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 4th 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 2nd 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.

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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 11th 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

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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.

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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 1st 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

 

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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 30th 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 31st 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 1st 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 22nd was 7750.53 and on the 23rd 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

www.hedgeratioanalysis.com

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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

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 22nd was 7750.53 and on the 23rd 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

www.hedgeratioanalysis.com

 

 

Nb. Our comment from 05/22/23

Welcome to the June expiry, the second triple witcher of ‘23.

In the end it was a very interesting battle last week for the finish of the May expiry, especially on rollover day, Wednesday 17th, when the market spent almost the entire day flip flopping either side of 7750 before losing 27-points and closing down at 7723.

As one can see in the table, the market did indeed close in its zone on the Friday, albeit only just. However, the settlement price was 7779.57, so very much inside its zone for when it counted (literally).

All told, the FTSE lost 159.39 points over the course of the May expiry, which was essentially all at the very start, way back on the 24th April, when it had the temerity to get close to R1 at 7950.

So, apart from the obvious hard work it took to keep the market in its zone and looking just at the closing price, 7756.87, it would have appeared to be an “easy and peaceful” expiry as the index only moved a whopping 2.25-points in the entire week.

Looking ahead to June and the most obvious aspect is that the zone is the same as May’s was, 7750-7850. However, what the table here doesn’t show, is that 7550-7650 has made a very strong move towards being the next zone.

No need to tell you that this would have quite significant bearish implications.

It is also probably no coincidence that the R ratios start at 7550 below the zone.

Above the zone it is worth noting that 7950 has gone from R2 up to R3, and as these ratios are exponential, this is a huge jump from the minimal Y ratios should the bulls feel so inclined to chase it back up there. Interestingly, the DAX reached a new all-time intraday high on Friday, while London’s record stands at 8047.06 now.

Whichever way the market does go, there is Y ratio either side of the zone (400-points in total), so the FTSE could have a very decent trading range this expiry.

 

Range:            7750  to  7850      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

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May 16th, 2023 by Richard

Job almost done in the SPX May expiry, but June may well be a different kettle of fish.

Nb. Our comment for 05/16/23

What neatly encapsulates this expiry is the fact that this market closed at 4137.04 the day before we last posted, and here we are with yesterday’s close of 4136.28, a miniscule move.

OK, it has only been a few trading days, but the point remains.

Just to emphasise this, the close on the very first day of this expiry, the 24th April, was actually 4137.04…and no this is not a typo, this is really the exact same close. Furthermore, it’s not as if we have selected dates to fit, as today is our normal posting date for the SPX, and we can hardly fudge the first date of the expiry either.

In a way this has been a fortunate turn of events as, way back at the very start of this expiry, the Y ratio bandwidth stretched from 3945 all the way up to 4270. So, it could very easily have been a very volatile expiry indeed.

As it happened, all we got was a test of Y2 at 4180 on the 1st May (intraday and expiry high of 4186.92) before it fell back to meet the rising zone. Which was what last week was pretty much all about, especially the last three days.

Of course, this week it is all about the rollover and expiry, but really all the hard work has been done, or at least in our book it has. To explain a bit further, the Y1 ratio bandwidth alone goes from 3995 up to 4205, which is a bit odd to be fair, but means there is no, or virtually no, pressure on this rollover and expiry as long as it stays within these parameters. In reality, only the rollover is fine, so it just needs today and tomorrow to be boring and its job done.

More importantly, looking ahead to June and, it being a triple and therefore significantly larger, can be and normally does exert influence from early on.

Interestingly the zone in June is still at 3995-4005, which will be an overhanging risk to the May expiry, unless it does change and move up.

Where, at first glance, 4145-4155 looks to be the front-runner, which is actually higher than May’s. However, with so much more ratio about, and therefore by definition, so much more dynamic delta, we very much doubt this “relaxed” environment will be able to continue for very much longer. No bad thing we think either.

 

Range:            4105  to  4205           

Activity:          Very poor

Type:              Bearish

 

www.hedgeratioanalysis.com

 

Nb. Our comment from the 05/11/23

 

Apologies for not posting sooner in respect of the SPX but, in truth, very little has actually happened since we last commented.

What has changed, is that the zone has eventually moved up, which happened the other day, the 9th May.

So, this has been a very long time in the making, which has been rather boring in all honesty.

In the meantime, the index has been “pinging” about so, all in all, it has been acting totally normally under these conditions.

The only aspect you may have missed, is that back on 1st May the intraday high was 4186.92, which was a very solid test of Y2 ratio, then standing at 4180.

This is also, so far at least, the expiry high.

However, the zone may have moved, but as this has just been inside the overall Y1 ratio bandwidth and, as it was so well flagged in advance, this is hardly a game-changer.

What it has done, is level out the ratios on either side, so one could say it is now a far more balanced overall ratio alignment.

Or more graphically, there is now 100-points of Y1 ratio either side of the zone. The depth of the Y2 bandwidth is still skewed in favour of the bulls…as in, there is far more of it above the zone than below it.

Although, at the end of the day, with over 200-points of Y1 ratio bandwidth to play around in this index has so much scope this extra distance to R1 will not exert any great influence as things stand with the market where it is currently.

The only surprise, to us at least, is why we aren’t seeing 100-point daily moves?

 

Range:            4105  to  4205           

Activity:          Poor

Type:              On balance just not bullish

 

www.hedgeratioanalysis.com

Available to buy now

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May 14th, 2023 by Richard

The FTSE100 regains its zone as we enter the run-in to the rollover and expiry.

Nb. Our comment on 05/15/23

This has definitely been one of those expiries when it has all been down to the market and how it has/will interact with the ratio levels as, on the whole, they have remained static throughout.

For example, below the zone, this time there is only a minor change to R2 and the only other change this expiry was to R1 back on the 10th. Above the zone there have been a few more changes, but all mainly confined to R3, which hasn’t had much impact in truth.

So, as we have been saying, it has all been about how the FTSE has been interacting with the ratio levels at each boundary of its zone.

Very neatly encapsulated by Friday’s action centred around 7750, with the close actually managing to get the index back inside its zone for the weekend.

All they have to do now is hold it in its zone for either the rollover, the preferred choice, or the actual expiry.

Which, when you consider the last two expiries where we were one of the few, if not the only ones, to warn of the dangers in the March expiry (fell 543.53) and then call the bounce in the April expiry (up 478.82), it’s not surprising it wanted a rest before the second triple witching expiry of the year, June, kicks in.

And we did say we would try to give you the “head’s-up” for June so just to let you know this is how things stand at the present.

Don’t forget it is still very early days for the June expiry but the zone here is at the same level as the May expiry, which could make for a very easy and peaceful transition. However, the real meaty ratios don’t kick-in until 7450 below the zone and 8050 above it, although they do get a bit chunky at 7950, so plenty of room for a lot of excitement as well.  

 

Range:            7750  to  7850      

Activity:          Poor

Type:              Bullish

www.hedgeratioanalysis.com

 

 

 

Nb. Our comment from 05/10/23

All these Bank Holidays are creating mayhem to our normal schedule of publication, so apologies for that.

Tuesday 2nd May may seem like an age ago that we last commented but it has only been five UK trading days.

As you can see in our previous comment, we didn’t really understand why they tried so hard in the last hour of trading to get the FTSE back above its zone but, in hindsight, it was almost definitely just for valuation purposes over the long weekend that was also a month end, especially when one considers what happened last week.

And rather than be all about the upper boundary of the zone, last week was all about the bottom boundary, 7750.

The market did close below the zone on Wednesday (rate decision day) but quickly regained it on Thursday.

Meaning four out of the five last trading days have been in its zone.

For those that have been following how the dynamic delta affects the benchmark indices, this pattern for the FTSE should not be new.

First week about the resistance above the zone. Second week all about the upper boundary, while the third all about the lower.

And before you know it, hey presto, we are into the rollover and expiry week.

So, things should at least get a bit more agitated as we approach this but, please bear in mind, that not only has time value has been disappearing rapidly but the second triple of the year has been sneaking up on us, the June expiry.

Hopefully, we will be able to give you the head’s-up next week as to how June is shaping up, but in the meantime just concentrate very closely whenever this index approaches one of its zone’s boundaries.

 

Range:            7750  to  7850      

Activity:          Moderate

Type:              On balance only just bullish

www.hedgeratioanalysis.com

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October 18th, 2022 by Richard

After the huge bounce off R3 at 3495 on Thu 13th the SPX now needs help with the actual expiry.

 

Nb. Our comment from the 10/12/22

 

The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.

Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.

On Friday 30th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.

However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.

For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.

The real issue now, is the zone.

Especially as next week is the rollover and expiry.

So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.

First the rate of decline in the ratios below the zone, especially R3, has to be arrested.

Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.

This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.

The trick will be in the timing.

 

Range:            3495  to  3645           

Activity:          Poor

Type:              Neutral

 

 

Nb. Our comment for 10/12/22

 

Well, you didn’t have to wait long, so we sincerely hope you managed to get your timing right.

The very day after we last published, we saw the inflation figures and the market plummeted…all the way down to R3 at 3495 with the intraday low of 3491.58.

We then saw an almost 200-point bounce before the market trimmed its gains to finish up 177 from its low, but only up 92.88-points from the previous day.

The next day, Friday 14th, was essentially all about trying to get back into the Y ratios. Which to most actually meant trying to get a close above 3695.

It did get up to 3712.00, so it had a chance, but couldn’t quite cement the deal.

Now we are into the rollover and expiry, things are going to get a little tense, especially as the zone has stubbornly refused to move.

Furthermore, the ratios above it haven’t moved, so are applying no pressure at all.

However, below the zone, the ratios are now in freefall.

This can be both good and bad. Good, as it may see the zone move, and 3800 & 3750 are the current frontrunners here. Although don’t rule out 3700 as an outside shot.

Bad, because it further dilutes what little ratio support there was down there. As you can see in the above table all the R ratios have slid back, and by a considerable amount as well.

Basically, this market needs the ratios above the market to lend a hand in determining where the correct zone should be, and not just leaving it down to where the undermining finishes when the music stops.

After all, the Y ratio bandwidth below the zone, is now 350-points wide all on its own.

And that, just has volatility written all over it, large.

 

Range:            3645  to  3995           

Activity:          Moderate

Type:              Bullish

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October 18th, 2022 by Richard

As the FTSE enters the Oct expiry rollover derivatives have a chance.

 

Nb. Our comment from the 10/10/2022

Despite the fact that R3 had retreated to 6850 last week, it seems the market hadn’t realised.

As R2 at 6950 evidently produced enough dynamic delta to achieve the same result, with the intraday lows on Thursday and Friday being 6961.10 and 6960.36 respectively.

If the market should go back there again even R2 has retreated, back to 6900 now but, with another drop in the zone, this now makes 6950 not only R1 but also the bottom boundary of this new zone.

Again, a falling zone coupled with falling ratios below and rising above are all bearish signs.

And don’t forget this market has already tested R3 (when it was at 6950 on 26th Sept with the intraday low of 6937.40), so the fact it is now at 6800 means that this market is not out of the woods yet.

However, if it can stabilise in its fallen zone, and the ratios either side can also stop, or change, their direction of travel then it might give a chance to the bulls.

Especially as we now have only two weeks to go in this expiry.

And with the way this expiry has evolved, above the zone you now have 300-points of just the minimal Y ratio. A level of ratio that should hold no fear for an index that has been messing with R3 and R2 levels already.

Of course, so far this expiry it has been one-way traffic, don’t forget the “opening” price on day 1 was 7236.68, and back then the zone was 7250-7350 and all the Y ratio was below it.

Almost the mirror image of what it is now, and back then, on the 20th September, did you think that the market would go down through all that Y ratio until it hit the R ratios?

 

Range:            6950  to  7050      

Activity:          Moderate

Type:              On balance definitely bullish

 

Nb. Our comment on 10/10/22

 

The only day we are sure what the ratios were last week was on the actual day we published, Monday 10th.

On the 10th 6950 held firm, with the post auction close of 6959.31 and the real time close at 6972.15.

After this we have no idea when the ratios changed but, as you can see in the above table, they have roughly slipped 50-points below the zone. Whereas, above it, they are unchanged apart from the appearance of R1.

The other aspect that also hasn’t changed, is the zone, which is good news, for the bulls at least.

And for derivatives, as on Friday the intraday high was 6976.30, tantalisingly back inside it just in front of this, the final week of this expiry.

Sadly, it couldn’t hold onto it, leaving R2 at 6850 to reprise its support role from the previous day again.

From the very first day of this expiry, it was always likely to be messy, one for the bears, the way the ratios were aligned.

The trouble is, now we are entering the rollover and expiry, if derivatives want to keep control and get it to expire in its zone, they have their work cut out for them such is the level of emotion inherent now.

The zone isn’t far away, so eminently achievable, as witnessed by Friday’s price action.

So, the only question that remains, for us at least, is whether or not derivatives can trump the BoE, interest rates and whatever the new Chancellor happens to spring on us next?

 

Range:            6850  to  6950      

Activity:          Moderate

Type:              Bullish

Available to buy now

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.

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