Mar
06
2023
March 6th, 2023 by Richard

The FTSE continues to aggressively attack DR Ratio

Nb. Our comment on 03/06/23

Well, the FTSE has gone from being very compliant to derivatives in the first week, to being weirdly over exuberant in week two.

Monday, for whatever reason, saw the FTSE get back over 7900 despite the presence of DR ratio there, and in the process undoing all the hard work from the first week.

The natural reaction came on Tuesday, with the market getting back below 7900, after yet another 6-hour epic battle with DR at 7900.

Then from Wednesday onwards London took on its own equity agenda, only returning to being recognisant of derivatives when it encountered DR once again, now resident at 7950.

We always say that the big expiries can happily take on far higher levels of ratio than the intermediaries but, even taking this into account, from day one of this expiry the FTSE has been relentlessly attacking DR, which is a bit odd to say the least.

We are now past the half way point of this expiry and the ratio table as one can see, has still got the zone all the way back at 7750, while the equity market is still persisting with taking on DR ratio.

At the end of the day the amount of dynamic delta futures selling proportionate to DR ratio is a lot for any market to absorb. Fantastic that there are so many willing buyers out there, and it has been known for triple witching expiries to even take on the B levels and, you know there is a but coming, but for the first one of the year and from day one, is a tad extreme.

We really don’t want to rain on the parade, but the market is evidently not quite brave enough to push past DR, so as long as it stays at 7950 then that is always going to be a hurdle. Then, even if it overcomes that, you have B1 at 8050. All the while, the gravitational pull of the zone 200-points below, with time running out, is only going to get stronger. Def not a market we would want to be long of, in a nutshell.

 

Range:            7900  to  7950      

Activity:          Very very poor

Type:              On balance bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from 02/27/23

 

Hopefully, after reading our comment last week you would have been able to appreciate why the FTSE did what it did last week.

Obviously being in the DR ratio bandwidth was a difficult situation for it, as every which way it turned it was faced with some serious levels of dynamic delta futures selling.

Especially coming from an intermediary expiry, this would have been even harder to cope with.

Hence such a quiet Monday, the entire trading range on which was only just 24-points.

Tuesday saw it get a bit bolder, and also work out which way was the path of least pain.

Wednesday and Thursday were strike one and two respectively on DR at 7900, the intraday lows being 7879.03 and 7888.88.

Friday, or strike three, saw the break through.

This week, and as you can see in the ratio table, there have been some significant changes.

We would hope 7900 is now over and done with, as we can’t believe they don’t know by now that there is a lot of futures selling here.

Which should be made all the more apparent as the ratio bandwidth it is in now has slipped to Y2.

So, just like 7900 last week, we strongly suspect the battle this week will be with the upper boundary of its zone, 7800, and pretty much for the exact same reasons.

Of course, if it breaks into its zone, then 7700 would be the next target.

 

Range:            7800  to  7900      

Activity:          Poor

Type:              On balance bearish

www.hedgeratioanalysis.com

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Dec
22
2022
December 22nd, 2022 by Richard

Huge trading range potential in the January 2023 expiry for the FTSE

 

Nb. Our comment on 12/19/22

We certainly got that exciting end to the December expiry that we hoped for.

Firstly, we sincerely hope you caught the test of DR at 7550 with the intraday high of 7553.36 on Tuesday 13th.

After that it was all about whether or not it would manage to breach the zones upper boundary at 7450. It failed to do so on rollover Wednesday, but this had as much to do with the SPX spending this day around their zone, at 4000.

On the Thursday it did manage it but, we suspect this was a very short-lived sense of achievement, as having broken through it obviously found it even harder to try and stay within it.

The settlement price was 7350.08, so they did do it, but only just.

And that is the trouble with the zone, as being where there is no ratio, then there is absolutely nothing to push back against the market whichever way it goes.

And once the expiry was out the way and, courtesy of the January expiry zone being slightly higher, the market found itself below the zone in this new expiry without having to actually even go anywhere.

Compounding this, is the fact that the new expiry also has 150-points of the very minimal Y1 ratio below the zone.

This makes the first meaningful ratio support level 7250.

However, the good news for the bulls, is that there is also 150-points of Y1 ratio on the other side of the zone.

Meaning we have a potential trading range of 7250 all the way up to 7650 this expiry.

 

Range:            7250  to  7400      

Activity:          Average

Type:              On balance decently bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from 12/12/22 (re. the Dec expiry)

Well, here we are in the final week of the mighty December expiry and, we have to say, it really hasn’t been that exciting. Quite the opposite in fact.

Hopefully the rollover and actual expiry will generate a bit of excitement, and then we can get down to the usual Christmas rally.

But first we must mention last week and, on the very day we last published (5/12/22) we saw a bandwidth test with B1 again featuring prominently, and exactly as suspected (please see our comment below).

The intraday high was 7598.21 and, although B1 had slipped, we did get that “nervous reaction”, which then saw the market to go on and test DR at 7550.

DR held but, as we always say with a bandwidth test, you tend to get a breakout the next day. Which is exactly what happened.

This meant the remainder of last week was all about the zone’s upper boundary at 7450.

Perfect timing as we enter the final week, now all they need is one last final effort to get it back in its zone for either the rollover or the expiry.

Trouble is, it is never that simple. As this week sees everything go up several notches, as the December expiry isn’t known as the biggest of the big for no reason.

The trouble is, this greatly enhanced activity can very easily be misdiagnosed and, therefore attributed to other factors, which can make getting, and holding, the market between 7350 and 7450 very difficult.

And then, we quite often see the amber gamblers, those that pile in at the closing stages, which can dramatically shift even the zone. So, a move to 7450-7550 is not out of the question either.

At least 7550 is still DR and B1 is back at 7600, so you at least definitely know where all that futures selling is going to come out at.

 

Range:            7450  to  7550      

Activity:          Very poor

Type:              Bearish

www.hedgeratioanalysis.com

Available to buy now

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Dec
14
2022
December 14th, 2022 by Richard

The FTSE starts the mighty Dec expiry struggling to get back into its zone.

 

Nb. Our comment on 12/12/22

Well, here we are in the final week of the mighty December expiry and, we have to say, it really hasn’t been that exciting. Quite the opposite in fact.

Hopefully the rollover and actual expiry will generate a bit of excitement, and then we can get down to the usual Christmas rally.

But first we must mention last week and, on the very day we last published (5/12/22) we saw a bandwidth test with B1 again featuring prominently, and exactly as suspected (please see our comment below).

The intraday high was 7598.21 and, although B1 had slipped, we did get that “nervous reaction”, which then saw the market to go on and test DR at 7550.

DR held but, as we always say with a bandwidth test, you tend to get a breakout the next day. Which is exactly what happened.

This meant the remainder of last week was all about the zone’s upper boundary at 7450.

Perfect timing as we enter the final week, now all they need is one last final effort to get it back in its zone for either the rollover or the expiry.

Trouble is, it is never that simple. As this week sees everything go up several notches, as the December expiry isn’t known as the biggest of the big for no reason.

The trouble is, this greatly enhanced activity can very easily be misdiagnosed and, therefore attributed to other factors, which can make getting, and holding, the market between 7350 and 7450 very difficult.

And then, we quite often see the amber gamblers, those that pile in at the closing stages, which can dramatically shift even the zone. So, a move to 7450-7550 is not out of the question either.

At least 7550 is still DR and B1 is back at 7600, so you at least definitely know where all that futures selling is going to come out at.

 

Range:            7450  to  7550      

Activity:          Very poor

Type:              Bearish

www.hedgeratioanalysis.com

 

Nb. Our comment from 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

Available to buy now

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Dec
05
2022
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

Available to buy now

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Nov
28
2022
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

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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Nov
21
2022
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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Nov
14
2022
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

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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Nov
07
2022
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

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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Oct
31
2022
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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Oct
24
2022
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.

Posted in Uncategorized Tagged with: ,

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