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

 

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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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October 24th, 2023 by Richard

After a perfect October expiry in the FTSE, let’s hope for more of the same in November.

Nb. Our comment on 10/23/23

So, the “big question” was answered and, yes, it did stay there for the next three days.

It did stray above and therefore outside of its zone early on in the morning but, for the vast majority of the day, it stayed between 7550 and 7650 on rollover Wednesday 18th.

So, yay, the perfect expiry, as we mentioned last week “Anyway, for the perfect expiry, we just need the market to be in its zone on preferably rollover Wednesday” (please see below).

For the record a perfect expiry is when the market hits a ratio level above or below its zone, then goes on to test the corresponding level at the other end, before finishing in its zone.

For the October expiry this meant hitting R3 at 7750 (intraday high 7746.53 on 21/9/23), before reversing all the way down to DR at 7400, don’t forget it went from R2 at 7450 then straight to DR, so no R3 (intraday low 7384.20 on 4/10/23) before closing on rollover Wednesday at 7588.00.

Anyway, moving on, and the ratio table for the November expiry makes for interesting reading.

Especially as the market is already in the R2 ratio bandwidth, courtesy of the fallout from the last two trading days of the Oct expiry.

This makes 7350 the critical level, and it is R3, but only just, as if you look at Friday’s table (on the right as you look at it) R3 didn’t start until 7250. It should still carry a hefty clout, as it is R3 after all but, just bear in mind, it could very easily become R2 again.

Either way, going any further down, this market will henceforth just keep encountering a lot of dynamic delta inspired futures buying.

All the while, R2 at the other end doesn’t kick-in until you hit 7850, meaning there is far more upside as we see it than downside in this expiry.  

 

Range:            7350  to  7450      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com


Nb. Our comment from 10/16/23 (Nb the October expiry)

Well, it wasn’t so much as “wading through ankle-deep water”, as we described what it would be like for the FTSE finding itself in the new Y ratio bandwidth at the start of last week, but rather a skim board across it.

On Monday, the intraday high was 7540.57, just below the bottom boundary of the zone.

However, on Tuesday, it just blasted straight through it and into its zone. Which is literally 100-points of no ratio at all.

So, absolutely no surprise when on Wednesday the intraday high was 7651.98, the upper boundary of its zone.

From DR at 7400 all the way up to its zones upper boundary at 7650 is quite a ride, a 3.38% one to be precise.

But don’t forget, the first leg was from 7750 down to 7400, a 350-point trip. Making the round trip a whopping 600-points, virtually 8%, which is outstanding.

Made even more so when you consider that at the very start of this expiry the market started at 7711.38, and is now currently at 7599.60, which is only a move of just over 100-points.

Anyway, for the perfect expiry, we just need the market to be in its zone on preferably rollover Wednesday, but the actual expiry on Friday would do at a pinch.

As you can see in this week’s ratio table, the market finished dead centre of its zone. That was after it tested 7650 at the start and at the end of the day as well.

So, the big question is whether it can stay here for the next three days?

7650 is still a solid R1, but has been tested over the last three trading days, so is already on strike 4. However, it is backed up by R2 at 7700. The trouble is, in this last week, activity spikes and positions change even more frequently, so it can be a constantly moving target. Nevertheless, as things stand, if it can hold out in its zone for the first three days, then it can cut-loose on the last two.

 

Range:            7550  to  7650      

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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August 9th, 2023 by Richard

After failing, yet again, at 7700 for the FTSE it has been all about its zone ever since.

Nb. Our comment on 08/07/23

The trouble with when a market, like the FTSE currently, is so compliant to the influences of the ratio levels, is that is has to end at some point.

Bit like a petulant teenager, eventually it will want to test the boundaries of what it can get away with.

In the meantime, one has to simply follow the ratio play-book.

Last Monday, the 31st, saw the FTSE attack 7700 very first thing, with two spikes about 10mins apart, before it fell back to the intraday low of 7667.81. Then in the afternoon, it had another go, hitting the intraday high of 7722.92 before, significantly, finishing at 7699.41.

Tuesday saw the intraday low of 7650.15, or R1 (albeit a very weak R1) in our language.

Wednesday, the real opening was below 7650 for the record, but by then it was into Y1 ratio bandwidth.

Thursday, saw the market test 7450, very precisely first thing, then after a small bounce, with more vigour, establishing the intraday low of 7437.88 before finishing at 7529.16. Of course, 7450, was the upper boundary of the zone.

Which presumably moved on Friday, as we suggested last week it might, to 7500-7600.

This is exactly where the market spent last Friday of course.

Now, we enter the third week of this expiry, and after last week’s 250-point (3.3%) trip, we rather hope it will relax for a bit inside its new zone. Especially as the week after it will be the rollover and expiry. The rollover being into the third biggie of the year…

Therefore, this week 7500 and 7600 become absolutely critical levels and, the astute, will have noticed the SPX closed below its zone on Friday. Interestingly, both the SPX and the FTSE were in or around their respective zones on Thursday and Friday, rather coincidentally.

It is not a given that this new zone is permanent, as it could easily revert back to 7350-7450, and the bottom boundary is already on strike one. However, if the SPX decides it doesn’t want, or deserve, to be in bear territory, that could influence proceedings over here. Either way, of course. So, basically, watch those boundaries for any possible break out, while bearing in mind we are actually only at the halfway point for the August expiry.

 

Range:            7500  to  7600      

Activity:          Moderate

Type:              Neutral

www.hedgeratioanalysis.com

 

 

Nb. Our comment from 07/31/23

Well, it wasn’t so much a “rude awakening” when the market encountered 7700, but more like a brick wall.

Apart from last Monday, every other day last week was a titanic battle with 7700.

Although, admittedly, the inroads in the last two days were greater than those on the Tuesday and Wednesday (intraday highs 7702.35 and 7702.74 respectively) with intraday highs of 7709.66 on the Thursday and 7716.82 on the Friday.

Despite the obvious failure to break through, you have to admire the commitment and tenacity in trying.

However, and far more importantly, is what may be in store for us this week.

As one can see there has been a lot of changes in the ratios, and deservedly so as activity has been at a very decent level, even for week one of the expiry.

First and foremost, 7700. It is now part of the R1 ratio bandwidth, which is still 7650 up to 7750. However, it still represents a step-up within that bandwidth, as at 7700 it is just below the threshold for remaining R2, whereas 7650 is just above the threshold of becoming Y2.

That said, 7700 is already on strike four, with the intraday tests to innumerable to count. In short, we are a bit surprised it remained so resilient on Friday.

Overall, obviously the ratios have fallen around where the market is currently but, outside that, they have actually risen, on both sides.

The upshot is, that the FTSE now has a bit more headroom but, R2 and R3, now lurk at 7750 and 7800 ready to ambush it.

Whereas, below 7700, it is now practically (ok 7650 notwithstanding) all Y ratio. So, brace yourself should this market get even a minor shock.

One saving grace may be that the zone may move to 7500-7600, which may limit the downside risk a bit.

 

Range:            7650  to  (7700) 7750      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

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August 2nd, 2023 by Richard

What a fight 7700 put up in the FTSE

Nb. Our comment on 07/31/23

Well, it wasn’t so much a “rude awakening” when the market encountered 7700, but more like a brick wall.

Apart from last Monday, every other day last week was a titanic battle with 7700.

Although, admittedly, the inroads in the last two days were greater than those on the Tuesday and Wednesday (intraday highs 7702.35 and 7702.74 respectively) with intraday highs of 7709.66 on the Thursday and 7716.82 on the Friday.

Despite the obvious failure to break through, you have to admire the commitment and tenacity in trying.

However, and far more importantly, is what may be in store for us this week.

As one can see there has been a lot of changes in the ratios, and deservedly so as activity has been at a very decent level, even for week one of the expiry.

First and foremost, 7700. It is now part of the R1 ratio bandwidth, which is still 7650 up to 7750. However, it still represents a step-up within that bandwidth, as at 7700 it is just below the threshold for remaining R2, whereas 7650 is just above the threshold of becoming Y2.

That said, 7700 is already on strike four, with the intraday tests to innumerable to count. In short, we are a bit surprised it remained so resilient on Friday.

Overall, obviously the ratios have fallen around where the market is currently but, outside that, they have actually risen, on both sides.

The upshot is, that the FTSE now has a bit more headroom but, R2 and R3, now lurk at 7750 and 7800 ready to ambush it.

Whereas, below 7700, it is now practically (ok 7650 notwithstanding) all Y ratio. So, brace yourself should this market get even a minor shock.

One saving grace may be that the zone may move to 7500-7600, which may limit the downside risk a bit.

 

Range:            7650  to  (7700) 7750      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

 

Nb. Our comment from 07/24/23

Well, that battle with R3 at 7250 seems like it was ages ago, but it was in fact, just over a week ago, on the 10th and 11th of July.

So, since then we have seen the FTSE rally from R3 all the way up to the top boundary of its zone at 7650. A very impressive 400-points, or 5.52%. Brilliant.

And to top it all off, the timing couldn’t have been better, as on rollover Wednesday the market manged to get its fingertips above the bottom boundary at 7550. And if that wasn’t enough (which it would have been for us considering the journey it had to make) this also resulted in the final two days of the July expiry being spent inside its zone. A win: win, literally.

If you hadn’t guessed by now, obviously the zone didn’t move.

Also, we make no apology for our lack of bravery in not calling this last week as, exactly as stated, we need to be calculating the ratios daily to be able to do that with any degree of accuracy during generally tumultuous expiry weeks.

However, it does, very succinctly and graphically, reveal the importance of the zone.

This is now the problem however, as we now enter the August expiry.

As the zone here is still at 7350-7450, which is a long way from where the market had to get to for the expiry of July.

On top of which, having closed at 7663.73, means the FTSE will wake up today in the R2 ratio bandwidth. Which is not good news for the bulls.

We must also point out that in the ratio table it shows R3 starting at 7750 but, at 7700, it is only just below the threshold. So, please bear this in mind should the market get there, especially as that may be its first rude awakening as to how much dynamic delta it will now be facing in the August expiry.

Hope you managed to ride the rally up from R3 but, unless the ratios change, August looks like one for the bears.

 

Range:            7650  to  (7700) 7750      

Activity:          Very good

Type:              On balance only just bullish

www.hedgeratioanalysis.com

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July 23rd, 2023 by Richard

The FTSE rebounded from R3 at 7250 to get back to its zone for the July expiry...but what now for Aug

Nb. Our comment on 07/24/23

Well, that battle with R3 at 7250 seems like it was ages ago, but it was in fact, just over a week ago, on the 10th and 11th of July.

So, since then we have seen the FTSE rally from R3 all the way up to the top boundary of its zone at 7650. A very impressive 400-points, or 5.52%. Brilliant.

And to top it all off, the timing couldn’t have been better, as on rollover Wednesday the market manged to get its fingertips above the bottom boundary at 7550. And if that wasn’t enough (which it would have been for us considering the journey it had to make) this also resulted in the final two days of the July expiry being spent inside its zone. A win: win, literally.

If you hadn’t guessed by now, obviously the zone didn’t move.

Also, we make no apology for our lack of bravery in not calling this last week as, exactly as stated, we need to be calculating the ratios daily to be able to do that with any degree of accuracy during generally tumultuous expiry weeks.

However, it does, very succinctly and graphically, reveal the importance of the zone.

This is now the problem however, as we now enter the August expiry.

As the zone here is still at 7350-7450, which is a long way from where the market had to get to for the expiry of July.

On top of which, having closed at 7663.73, means the FTSE will wake up today in the R2 ratio bandwidth. Which is not good news for the bulls.

We must also point out that in the ratio table it shows R3 starting at 7750 but, at 7700, it is only just below the threshold. So, please bear this in mind should the market get there, especially as that may be its first rude awakening as to how much dynamic delta it will now be facing in the August expiry.

Hope you managed to ride the rally up from R3 but, unless the ratios change, August looks like one for the bears.

 

Range:            7650  to  (7700) 7750      

Activity:          Very good

Type:              On balance only just bullish

www.hedgeratioanalysis.com

 

Nb. Our comment from 07/17/23 (Nb. The July expiry)

 

Yet another great week for the ratio watchers.

Monday was as expected and, although the official open was 7256.94, in everyone else’s world it was in fact around 7238.

This is important, as this means the market actually opened below R3 at 7250. Although, this does not alter the fact that the dynamic delta would still kick-in immediately. So, just like the previous Friday, which we spoke about last week (please see below), the FTSE wanted to go easier, the trouble was this persistent and significant futures buying going on.

It did stay below 7250 for the first half hour or so but, after that, it never really looked back. Significantly, the intraday low was 7238.72.

On the Tuesday, we did get another test of R3, but since then it has managed to put on 200-points, or 2.76%, which is not a bad rebound from R3.

Now, it has been a very good four weeks for those that knew where the pertinent ratio levels were for the FTSE, so we can’t rally moan. Sadly however, this final week is very unclear. In fact, we would really need to be calculating these ratios daily to stand any chance of working out what might happen next.

In a nutshell, there has been some very decent activity, especially in the calls so, although the zone hasn’t changed, it could very easily do so.

As things stand, 7250-7350 is the front-runner but, as this final week gets going, a lot could happen, making this very difficult to call. On top of which, in August, the zone is at 7350-7450, just to muddy the waters even further.

However, the real problem is that the Y2 bandwidth now stretches from 7250 all the way up to 7550 so, in reality, the zone could end up anywhere in here, assuming of course that it will move. After having had 20 trading days being spot-on, we are therefore ducking this last week, sorry.

 

Range:            7250  to  7550      

Activity:          Average

Type:              Bullish

www.hedgeratioanalysis.com

Available to buy now

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July 9th, 2023 by Richard

The FTSE having failed to reclaim its zone now needs R3 at 7250 to save it.

Nb. Our comment on 07/10/23

Gosh, we really hope you had taken note of the levels we mentioned last week.

In fact, even the part about ratios affecting the SPX that did indeed translate across.

Monday and Tuesday were indeed crucial last week, as on Monday the intraday high was 7561.26 and, not just once but on three very identifiable spikes up during the day, and yet the market finished at 7527.26.

On the Tuesday the intraday high was 7547.38, at the end of a steady climb throughout the day but, again, it closed at 7519.72.

That made two very distinct tests of the bottom boundary of the zone at 7550, and the failure to breach it should have set the warning bells off.

Of course, when the Street reopened on the Wednesday it was not good news from over there, which only conspired to compound this failure over here.

Worth mentioning, that on the Thursday, our old friend R2, managed to support the FTSE right up until 13:00 when, yup, you guessed it, the weak US market finally broke its back.

Interestingly, that day, the intraday low was 7267.62. Although that is 17.62-points above R3 at 7250, it was at that moment down 174.48-points (2.34%), which is chunky for the FTSE, so all the greeks were spiking, especially the Vega, so we are more than happy to call that strike one.

Friday was far more interesting as, if you knew about R3 at 7250 that is, you could clearly see the confusion in the market, which basically wanted to fall but couldn’t understand the steady but significant futures buying.

No coincidence, to us at least, that it closed at 7256.94.

Looking ahead, the changes in the ratio table are clear to see.

However, the main point is that 7250 is still R3. The trouble is, that it is now on strike three.

Even so, R3 ratio is a lot, especially for an intermediary expiry. So, even if it wants to fall, it is not going to find it easy. Essentially, just like on Friday.

Worth remembering that no amount of ratio is insurmountable, it just shows you were there will be futures buying (or selling) and a scale of how much to expect.

 How the market reacts to this, or the strength of its current fear/greed is the unknown factor.

That said, it would be highly unusual for the FTSE to significantly breach R3 during one of the smaller expiries. Furthermore, the SPX, on Friday, closed in its zone, so not so much pressure to come from them, hopefully. Although, they still have a vast amount of Y ratio either side of their zone.

Also, we are now entering the last two weeks of this expiry so, especially towards the end of this week, the zone should start bringing its influence to bear.

The only other aspect to mention, is that although activity has been classed as “very poor” this is mainly due to the fact that a lot of it has essentially netted off against each other. Even so, taking this into account, it hasn’t been exactly inspiring by any calculation.

 

Range:            7250  to  7550      

Activity:          Very poor

Type:              Bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment from 07/03/23

 

As we said last week, 7400 did indeed prove to be a real test for the bears.

On the day we published and, quite some considerable time after we may add, the intraday low on that Monday 26th was 7401.18.

Evidently, the dynamic delta inspired bout of futures buying generated by the market hitting R2 at 7400 was more than enough to see this index pivot and reverse direction. Furthermore, it was bit of spike down, so it wasn’t there for very long.

Then it took the rest of last week to travel across the entire R1 ratio bandwidth, as on Friday the intraday high was 7551.59. Or in our world, the bottom boundary of the zone, or our trading range in fact.

From R2 to the zone, or the R1 bandwidth, is 150-points.

More importantly, looking ahead, don’t forget we still have three weeks of this expiry to go.

So, the important level this week will be 7550, or the bottom boundary of the zone.

If the market can get back above this and, let’s face it, the one thing the FTSE has been keen on recently, has been staying in its zone, then it has 100-points of zone above it.

If it fails, the one change in the ratio table for this week, has actually been R2 at 7400, as it has slipped to 7350.

However, 7400 still represents a considerable step-up, as it is only just below the threshold.

Perhaps another aspect to bear in mind, is that the SPX got back to its zone last Thursday and, on Friday, hit Y2 with the intraday high of 4458.48. The point being, is that it may seem set fair over here, but the SPX may run into ratio troubles which can translate across. Otherwise, our best guess is that the FTSE will want to get back inside its zone, which would then make the trading range 7550 to 7650.

 

Range:            7400  to  7550      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

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July 3rd, 2023 by Richard

The FTSE traverses the entire R1 ratio bandwidth in a week.

Nb. Our comment on 07/03/23

As we said last week, 7400 did indeed prove to be a real test for the bears.

On the day we published and, quite some considerable time after we may add, the intraday low on that Monday 26th was 7401.18.

Evidently, the dynamic delta inspired bout of futures buying generated by the market hitting R2 at 7400 was more than enough to see this index pivot and reverse direction. Furthermore, it was bit of spike down, so it wasn’t there for very long.

Then it took the rest of last week to travel across the entire R1 ratio bandwidth, as on Friday the intraday high was 7551.59. Or in our world, the bottom boundary of the zone, or our trading range in fact.

From R2 to the zone, or the R1 bandwidth, is 150-points.

More importantly, looking ahead, don’t forget we still have three weeks of this expiry to go.

So, the important level this week will be 7550, or the bottom boundary of the zone.

If the market can get back above this and, lets face it, the one thing the FTSE has been keen on recently, has been staying in its zone, then it has 100-points of zone above it.

If it fails, the one change in the ratio table for this week, has actually been R2 at 7400, as it has slipped to 7350.

However, 7400 still represents a considerable step-up, as it is only just below the threshold.

Perhaps another aspect to bear in mind, is that the SPX got back to its zone last Thursday and, on Friday, hit Y2 with the intraday high of 4458.48. The point being, is that it may seem set fair over here, but the SPX may run into ratio troubles which can translate across. Otherwise, our best guess is that the FTSE will want to get back inside its zone, which would then make the trading range 7550 to 7650.

 

Range:            7400  to  7550      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

 

Nb. Our comment from 06/26/23

Back to the usual format for the foreseeable, which also holds true for the actual expiry, now we are down to four weeks.

And last week was indeed all about the zone, just not the boundary we expected.

Although, there was plenty of warning what with the intraday low on Tuesday of 7566.33. Followed closely by 7520.92 on the Wednesday, which saw the market close at 7559.18, just above the bottom boundary at 7550.

It was certainly trying to stay in its zone but, most certainly, it wasn’t helped by what was happening in Europe and across the pond.

Anyway, once the boundary gave way on Thursday, it has managed to almost catch up on the drop seen in Europe.

Looking ahead and, at this point it may be worth considering the type of activity we mention below. As “on balance bullish” is quite bland, although it can all that is necessary normally.

However, this early on in an expiry, it can sometimes be worth pointing out that this description has been derived from the fact that there has definitely been a lot of bullish call activity but, the put activity was far more diverse, with ITM increasing but OTM decreasing. So, very much a mixed picture but, netted-off, definitely flattering the “bullish” activity calculation.

The overall result can be seen in the ratio table.

The obvious aspect is that R2 kicks-in at 7400, and how the FTSE deals with this number of futures buying generated by the dynamic delta will be a real test for the bears. Perhaps what isn’t so obvious is, that there is a small step-up in the level of R1 ratio at 7450, which may also generate an insight as to how committed the bears really are.

 

Range:            7400  to  7550      

Activity:          Moderate

Type:              On balance bullish

www.hedgeratioanalysis.com

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June 27th, 2023 by Richard

Will R2 Ratio at 7400 come to the FTSE's rescue?

Nb. Our comment on 06/26/23

Back to the usual format for the foreseeable, which also holds true for the actual expiry, now we are down to four weeks.

And last week was indeed all about the zone, just not the boundary we expected.

Although, there was plenty of warning what with the intraday low on Tuesday of 7566.33. Followed closely by 7520.92 on the Wednesday, which saw the market close at 7559.18, just above the bottom boundary at 7550.

It was certainly trying to stay in its zone but, most certainly, it wasn’t helped by what was happening in Europe and across the pond.

Anyway, once the boundary gave way on Thursday, it has managed to almost catch up on the drop seen in Europe.

Looking ahead and, at this point it may be worth considering the type of activity we mention below. As “on balance bullish” is quite bland, although it can all that is necessary normally.

However, this early on in an expiry, it can sometimes be worth pointing out that this description has been derived from the fact that there has definitely been a lot of bullish call activity but, the put activity was far more diverse, with ITM increasing but OTM decreasing. So, very much a mixed picture but, netted-off, definitely flattering the “bullish” activity calculation.

The overall result can be seen in the ratio table.

The obvious aspect is that R2 kicks-in at 7400, and how the FTSE deals with this number of futures buying generated by the dynamic delta will be a real test for the bears. Perhaps what isn’t so obvious is, that there is a small step-up in the level of R1 ratio at 7450, which may also generate an insight as to how committed the bears really are.

 

Range:            7400  to  7550      

Activity:          Moderate

Type:              On balance bullish

www.hedgeratioanalysis.com

 

 

 

Nb. Our comment from 06/19/23

 

The zone in the FTSE June expiry did move down to 7450-7550, but it was very obvious this was on paper only.

The really important date here was the rollover Wednesday, the 14th, and anybody looking at the price action that day was left in no doubt that this index was in its zone.

The fact that it had many opportunities, like other European exchanges, to react to the rampant US markets, but didn’t, tells its own story.

Therefore, there is very little we can add to the June expiry except say we wish they were all this simple, or compliant.

Which brings us into the July expiry, and naturally the zone is still at 7550-7650.

Good news for the bulls though, is that the lower boundary is underpinned with R1, whereas the upper boundary has 200-points of Y ratio above it.

All things considered, it could be a good expiry for the bulls and give it a chance to catch up with the DAX. First though, it will have to break free from its zone, where it has resided for the best part of two weeks.

 

 

Range:            7550  to  7650           

Activity:          Average

Type:              Neutral

 

www.hedgeratioanalysis.com

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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