December 5th, 2022 by Richard

The FTSE runs into B1at 7600 (twice) and gets knocked back (twice).

 

Nb. Our comment from 11/28/22

Well, the first week was indeed all about the zone but, by the end, it also seems R2 did indeed hold no fear.

Although, we have to admit, judging by the lack of movement, the market evidently found it very difficult coping with the ratio. Bit like walking waist deep in mud, having to deal with the incessant futures selling, if you’re not really up for it.

On Monday last week the FTSE tested the bottom boundary (7350) of its zone with the intraday low of 7343.37.

The Tuesday saw it test the upper boundary (7450), firstly in the morning when it just touched it before getting repelled 30-points, and then again in the afternoon, with the intraday high of 7458.88.

The following two days saw it struggle in R2 above the zone but, on both days, it came down to test the upper boundary for support, or confirmation, with the intraday lows of 7452.84 and 7443.46 respectively.

The end result of all this, is that you now know that the market certainly now knows where the safety of its zone is.

Looking ahead, and there haven’t been many changes in the ratio, and most of those are below the zone, so the ratio situation is very plain to see this expiry.

7550 is now critical for the FTSE and, although it is only DR, it is that level for the market which is coming from R1.

That is a huge leap, 3 entire levels, and don’t forget these are exponential, so this should be like running into a wall, albeit a wall of futures selling.

Also, don’t forget, B1 is also lurking there at 7600, giving it some serious backup.

Looking a lot further ahead and, very much dependant on what happens in the next fortnight, we can see the zone being 7450-7550 in the final week.

 

Range:            7450  to  7540      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

 

Nb. Our comment on 12/05/22

We had to wait until the following day after we published last week for the test of 7550.

The intraday high was 7543.09 on the back of a 4.44% gain on the very heavily weighted HSBC. Although the market finished down at 7512 the writing was on the wall as one could definitely see the bullish flame had been seriously ignited.

We do bang on about the misleading opening level on the FTSE, because it is so very misrepresentative, and such was again the case on Wednesday 30th Nov. Officially the market opened at 7512 but, in reality, it was 7555.

This meant it had essentially leapfrogged the DR level at 7550, and it really didn’t look back again all day.

Rather that Wednesday and Thursday it was all about B1 at 7600, the “serious backup” we called it last week.

The intraday highs were 7599.27 and 7599.70 respectively.

The trouble on Friday, was the market couldn’t break back down over DR at 7550.

If B1 was still at 7600 and the market went back there it would be strike 3 but, as you can see in the above table, B1 now starts at 7650.

Does give the market a bit more headroom but, the market won’t know B1 has slipped, so should it go there again it may well have a nervous reaction.

As we are just at the halfway point of this expiry there is still plenty of time but, eventually the zone down at 7400 will exert its influence, especially as the move up to 7500 is now looking unlikely.

Finally, a note re the Christmas rally and, very typically, this is what we are used to seeing, so if it remains as normal then we won’t see this year’s rally until after the Dec expiry is over.

 

Range:            7450  to  7550        or        7550  to  (7600)/7650     

Activity:          Very poor

Type:              Bullish

www.hedgeratioanalysis.com

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November 28th, 2022 by Richard

7550 now a huge ratio level for the FTSE, if it can break free from its zone.

 

Nb. Our comment from 11/21/22

What we didn’t know when we last commentated on the final week of the November expiry, was the fact that the mighty Dec expiry’s zone was about to move up.

And as you can see in the above table, not insignificantly, as it jumped from 7200 all the way up to 7400.

Rather interestingly, in the Nov expiry, that zone actually ended up at 7250-7350, so both headed north during the week.

Anyway, we call it the “mighty” expiry as triple witching ones are by their very nature far far bigger than the intermediary ones. And, Dec, is the biggest of these big ones.

Already it is about four times the size of November’s, and that is also when one is at the start of being the near month whilst the others journey is over.

What this means in a practical sense, is all forms of activity get a sizeable boost.

Which also means, a lot of misinterpretation as to what is causing it. With a lot of the Fourth Estate very often ascribing it to various news items, rather than derivatives.

Of course, the fact the market is going to start in its zone is good but, once everybody gets acclimatised, R2 shouldn’t hold much fear.

In fact, triples routinely challenge the DR and B levels of ratio, especially the FTSE, by the end.

Enjoy the excitement, and make a note of where the ratio levels are.

 

Range:            7350  to  7340      

Activity:          Poor

Type:              Bearish

www.hedgeratioanalysis.com

 

 

Nb. Our comment on 11/28/22

Well, the first week was indeed all about the zone but, by the end, it also seems R2 did indeed hold no fear.

Although, we have to admit, judging by the lack of movement, the market evidently found it very difficult coping with the ratio. Bit like walking waist deep in mud, having to deal with the incessant futures selling, if you’re not really up for it.

On Monday last week the FTSE tested the bottom boundary (7350) of its zone with the intraday low of 7343.37.

The Tuesday saw it test the upper boundary (7450), firstly in the morning when it just touched it before getting repelled 30-points, and then again in the afternoon, with the intraday high of 7458.88.

The following two days saw it struggle in R2 above the zone but, on both days, it came down to test the upper boundary for support, or confirmation, with the intraday lows of 7452.84 and 7443.46 respectively.

The end result of all this, is that you now know that the market certainly now knows where the safety of its zone is.

Looking ahead, and there haven’t been many changes in the ratio, and most of those are below the zone, so the ratio situation is very plain to see this expiry.

7550 is now critical for the FTSE and, although it is only DR, it is that level for the market which is coming from R1.

That is a huge leap, 3 entire levels, and don’t forget these are exponential, so this should be like running into a wall, albeit a wall of futures selling.

Also, don’t forget, B1 is also lurking there at 7600, giving it some serious backup.

Looking a lot further ahead and, very much dependant on what happens in the next fortnight, we can see the zone being 7450-7550 in the final week.

 

Range:            7450  to  7540      

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

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November 21st, 2022 by Richard

First look at the FTSE Dec expiry Hedge Ratio table for the biggest of the big ones.

 

Nb. Our comment from 11/14/22 (Not published)

Nb. Our comment on 11/21/22

What we didn’t know when we last commentated on the final week of the November expiry, was the fact that the mighty Dec expiry’s zone was about to move up.

And as you can see in the above table, not insignificantly, as it jumped from 7200 all the way up to 7400.

Rather interestingly, in the Nov expiry, that zone actually ended up at 7250-7350, so both headed north during the week.

Anyway, we call it the “mighty” expiry as triple witching ones are by their very nature far far bigger than the intermediary ones. And, Dec, is the biggest of these big ones.

Already it is about four times the size of November’s, and that is also when one is at the start of being the near month whilst the others journey is over.

What this means in a practical sense, is all forms of activity get a sizeable boost.

Which also means, a lot of misinterpretation as to what is causing it. With a lot of the Fourth Estate very often ascribing it to various news items, rather than derivatives.

Of course, the fact the market is going to start in its zone is good but, once everybody gets acclimatised, R2 shouldn’t hold much fear.

In fact, triples routinely challenge the DR and B levels of ratio, especially the FTSE, by the end.

Enjoy the excitement, and make a note of where the ratio levels are.

 

Range:            7350  to  7340      

Activity:          Poor

Type:              Bearish

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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November 14th, 2022 by Richard

As the FTSE enters the Nov rollover and expiry it's going to be all about the zone.

 

Nb. Our comment from 11/07/22

As we said, a lot of ground to cover.

Made even more by the fact that R1 reverted back to where it was the week before. Well, not exactly, as back then it was at 7350, whereas today it is 7300.

We say “today” but, we have no way of knowing now when it did actually change, although we are certain that it hasn’t just moved.

So, that huge Y ratio bandwidth had re-established itself sometime last week.

That means the big move we saw on Friday took the market up to test R2 at 7350 with the intraday high of 7376.23.

It also means, that having closed above 7300, it is now inside the R1 bandwidth.

Which is very aggressive for the FTSE, and only today will we be able to tell how comfortable it really is having to cope with this amount of dynamic delta.

Since it broke free of its zone traversing the Y ratio bandwidth was always likely. In fact, it would have been more of a surprise had it not done so.

We have to give the market a bit of leeway, especially the FTSE, as on Friday it was the turn of another of the heavily weighted sectors. In fact, it was two of them together, namely the miners and banks.

However, Monday should bring some reality back to the market. By reality what we actually mean is futures selling courtesy of the dynamic delta created by R1 and, should it venture higher, R2 as well.

Now, the bulls may well be happy enough to absorb all these futures, we simply just don’t know. However, there has been nothing we have seen that makes us believe there is any great bullish sentiment. Especially as all the big moves so far this expiry has been down to specific stocks, firstly Shell and now HSBC and Rio’s, which is why we are sceptical and for the moment at least, put our faith in the dynamic delta.

 

Range:            6950  to  7050      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

 

Nb. Our comment on 11/07/22

What we should have mentioned in our comment last week, was the distinct possibility of the zone moving up to where it is today.

Therefore. we must not fail to mention this time, that there is so little ratio immediately above the current zone, that it was a close call as to whether we actually made the zone 7150 all the way up to 7350 rather than the 100-points it is in the table above.

What is more, is that 7300-7400 is also making a play.

And, we must point out, that the ratios are calculated entirely on activity. So, no business means no change. Therefore, big changes mean a lot of activity.

Interestingly, on the week, the FTSE has actually lost ground. Remarkable when one considers the SPX has actually put on 220-points (5.83%) and the DAX is up 765-points (5.68%).

Don’t know about the DAX anymore as we no longer calculate the ratios for it but, in respect of the SPX, they have just travelled from Y2 at 3695 all the way to their corresponding Y2 at 4005 (not all of it in last week mind).

Basically, both the FTSE and the SPX have travelled across their respective Y ratio bandwidths, it’s just that in the case of the FTSE they covered theirs sooner and spent the last week banging their head on the R ratios.

Concentrating on the FTSE, the zone is going to be key this week. Not just because of its rather liquid state, but because we are now into the rollover and expiry already.

And, next up is the mighty Dec expiry, the biggest of the big.

Obviously, it all depends on your risk appetite, but with the market at 7318 and R1 at 7350, in the final week, and the zone currently southwards, we are far more bearish than bullish. And, don’t forget, there is effectively no ratio at all between 7150 and 7350.

 

Range:            7150  to  7350      

Activity:          Good

Type:              On balance only just bearish

www.hedgeratioanalysis.com

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November 7th, 2022 by Richard

The FTSE powers up through its Y Ratio bandwidth, but now comes the real test.

 

Nb. Our comment from 10/31/22

Well, respect to the zone.

How it managed to contain the FTSE for an entire week we have no idea, but that is exactly what it did with the slight exception of Thursday.

On Thursday Shell reported, which set the oil sector ablaze with them alone finishing up 5.5%. This does highlight another of the oddities of this index, as it is populated by a few very heavily weighted sectors. The oil sector being one, and with the weighting attributed to the oil majors if they get some bullish wind in their sails, like Thursday, it is very difficult for any amount of dynamic delta to contain that.

Although, it is fascinating to watch.

And also, you do tend to get a large deviation in the fair value. That is the difference between the cash (the index itself) and the futures price. Which can make for some good trading opportunities, at least for those that like that type of scalping.

Getting back to the more mundane issues and, although activity has been high this was from a very low baseline, the huge amount of Y ratio remains.

Although, this overall bandwidth has shrunk from 500 to 300-points, this is still a lot of ground to cover, especially for the FTSE.

The zone may come to the rescue again, and it has been known to contain this index for three weeks at a time, but we can’t see it ourselves this time round.

Every day last week either the upper boundary, 7050, or the bottom, 6950, was tested.

So, the market definitely knows what is where in respect of the dynamic delta, and both are on strike three or more anyway.

On top of which the ratio on either side is just the absolute minimal Y1, so not really a huge hurdle, therefore best not to loosen that seatbelt just yet.

 

Range:            6950  to  7050      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

 

Nb. Our comment on 11/07/22

 

As we said, a lot of ground to cover.

Made even more by the fact that R1 reverted back to where it was the week before. Well, not exactly, as back then it was at 7350, whereas today it is 7300.

We say “today” but, we have no way of knowing now when it did actually change, although we are certain that it hasn’t just moved.

So, that huge Y ratio bandwidth had re-established itself sometime last week.

That means the big move we saw on Friday took the market up to test R2 at 7350 with the intraday high of 7376.23.

It also means, that having closed above 7300, it is now inside the R1 bandwidth.

Which is very aggressive for the FTSE, and only today will we be able to tell how comfortable it really is having to cope with this amount of dynamic delta.

Since it broke free of its zone traversing the Y ratio bandwidth was always likely. In fact, it would have been more of a surprise had it not done so.

We have to give the market a bit of leeway, especially the FTSE, as on Friday it was the turn of another of the heavily weighted sectors. In fact, it was two of them together, namely the miners and banks.

However, Monday should bring some reality back to the market. By reality what we actually mean is futures selling courtesy of the dynamic delta created by R1 and, should it venture higher, R2 as well.

Now, the bulls may well be happy enough to absorb all these futures, we simply just don’t know. However, there has been nothing we have seen that makes us believe there is any great bullish sentiment. Especially as all the big moves so far this expiry has been down to specific stocks, firstly Shell and now HSBC and Rio’s, which is why we are sceptical and for the moment at least, put our faith in the dynamic delta.

 

Range:            6950  to  7050      

Activity:          Good

Type:              Neutral

www.hedgeratioanalysis.com

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October 31st, 2022 by Richard

It was all about its zone for the FTSE last week, but can it break free this week?

 

Nb. Our comment from 10/24/22

Partly the reason for explaining the closing few hours of the Oct expiry is that it also sheds some light on this, the Nov expiry.

And as one can see in the table above the ratios are so underdeveloped in Nov that this may be a problem for the next few weeks.

Admittedly, this is one of those times that we are going from an intermediary expiry to another intermediary one, so activity is always thinner but, even taking this into consideration, the ratio levels are dangerously low.

At least the R ratios start a bit closer below the zone, at 6850, but this is only R1, and you have to go all the way down to 6250 before you get the next level.

Above the zone, the R ratios don’t kick-in until 7350, but at least the next level is slightly closer, only being a further 300-points away.

Despite these huge ranges, don’t miss the fact that the highest the ratios even go in either direction is just R2, which is very low and will not provide that much support or resistance.

But it is the 500-point wide Y ratio bandwidth that is the most concerning.

From 6850 all the way up to 7350, and with no ratio to speak of then it could get very volatile indeed.

And because of the distance involved, if the market does build up a head of steam, then R1, or even R2, are going to struggle to make a difference.

Hopefully, the circumstances that are evidently keeping the players on the side-lines, will dissipate and normal conditions will return but, in the meantime, best fasten those seatbelts nice and tight.

 

Range:            6950  to  7050      

Activity:          Average

Type:              Neutral

 

 

 

Nb. Our comment on 10/31/22

 

Well, respect to the zone.

How it managed to contain the FTSE for an entire week we have no idea, but that is exactly what it did with the slight exception of Thursday.

On Thursday Shell reported, which set the oil sector ablaze with them alone finishing up 5.5%. This does highlight another of the oddities of this index, as it is populated by a few very heavily weighted sectors. The oil sector being one, and with the weighting attributed to the oil majors if they get some bullish wind in their sails, like Thursday, it is very difficult for any amount of dynamic delta to contain that.

Although, it is fascinating to watch.

And also, you do tend to get a large deviation in the fair value. That is the difference between the cash (the index itself) and the futures price. Which can make for some good trading opportunities, at least for those that like that type of scalping.

Getting back to the more mundane issues and, although activity has been high this was from a very low baseline, the huge amount of Y ratio remains.

Although, this overall bandwidth has shrunk from 500 to 300-points, this is still a lot of ground to cover, especially for the FTSE.

The zone may come to the rescue again, and it has been known to contain this index for three weeks at a time, but we can’t see it ourselves this time round.

Every day last week either the upper boundary, 7050, or the bottom, 6950, was tested.

So, the market definitely knows what is where in respect of the dynamic delta, and both are on strike three or more anyway.

On top of which the ratio on either side is just the absolute minimal Y1, so not really a huge hurdle, therefore best not to loosen that seatbelt just yet.

 

Range:            6950  to  7050      

Activity:          Good

Type:              Neutral

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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October 24th, 2022 by Richard

We could be in for a very volatile start to the FTSE Nov expiry as there is so little ratio present.

 

Nb. Our comment from the Oct expiry

We thought it might be a good idea to have one last comment on the October expiry which finished on Friday.

The settlement price was 6875.96, so below the zone and by some considerable margin.

In fact, despite the appearance of Y1 below the zone, the expiry actually finished in R1 ratio, which would have cost someone a bob or two.

Which was a bit careless as the market closed on Thursday at 6943.91, just a fraction below the zone. So, all they had to do was to either get the market up by 6-points to get it into its zone or, failing that, keep it above 6900, and therefore in the minimal Y1 ratio.

Not managing to do either in the very short time frame left would not have been the preferred choice, and which therefore reveals that there was a lot more going on than just the expiry.

The fact that the market actually closed back in its zone somewhat masks the reality that the Oct expiry was expensive for someone despite the best efforts right up until the final few hours.

 

Range:            6950  to  7050      

Activity:          Moderate

Type:              On balance bullish

 

 

Nb. Our comment on 10/24/22

 

Partly the reason for explaining the closing few hours of the Oct expiry is that it also sheds some light on this, the Nov expiry.

And as one can see in the table above the ratios are so underdeveloped in Nov that this may be a problem for the next few weeks.

Admittedly, this is one of those times that we are going from an intermediary expiry to another intermediary one, so activity is always thinner but, even taking this into consideration, the ratio levels are dangerously low.

At least the R ratios start a bit closer below the zone, at 6850, but this is only R1, and you have to go all the way down to 6250 before you get the next level.

Above the zone, the R ratios don’t kick-in until 7350, but at least the next level is slightly closer, only being a further 300-points away.

Despite these huge ranges, don’t miss the fact that the highest the ratios even go in either direction is just R2, which is very low and will not provide that much support or resistance.

But it is the 500-point wide Y ratio bandwidth that is the most concerning.

From 6850 all the way up to 7350, and with no ratio to speak of then it could get very volatile indeed.

And because of the distance involved, if the market does build up a head of steam, then R1, or even R2, are going to struggle to make a difference.

Hopefully, the circumstances that are evidently keeping the players on the side-lines, will dissipate and normal conditions will return but, in the meantime, best fasten those seatbelts nice and tight.

 

Range:            6950  to  7050      

Activity:          Average

Type:              Neutral

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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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

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October 10th, 2022 by Richard

Fascinating evolution of the FTSE ratios this expiry, means there's a lot left to come.

 

Nb. Our comment from the 10/03/2022

As we said last week it certainly was a fantastic battle the market had with R3 at 6950, and it was on the Monday as well.

In fact, we thought it might just have been a case of job done when the market bounced right back int the 7000’s, and held there on the Tuesday.

Wednesday was the crunch day, and although the official open (always the previous days close) was 6984.59, in the real world it was nearer 6918.

What this meant was that is gapped down at the open to below R3 at 6950, if it was even still there in fact.

As you can see from the above table 6950 is now R2, having lost a third of its potency. The trouble is that we don’t know when that changed, and it could easily have been on Wednesday.

The fact that R3 is now 6850 and the last three intraday lows have been 6836.28, 6829.29 & 6840.07 does tend to suggest this as well.

Without calculating the ratios daily, we have no way of knowing, sorry.

So, apart from the ratios below the zone all looking weak, the other big news is the zone itself.

And it is not a small drop either, but a 200-point fall.

The upside, is perhaps that come the rollover and expiry, that this might be far more attainable but, the not so good news, is that there is still three weeks left in this expiry.

Obviously, falling ratios coupled with a falling zone are both bearish, as is the rising ratios above the zone. However, R3 does still seem to holding its own.

Plenty of upside now, the only question is will 6850 remain at R3 to give some downside protection?

 

Range:            6850  to  7050      

Activity:          Good

Type:              On balance just bullish

 

Nb. Our comment on 10/10/22

 

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

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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 3rd, 2022 by Richard

Will R3 remain able to contain the FTSE rout?

 

Nb. Our comment from the 09/26/2022

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 21st 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

 

Nb. Our comment on 10/03/22

 

As we said last week it certainly was a fantastic battle the market had with R3 at 6950, and it was on the Monday as well.

In fact, we thought it might just have been a case of job done when the market bounced right back int the 7000’s, and held there on the Tuesday.

Wednesday was the crunch day, and although the official open (always the previous days close) was 6984.59, in the real world it was nearer 6918.

What this meant was that is gapped down at the open to below R3 at 6950, if it was even still there in fact.

As you can see from the above table 6950 is now R2, having lost a third of its potency. The trouble is that we don’t know when that changed, and it could easily have been on Wednesday.

The fact that R3 is now 6850 and the last three intraday lows have been 6836.28, 6829.29 & 6840.07 does tend to suggest this as well.

Without calculating the ratios daily, we have no way of knowing, sorry.

So, apart from the ratios below the zone all looking weak, the other big news is the zone itself.

And it is not a small drop either, but a 200-point fall.

The upside, is perhaps that come the rollover and expiry, that this might be far more attainable but, the not so good news, is that there is still three weeks left in this expiry.

Obviously, falling ratios coupled with a falling zone are both bearish, as is the rising ratios above the zone. However, R3 does still seem to holding its own.

Plenty of upside now, the only question is will 6850 remain at R3 to give some downside protection?

 

Range:            6850  to  7050      

Activity:          Good

Type:              On balance just 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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