test R2 at 8000 with the intraday high of 7999.84.

Having dropped back nigh on 40-points after that test, the bulls were again left scratching their heads as to why everyone wasn’t on their side. This also resulted in a lame Thursday while they appraised the situation.

Evidently, they were desperate to join the other markets in establishing a new all-time high so, on the Friday, they dispensed with protocol and the market opened at about 7970, and then immediately went straight back up to 8000 in the first few minutes. We know the official open was 7923.80, but we all know that’s rubbish. Incidentally, Friday’s test of 8000 was also strike three, the first being back on the 4^th April.

Sadly, and as we mentioned previously, the all-time high of 8047.06 was being protected by R3 at 8050. Now, that is a lot of dynamic delta futures selling, and as the vega was spiking with the market being up 121.18-points, it’s no surprise to us that the intraday high was 8044.98.

Significant as well, that the close was just below 8000.

Now there have been quite a few changes in the ratios which you should be aware of.

Most importantly, is the fact that none of these changes are above the zone. So, you should be very familiar by now with these pertinent levels.

Below the zone we now see Y2 appearing, with a few of the R ratios slipping, which is bearish.

However, the overriding influence this week should be the rollover and expiry, so a retreat back to 7800 is what we would expect anyway, despite the geopolitical situation. Ironically, the May expiry is looking good should the want to have another pop at the new high, but still very early days there of course.

Range: 7950 to 8000

Activity: Moderate

Type: On balance only just bullish

www.hedgeratioanalysis.com

Nb. Our comment from 08/04/24

London was closed last Monday, so the first day of trading was Tuesday 2^nd and true to form it went up to the 8000 level which we mentioned (please see below).

Significantly, it closed just below the other level we mentioned, 7950.

Wednesday was bit of a holding pattern, where the bulls tried to work out why everyone wasn’t on their side.

This meant Thursday was a rerun of Tuesday, significantly topping out at 7990.41, just below the 8000 level, as everyone now knew there was a big futures seller there and didn’t want to be the one getting filled.

Friday was essentially the culmination of the bulls’ failure to deal with the dynamic delta at 8000.

As you can see in today’s ratio table there have been quite a few changes, but it is generally the same levels which are pertinent.

8000 is now out on its own at R2 although, in the last two-weeks, it has gone from being just below the R3 threshold to now, being only just above the R2 threshold.

Should still pack a punch though, or at least for the first couple of days it will.

7950 remains the demarcation line between the Y and R ratios, so still a critical level.

We still have two-weeks to go in this expiry but, by the end of this week, thoughts should be starting to focus on the zone.

In the meantime, now the FTSE is in the Y ratio bandwidth expect volatility and whipsaw, just as we have been seeing in the SPX recently.

Don’t forget, at the start of this expiry the zone was at 7650-7750, and it’s not beyond the realms of possibility that it could revert back.

Range: 7850 to 7950

Activity: Poor

Type: On balance not bullish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Mar

20

2024

March 20th, 2024 by Richard

The FTSE April expiry is here and it could be a fun ride.

Nb. Our comment on 18/03/24

Before we get on to the April expiry we must comment on the last week of the mighty March one.

Obviously, it didn’t finish in its zone on rollover Wednesday but, we suspect they were already counting up their gains from the previous three weeks, so were not that bothered.

The writing was on the wall on Monday, with the market closing at 7669.23, just above the zone’s upper boundary at 7650.

Then on Tuesday, from 11am onwards the FTSE traded between 7740 and 7760, bouncing between those two lines like a ping pong ball. Which back then was testing R2 at 7750. Today, if that expiry was still live, 7750 would be R1.

Essentially, 7750 dominated the last four days of the March expiry. It still could have capitulated at any time, especially either the Wednesday or expiry day, Friday, but it seemed happy to just sit there banging its head on 7750.

Perhaps, with one eye on the April expiry, they were more than happy to see it between 7650 and 7750.

On a final note, regarding March, had the zone changed, 7450-7550 would have been the favourite, so the bulls got away with one there for sure.

Anyway, April, and the most striking aspect is the zone is at 7650-7750, and has been since before the 11^th significantly.

This is all well and good as long as the market is happy to stay in there and, we are certain, the market would be well pleased taking all that time value again.

The issue this time, is that there is an awful lot of Y ratio either side of the zone.

This gives you a potential trading range over the next five weeks (that includes the April Bank Holiday) of 7550 all the way up to 7900.

As we said last week, the FTSE may be arriving at the party just before the police.

However, don’t lose sight of the lack of support either. Either, or both ways, it could be a real fun ride this expiry.

Range: 7650 to 7750

Activity: Strong

Type: On balance only just bearish

www.hedgeratioanalysis.com

Nb. Our comment from 11/03/24 (NB. The March expiry)

Hate to say it but, and this is what is both good and bad about London, the FTSE is currently under total sway of derivatives.

The overall move this week was down 22.76-points, yawn.

However, there wasn’t a day that didn’t involve the upper boundary of the zone. If the market itself can’t generate enough firepower to outdo the dynamic delta, then it will always end up like it has for the last three weeks.

Monday, as anticipated, the FTSE retreated back inside its zone. The intraday high of 7654.81 on Tuesday saw it try, but fail to break back out.

The Wednesday was the big day, despite the official open of 7646.16 the real one was 7651, significantly above the upper boundary. The very first bar on the open established the intraday low of 7639.03 but, those first few minutes, were the only time the market was below said boundary.

Sadly, memories of 7750 curtailed the bull’s enthusiasm and, both Thursday and Friday, were all about said boundary yet again with the intraday lows of 7645.06 and 7646.20 respectively.

This brings it all around rather neatly to the final week of the mighty March expiry.

It really is a great expiry to absorb all that time value due to the fact it is a triple, and therefore at least three times the size of intermediary expiries.

Anyway, rollover Wednesday is now but a heartbeat away so, if can get into its zone for that then job done, then it can party for the final two days.

Being realistic, this expiry has been a result for the FTSE, as if it wasn’t for every other Western market hitting all-time highs, then the FTSE would have spent far more time in its zone. This would have meant visiting 7550 and, with only Y2 beneath that boundary, 7450 would have been a very distinct probability.

So, going nowhere, was actually a result for the bulls.

Early days but, April looks a far better expiry for the bulls, however it may just be wanting to join the party when it’s winding up.

Range: 7650 to 7750

Activity: Very poor

Type: On balance only just not bearish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Feb

20

2024

February 20th, 2024 by Richard

The FTSE starts the mighty March expiry in an interesting situation.

Nb. Our comment on 19/02/24

Well, the last week of the Feb expiry was certainly exciting, as these weeks often are.

The Monday started out quite boring and, apart from a test of the bottom boundary (7555.47), maintained this indifference to the close of play.

Then it came to life on the Tuesday, with derivatives fighting a rearguard action to keep the market even in its zone’s proximity.

Rollover Wednesday saw this fight intensify, but in the end the market did regain its zone on this significant day.

Thursday was like Monday, but Friday saw battle resume and, although the official open was 7597.53 (the previous day’s close), the real open was around 7641. Right on the upper boundary. So, to hold the market for a settlement price of 7660.15, was a hard-fought victory really. Especially, as after that, the market leapt up 114-points.

Good expiry though for derivatives, and you if you knew where the ratio levels were, but the first triple of the year, March, is an entirely different beast.

While in the intermediary expiry Feb, the market found R1 too much to handle at 7700. Or, more precisely, the dynamic delta futures selling equivalent to R1, too much to handle, but everything ramps up in a triple such as March.

Of course, any ratio inspired futures selling, is going to have an impact, its just now, only the higher ratios are the ones that can become pivotal for markets.

As we know, precisely, where the ratio levels are, the only question that remains is how sensitive this market is going to be?

After Friday’s rise, this means the mighty March expiry is already going to start in R1 ratio, a good baptism by fire if you like.

This bandwidth goes up to 7750, so not that far away at all. More significantly, it also skips a level, as it is R3. A very solid R3 as well, so the market should notice it for sure. Quite often, it sometimes does take a while to build up enough of a head of steam for the market to tackle this number of futures selling, so not only is it a high ratio level but its also catching the market early, so best watch out.

Range: 7650 to 7750

Activity: Very poor

Type: Bullish

www.hedgeratioanalysis.com

Nb. Our comment from 12/02/24 (The February expiry)

Indeed, it was “another exciting week going nowhere”.

Actually, it did go somewhere, which was back up to R1. What we are referring to, is the fact that on the week the overall change was a fall of 42.96-points but, and far more importantly, it finished back inside its zone.

And it followed the ratio playbook to the letter again last week.

Monday was a sighting shot, with the intraday high being a test of the upper boundary at 7650.

Which did then prove “porous” as after Monday 7650 hardly caused a ripple in the market’s movement, in either direction. Tuesday and Wednesday, with intraday highs of 7693.60 and 7694.90 respectively, were definitely tests of R1 at 7700.

Interestingly, Tuesday was the only day last week that the FTSE actually closed outside its zone. This just goes to prove how serious they were in trying to continue with the rally, and therefore how serious the test of R1 was on Wednesday.

The last two days of last week were all about the market reestablishing boundaries. The intraday high on Thursday was 7653.40 and the intraday low on Friday was 7557.35. Basically, a two-day zone bandwidth test.

This makes next week rather interesting, especially in light of the changes in the ratio table.

Below the zone it looks quite dramatic but, all that has really changed, is we have lost Y2 which has become R1. The other R ratios remain the same.

Above the zone, they have also strengthened, but not by enough to effect any changes.

The first few days, at least until rollover Wednesday, should be all about the zone but, and as we say every time, the final week of an expiry always gets a bit excitable.

What is different this time, is next up is the mighty March expiry, the first triple of 2024. Suffice it to say, but the zone mirrors February’s however R1 starts at 7650 above it and not until 7450 below it however, as everything ramps up by a factor of three at the least, it can sometimes extend its influence forward into this current expiry due solely to the weight of its numbers alone.

Range: 7550 to 7650

Activity: Very poor

Type: On balance bearish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE

Jun

06

2023

June 6th, 2023 by Richard

Has the SPX bitten off more than it can chew?

Nb. Our comment for 06/06/23

As compliant as the FTSE is being here, on the other side of the pond, the SPX is being rather aggressive.

We did point out last week that sometimes this index can “get a bee in its bonnet” and, we did suspect as much, otherwise we would not have mentioned it.

Essentially, it was looking for a fight, or that was the way it appeared to us at least.

To be fair, it needed something to give it a shake as, up until the middle of last week, the SPX had gone absolutely nowhere. It started this expiry by opening at 4190.78 and by last Wednesday 1^st it had closed at 4179.83.

The only question that remains, is whether or not it has now bitten off more than it can chew…or more precisely, more futures than it can handle courtesy of the dynamic delta that comes with encountering R2 ratio level.

Judging by the reaction yesterday, when it should have “sobered up”, the answer is yes, it looks decidedly uncomfortably with this many futures coming out onto the market.

Luckily, for the market, by shaking things up a bit then we are seeing the ratios above the zone recede quite quickly now.

Amazingly though, the actual zone itself hasn’t moved.

Obviously, today R2 starts at 4270 but, by the end of play we would expect it to have slipped to 4280. Then, during the week, it will slip further to 4305.

The SPX can of course continue to knock on the retreating door of R2 but, next week is the rollover and expiry, and where that will end up is going to become increasingly important.

So, enjoy it while you can, but we feel the bulk of the upside potential has been achieved for this expiry and the downside risk only grows.

Range: 4005 to 4270 (4305)

Activity: Poor

Type: On balance only just bearish

www.hedgeratioanalysis.com

Nb. Our comment from the 06/01/23

Nothing at all to do with the SPX to begin with as we must point out that hopefully you took heed of the dubious nature of the support R1 ratio would provide the FTSE100 at 7550.

Furthermore, also what we said about 7450, as today, in this index, this is what it will all be about, no question.

Looking at the SPX now, and as you can see there hasn’t been a great deal of change.

However, there have been significant developments regardless.

Firstly, although the zone hasn’t changed, it seems like 4145-4155 has eventually made up its mind in the last few days to becoming the very likely new zone.

Secondly, on Tuesday (the first trading day this week) this index hit two very important ratio levels.

Initially it hit R2 then at 4230 with the intraday high of 4231.10.

Then it closed at 4205.52, right on R1.

Overall, this shows that the ratios are retreating above the zone (which we knew anyway), that the zone should move up and, what is not evident in the table, is that the ratios are growing below the current zone.

This is all bullish. However, a lot of this has been already reflected in the market, as the market still remains just below R1 and R2. So, the downside risks still remain, as the corresponding R1 & R2 levels don’t start until 3995-see trading range below.

As there is a lot of potential news to come out, debt and rates to name two, so just to warn you that sometimes if the SPX gets a bee in its bonnet, then it can blast through ratio levels, only sobering up the next trading day.

Range: 4005 to 4205

Activity: Poor

Type: On balance only just bearish

www.hedgeratioanalysis.com

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, SP500

Jun

05

2023

June 5th, 2023 by Richard

Big bounce for the FTSE off R3 at 7450

Nb. Our comment on 06/05/23

Again, another good week for those if they had taken note of the ratio levels.

In the first instance, the fragility of 7550 that we suspected proved to be well founded.

On the first trading day back, post the Bank Holiday, Tuesday 30^th May, the FTSE did bounce off 7550, and managed a small rally that lasted for about 20 minutes. However, that was all it could muster and it soon caved in once it got tested again, which really wasn’t a great surprise.

Then the Wednesday and Thursday saw the market attack R3 at 7450, in what we referred to last week as “a far more solid ratio level”. It certainly had its work cut out, as on the 31^st the market tested it first thing in the morning and it then promptly rallied 65-points where it remained for most of the rest of the day before coming back for another bite right at the close.

Thursday 1^st saw the market open up about at about 7478 (usual moan about the idiotic official open being the previous day’s close) and it wasn’t until the late afternoon that saw three spikes down to test it, with one resulting in the intraday low of 7445.30.

So, Friday’s rally was exactly what should have happened.

The other aspect to note is that the zone has moved, so this rally also took the market back into this.

We are now at the half way point of this expiry, so after this week we then get the rollover and expiry, so volatility could actually increase.

Also, there are signs that the zone could also move down again, to 7450-7550, so there is plenty of life left in these final two weeks and something we will have to keep a close eye on. Otherwise, if the zone remains static the market could just stay inside it if it wants a peaceful week, meaning that 7550 and 7650 are the critical levels to watch in the next few days.

Range: 7550 to 7650

Activity: Moderate

Type: Bullish

www.hedgeratioanalysis.com

Nb. Our comment from 05/30/23

All we can say is that we hope you did take notice of the ratio levels before the start of last week.

Monday and Tuesday last week were all about the bottom boundary of the zone, 7750.

The intraday low on the 22^nd was 7750.53 and on the 23^rd 7747.09.

Quite often these tests can result in a reciprocal test of the other boundary but, if it is evident that this desire is lacking, it can also be an early warning sign.

Either way, the Wednesday saw strike three of 7150, so we would not have expected it to hold anyway, and sirens should have been going off now anyway.

After that it was simply a case of waiting for the market to traverse the Y ratio bandwidth below the zone.

We are not calling the intraday low of 7569.17 on Thursday a test of R1 at 7550, although it wasn’t very far away at all, the market having dropped 200-points at that stage, so the Greeks were spiking a bit.

However, the intraday low of 7556.92 on Friday definitely was. This also resulted in a rather nice, and confirming, bounce of 70-points.

Looking ahead, 7550-7650 is still a very likely candidate to be the next zone and, although it hasn’t actually changed, this means the “bearish implications” we mentioned last week are not so much in play anymore, as the market has made the move already.

Nevertheless, it would be best to follow very closely any activity around 7550 and 7650 this week.

Other than that, although 7550 is still R1, it has only just made the threshold, so do treat even a strike two with suspicion. A far more solid ratio level is R3. Otherwise, it has a huge Y ratio bandwidth to play around in now.

Range: 7550 to 7750

Activity: Poor

Type: On balance just bullish

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Posted in Uncategorized Tagged with: derivatives, FTSE

May

30

2023

May 30th, 2023 by Richard

Once the FTSE's bottom boundary 7750 broke we had to wait until Friday for the test of R1 at 7550

Nb. Our comment on 05/30/23