May

2023

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 10^th. 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 2^nd 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

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, Futures, shares, stocks

Oct

18

2022

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 30^th 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 14^th, 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

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, spx

Oct

18

2022

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 26^th 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 20^th 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 10^th.

On the 10^th 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

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

Oct

12

2022

October 12th, 2022 by Richard

The SPX continues with its ratio stepping-stone decline, but will the rollover and expiry rescue it?

Nb. Our comment from the 09/27/22

The last five trading days has simply been a ratio stepping-stone decline.

We last published on Tuesday 20^th. On Wednesday 21^st the market intraday low was 3789.49 and close was 3789.93.

R1 was, and still is, at 3795. Of course, this was the day the Fed hiked by 0.75%, but it was the rhetoric that did the damage, so for R1 to even have an influence was pretty amazing. The fact that the market closed just a few points below it, was also rather significant…as we have seen in the past.

Next stepping-stone was R2 at 3745, on the Thursday, and the market duly obliged with the intraday low of 3749.45.

Could this have been pivotal? Obviously not, but as the market gapped down at the open on Friday to 3727.14 this was a moot point anyway.

So, Friday and Monday (yesterday) were all about the next stepping-stone, R3 at 3645.

Fridays intraday low was 3647.47 and yesterdays was 3644.76.

Apologies, we probably should have warned you when R3 fell from 3670 to 3645, sorry.

Anyway, it is still there but, having had two severe battering’s over the last two days, it is understandably weakened. In fact, so much so, it is only just above the threshold, and if the rate of decline continues today then it won’t be for much longer.

Actually, you now have to be looking at the low 3600’s to see the same level of R3 ratio that this market first encountered on Thursday.

Sometimes, strike two can be enough of a confirmation and can turn a market around (especially with the FTSE rebounding so well off 6950, giving it a friend), but please remember that the next time it goes down there, not only is it only just R3 but that would be strike three.

At least the bulls have the dynamic delta batting in their corner now, so the only question that remains is whether or not they want to make use of it?

Range: 3645 to 3745

Activity: Poor

Type: On balance bullish

Nb. Our comment for 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 30^th 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

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, Futures, spx

Sep

26

2022

September 26th, 2022 by Richard

Big Ratio battle looming for the FTSE, which could determine the rest of this expiry.

Nb. Our comment from the 09/21/2022

Well, the September expiry did end up a textbook one.

On the Wednesday and Thursday, the intraday lows were 7259.24 and 7258.67 respectively, and the EDSP was 7264.45. So, there was no doubt at all they held it in its zone over the rollover and expiry, which when you consider what was happening in the US, then this is even more impressive.

Moving swiftly on to more important matters…October, and the new 5-week expiry.

Obviously, the close last Friday was south of the zone, so the grand intentions of September evidently didn’t carry across into the October expiry.

With the short notice Bank Holiday on Monday no doubt affecting things, Tuesday was going to be crucial in determining what the possible intentions might be for this expiry.

And having been almost 100-points higher at one stage seemed to answer that. However, it really didn’t take much to knock the legs out from under that rally, and very early on into the proceedings as well.

More importantly, the bottom boundary of the zone (7250) hardly put up any resistance at all. In stark contrast to the week before.

The next level of support is not until it hits Y2 at 7150.

After that, you have to wait until 7050 before it hits R1.

Even from the very start the ratios were lopsided (no Y ratio above the zone), so it always had the potential to be a hard slog this expiry for the bulls.

Therefore, the only question that really remains, is what will tempt them back in to the fray, Y2, R1 or might it take R3 at 6950?

Range: 7050 to 7250

Activity: Average

Type: Neutral

Nb. Our comment on 09/26/22

October could well turn out to be another classic expiry, albeit one that still carries the memories of 1987, courtesy of it being regurgitated by the press every year.

First however we must look back at last week, before going over the coming one.

Wednesday the 21^st was significant not just because it started weak and finished strong, but because the intraday high was 7258.87.

This was a test of its zone’s bottom boundary, and the fact it failed to hold onto it was the significant part.

Thursday was also significant, as the intraday low was 7149.59, right on Y2.

It did close back above it, giving the bulls a small crumb of comfort, but not by very much, in the end closing at 7159.52.

Who knows whether R1 at 7050 might have been more effective on Friday if it wasn’t for the shocks coming out of the mini-budget.

It is just R1, and don’t forget these ratios are exponential, but with gilts and sterling also getting hammered it really didn’t have much of a chance. Sometimes this is also healthy, as it does show that sometimes derivatives don’t have it all their own way.

The big, nay huge test, will hopefully come today. By this we mean the market testing R3 at 6950.

This is a significant jump in the ratio level it has been experiencing, and this is a level that will produce a considerable number of futures buying generated by the dynamic delta.

If it holds, it may well tempt the bulls back on board. If the market is really in the doldrums, it will just provide a buyer for those dumping futures. No crystal ball we are afraid, but it should be a fantastic battle. A battle we suspect that will decide what happens for the rest of this expiry.

Range: 6950 to 7250

Activity: Moderate

Type: Neutral

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, indices

Sep

22

2022

September 22nd, 2022 by Richard

The FTSE was in ratio trouble from day1

Nb. Our comment from the 08/19/2022 (Not published)

Nb. Our comment on 09/21/22