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
Type: On balance only just bullish
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