Jan
04
2022
January 4th, 2022 by Richard

Looks like the FTSE is heading straight away into tough ratio levels in 2022.

 

Nb. Our comment from the 12/20/21

In our last comment on the December expiry, we said “then holding this market between 7250 and 7350 should be the order of the week” and as the EDSP was 7264.53 we can only surmise that they did a good job.

However, quite often the settlement of one expiry can lead to problems for the next one, especially if the zones are not aligned.

And although this is the case here, the discrepancy isn’t so great and anyway there is a hundred points of the very minimal Y1 ratio above the January zone.

This should make for a very decent start to this expiry, as this 100-points of Y1 ratio together with a 100-points of the zone means that there is plenty of space for this index to play around in.

The one word of caution is that in just a few days, which you can see by comparing the two tables above, there has been a huge loss of Y ratio already. Although this may not continue, it is perhaps wise to be aware of the trend.

Also, January is a 5-week expiry and this, the first “extra” week can therefore sometimes be very quiet, although with everything that’s going on at the moment, we can’t see it getting away with this in the current climate.

Otherwise, looking at the above table, it is obvious there is far more ratio above the zone than below it, although this bias has been undone by the recent activity to a large extent, it is still significant and may yet come into effect as this expiry progresses.

In the meantime, obviously 7250 is the first critical level to watch out for, thereafter the next ones are in the table above for you.

 

Range:            7250  to  7350       

Activity:          Strong

Type:              On balance bearish

 

 

 

Nb. Our comment on 01/04/22

 

Happy New Year to you all and may 2022 bring you all health, wealth and happiness.

Just to recap the first two days of this expiry were all about the zone, and 7250 did prove critical (please see above).

But thereafter it definitely got its Santa rally hat on and R1 was the next stop, then at 7350.

When we last published it had only just become R1 by a fingernail from the Y2 it had been on the 16th Dec, two trading days prior, so coming under assault from the rampant market we suspect it beat a very hasty retreat.

This means that by the end of last week we firmly believe R1 was at 7400, where it is today.

This then makes perfect sense of the price action last week, especially all the concentrated activity around 7403 on the Thursday and Friday.

Looking forward, as you can see in the above table, 7400 is still R1, but only just, and we wouldn’t expect it to remain so for much more than a day.

7450 is another matter entirely, and is in fact just a smidgen below the R2 threshold.

Which is actually the same situation for 7500, apart from this threshold being R3.

So, it is great it made a new all-time-high, and there is even scope for it to go back there again, but the dynamic delta futures selling brought about by R1 at 7450 and backed up by R2 at 7500 will certainly take the steam, and perhaps enthusiasm out of this market should it test these levels we believe.

On the other hand, and don’t forget we still have three weeks to go in this expiry, the zone is now 200-points south, with virtually no ratio in-between.

 

Range:            7250  to  7400       

Activity:          Moderate

Type:              Neutral

 

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Dec
20
2021
December 20th, 2021 by Richard

As the FTSE Jan expiry starts there is an awful lot of minimal Y ratio around.

 

Nb. Our comment from the 12/16/21 (Not published)

Nb. Our comment on 12/20/21

 

In our last comment on the December expiry, we said “then holding this market between 7250 and 7350 should be the order of the week” and as the EDSP was 7264.53 we can only surmise that they did a good job.

However, quite often the settlement of one expiry can lead to problems for the next one, especially if the zones are not aligned.

And although this is the case here, the discrepancy isn’t so great and anyway there is a hundred points of the very minimal Y1 ratio above the January zone.

This should make for a very decent start to this expiry, as this 100-points of Y1 ratio together with a 100-points of the zone means that there is plenty of space for this index to play around in.

The one word of caution is that in just a few days, which you can see by comparing the two tables above, there has been a huge loss of Y ratio already. Although this may not continue, it is perhaps wise to be aware of the trend.

Also, January is a 5-week expiry and this, the first “extra” week can therefore sometimes be very quiet, although with everything that’s going on at the moment, we can’t see it getting away with this in the current climate.

Otherwise, looking at the above table, it is obvious there is far more ratio above the zone than below it, although this bias has been undone by the recent activity to a large extent, it is still significant and may yet come into effect as this expiry progresses.

In the meantime, obviously 7250 is the first critical level to watch out for, thereafter the next ones are in the table above for you.

 

Range:            7250  to  7350       

Activity:          Strong

Type:              On balance bearish

 

Available to buy now

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Dec
13
2021
December 13th, 2021 by Richard

As we enter the rollover and expiry for the mighty Dec might the FTSE just get a quiet one?

 

Nb. Our comment from the 12/08/21

Well thankfully we didn’t have to wait very long before the writing was on the wall, as the very day we published (29th Nov) the FTSE finished at 7109.95, comfortably back above its zone.

And, as we pointed out, that now it had a lot more Y ratio above it. In fact, 200-points worth of it back then.

However, it wasn’t very gung-ho last week, as on the Tuesday it closed just above the top boundary, and on Wednesday the intraday low was 7059.35. Furthermore, the next day it never even came close.

Obviously, not out of the woods, but the signs were there.

Apologies for not publishing on our usual Monday, as we will now never know when R1 disappeared at 7250, although it may have provided a speed bump on Monday 6th Dec as the intraday high was 7246.25.

It will be very interesting and revealing how this market will react to R2 at 7350, the first real test it has had for some considerable time. And as such, it may just come as a surprise to the bulls.

However, if they are committed enough to push through it is clear up to R3 at 7450, but we feel we should point out that this is just below the DR threshold, so would be a very tough ask indeed. Then if it does break through this it is just in a world of dynamic delta futures selling that we just can’t see it coping with.

Of course, everything can change rapidly as we approach the rollover and expiry, but as this is next week and will bring its own peculiar pressures to bear, we see a limited upside as things stand.

Still, it has been an absolute corker of an expiry so far, so it’s nice to see the mighty Dec holding true to form.

 

Range:            7050  to  7350       

Activity:          Very poor

Type:              On balance not bearish

 

 

Nb. Our comment on 12/13/21

 

Again, it was rather fortuitous timing on our publication, as from the 8th onwards it was all about R2 at 7350.

As one can see in the above table, 7350 is still R2 and 7450 remains at R3. However, we must point out that after the battering it has taken R2 is now only just above the threshold and, R3 is now no longer just below the DR threshold, but rather nearer midway.

So, now it will be all about the bull’s commitment versus the impending rollover and expiry.

Now, this would be a very serious battle considering where the zone is currently as well as all that Y ratio in-between but, in another development, we can easily see 7250-7350 becoming the new zone, having fallen 43.49% in just the last three days.

When the biggest expiry of the big ones enters its final week, it can get very excitable as there is a naturally created derivative inspired giant leap in activity, both futures and equity based, and this can always lead to a misdiagnosis.

But, in the absence of this, then with R2 still at 7350, and assuming the zone does move, then holding this market between 7250 and 7350 should be the order of the week.

7350 speaks for itself, and there is no longer any ratio surprise at that level anymore, and another visit would be strike 3 anyway but, it is the other end that provides the concern.

As, even if the zone does shift, then the new bottom boundary will only be reinforced by Y2 ratio so, should the market test this level, then that will be the harder one to hold.

Always good to get past the mighty Dec rollover and expiry, then the market can concentrate on the Santa rally, but this final week is always an exciting time.

 

Range:            7050  to  7350       

Activity:          Moderate

Type:              Bearish

 

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Dec
08
2021
December 8th, 2021 by Richard

First real test for the FTSE rally up from its zone dead ahead.

 

Nb. Our comment from the 11/29/21

Again, yet another perfect example of why we start by repeating our previous comment (see above) as not only does it act as an aide memoire but, it also saves us having to reference it when our levels are hit.

We are of course referring to 7050, and last Friday the market dropped like a stone, some would even argue hitting terminal velocity it was so quick, all the way down to 7051.24, which remained the intraday low until the last few minutes.

And it was a spectacular bounce off this level, made all the more obvious by being on the end of a very long wick (if you are into candlesticks of course), ending up in a rally of about 70-points.

However, it is the end of the day that counts and so, with little surprise from a ratio perspective, it ended up safely in its zone.

This will make today a very crucial day, and both the upper and bottom boundaries now become very significant.

Of course, there is no way we could have predicted a new mutant variant strain, but in truth what the ratios tell you is what is possible, not the cause. If it wasn’t this it would very probably have been something economical for example.

Obviously, for sanity alone, we would love to see this market excitedly whizz around in its zone for the next two weeks. But, failing this, don’t forget below the bottom boundary it is bear territory, and so, should this market get there, this move will take on an entirely different complexion.

Back above the upper boundary, and we are just back to where we were. Although, there has been quite a shake up in the ratios, so there is a lot more minimal Y ratio around now.

Hopefully we will see soon enough, relax in its zone or will one or the other of the bulls or bears take control?

 

Range:            6950  to  7050       

Activity:          Poor

Type:              On balance only just bullish

 

 

Nb. Our comment on 12/08/21

 

Well thankfully we didn’t have to wait very long before the writing was on the wall, as the very day we published (29th Nov) the FTSE finished at 7109.95, comfortably back above its zone.

And, as we pointed out, that now it had a lot more Y ratio above it. In fact, 200-points worth of it back then.

However, it wasn’t very gung-ho last week, as on the Tuesday it closed just above the top boundary, and on Wednesday the intraday low was 7059.35. Furthermore, the next day it never even came close.

Obviously, not out of the woods, but the signs were there.

Apologies for not publishing on our usual Monday, as we will now never know when R1 disappeared at 7250, although it may have provided a speed bump on Monday 6th Dec as the intraday high was 7246.25.

It will be very interesting and revealing how this market will react to R2 at 7350, the first real test it has had for some considerable time. And as such, it may just come as a surprise to the bulls.

However, if they are committed enough to push through it is clear up to R3 at 7450, but we feel we should point out that this is just below the DR threshold, so would be a very tough ask indeed. Then if it does break through this it is just in a world of dynamic delta futures selling that we just can’t see it coping with.

Of course, everything can change rapidly as we approach the rollover and expiry, but as this is next week and will bring its own peculiar pressures to bear, we see a limited upside as things stand.

Still, it has been an absolute corker of an expiry so far, so its nice to see the mighty Dec holding true to form.

 

Range:            7050  to  7350       

Activity:          Very poor

Type:              On balance not bearish

 

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Nov
29
2021
November 29th, 2021 by Richard

FTSE ends in its zone after new variant scare.

 

Nb. Our comment from the 11/22/21

 

Welcome to the big one, the cumulation of everything done so far this year.

Although easily the biggest of the year, by a huge margin over the intermediaries but, even over the previous three triples, it is ahead by a very decent amount.

Therefore, by this very nature, it is more cumbersome and unwieldly which should be borne in mind. As should the fact that because it is so massive there is normally a significant uptick in the derivative related equity business, which more often than not gets misdiagnosed, but also means they get emboldened to take on higher ratio levels than they normally would.

However, just looking at the table above and the main issue is going to be the zone.

It is currently 6950-7050, which is actually lower than it was in the Nov expiry, but it could very easily move to 7050-7150 and there is even an outside chance of it getting to 7250-7350 further down the line during this expiry.

This means, to us at least, that where the zone is will play a crucial role for this trip so we will keep you posted as best we can.

Otherwise, the other critical levels to watch are R3 at 7350, as although R3 should not be particularly troublesome in the mighty Dec expiry it does have history and proved to be an important level in Nov. Then 7450 is a far more robust resistance level, and DR ratio amount of dynamic delta there is enough for even this expiry to sit up and take notice.

On the support side, well this will really be down to the bottom boundary of the zone. So, currently at 6950, but also keep a wary eye on 7050.

Otherwise, just enjoy the ride and surf along on the volume spike.

 

Range:            7150  to  7350       

Activity:          Poor

Type:              Neutral

 

 

Nb. Our comment on 11/29/21

 

Again, yet another perfect example of why we start by repeating our previous comment (see above) as not only does it act as an aide memoire but, it also saves us having to reference it when our levels are hit.

We are of course referring to 7050, and last Friday the market dropped like a stone, some would even argue hitting terminal velocity it was so quick, all the way down to 7051.24, which remained the intraday low until the last few minutes.

And it was a spectacular bounce off this level, made all the more obvious by being on the end of a very long wick (if you are into candlesticks of course), ending up in a rally of about 70-points.

However, it is the end of the day that counts and so, with little surprise from a ratio perspective, it ended up safely in its zone.

This will make today a very crucial day, and both the upper and bottom boundaries now become very significant.

Of course, there is no way we could have predicted a new mutant variant strain, but in truth what the ratios tell you is what is possible, not the cause. If it wasn’t this it would very probably have been something economical for example.

Obviously, for sanity alone, we would love to see this market excitedly whizz around in its zone for the next two weeks. But, failing this, don’t forget below the bottom boundary it is bear territory, and so, should this market get there, this move will take on an entirely different complexion.

Back above the upper boundary, and we are just back to where we were. Although, there has been quite a shake up in the ratios, so there is a lot more minimal Y ratio around now.

Hopefully we will see soon enough, relax in its zone or will one or the other of the bulls or bears take control?

 

Range:            6950  to  7050       

Activity:          Poor

Type:              On balance only just bullish

 

Available to buy now

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Nov
22
2021
November 22nd, 2021 by Richard

Looks like the zone will be crucial as we kick-off the mighty Dec expiry.

 

Nb. Our comment from the 11/15/21 (Not published)

Nb. Our comment on 11/22/21

 

Welcome to the big one, the cumulation of everything done so far this year.

Although easily the biggest of the year, by a huge margin over the intermediaries but, even over the previous three triples, it is ahead by a very decent amount.

Therefore, by this very nature, it is more cumbersome and unwieldly which should be borne in mind. As should the fact that because it is so massive there is normally a significant uptick in the derivative related equity business, which more often than not gets misdiagnosed, but also means they get emboldened to take on higher ratio levels than they normally would.

However, just looking at the table above and the main issue is going to be the zone.

It is currently 6950-7050, which is actually lower than it was in the Nov expiry, but it could very easily move to 7050-7150 and there is even an outside chance of it getting to 7250-7350 further down the line during this expiry.

This means, to us at least, that where the zone is will play a crucial role for this trip so we will keep you posted as best we can.

Otherwise, the other critical levels to watch are R3 at 7350, as although R3 should not be particularly troublesome in the mighty Dec expiry it does have history and proved to be an important level in Nov. Then 7450 is a far more robust resistance level, and DR ratio amount of dynamic delta there is enough for even this expiry to sit up and take notice.

On the support side, well this will really be down to the bottom boundary of the zone. So, currently at 6950, but also keep a wary eye on 7050.

Otherwise, just enjoy the ride and surf along on the volume spike.

 

Range:            7150  to  7350       

Activity:          Poor

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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Nov
14
2021
November 14th, 2021 by Richard

As Nov ends and the mighty Dec expiry begins will both be about the zone?

 

Nb. Our comment from the 11/08/21

Well, we certainly didn’t get the retreat back to its zone but, there is definitely no doubt now that wants to go better. It’s just a question of will the ratios let it.

This time last week, Monday 1st, saw the intraday high of 7303.39 giving us the first definite test of R3 at 7300.

We then had to wait until the Thursday 4th before the market ventured back there again, this time with the intraday high of 7292.96.

The next test would be strike 3 and anyway we are 99% certain that by Friday 7300 had dropped to R2. Don’t forget the last time we saw R2 it was at 7250, the level that had such an influence on this market in the second week of this expiry, so it is no pushover in itself.

This is probably why the market hovered around 7300 for most of that Friday but, R2 is obviously a lot less of a hurdle than R3.

And if there was any doubt as to how much activity there must have been to bring about such a change, then all you need to see is that B1 has now gone.

The problem for the FTSE is that it hasn’t really got rid of its R3 problem, it has just pushed it back to 7350 now.

It does mean though that everyone is hitting new all-time-highs, with the FTSE managing a rise of 0.91% on the week. However, with the ratios holding it back this a very poor comparison to the DAX, CAC and SPX which managed 2.33%, 3.07% and 2.00% respectively.

There is still two weeks to go in this expiry but towards the end of this week the rollover and expiry will start to play a more important role, and this is across all markets. On top of this, next up is the mighty Dec expiry, the biggest of the big, so it’s no bad thing the markets are getting used to dealing with higher levels of ratio but, at the end of the day, one or the other will have to give way.

 

Range:            7300  to  7350       

Activity:          Moderate

Type:              Bearish

 

Nb. Our comment on 11/15/21

 

Well, you can’t fault the bulls for giving it everything they have got, and Wednesday and Thursday last week were the really important days.

Monday basically saw it camp out at 7300, then Tuesday finished at 7274.04 so we thought “job done” but, Wednesday was important because the market reclaimed R2 at 7300, ending at 7340.15.

Thursday was important because (and we checked it still was) the market got above R3 at 7350, although it was plain to see it really did struggle with that amount of dynamic delta.

But credit where credit is due, and they did manage to close above it but, this only made Friday hugely significant, and the fact the market closed at 7347.97 says it all really.

This week the FTSE now faces the rollover on Wednesday and the expiry on Friday.

Throughout the zone hasn’t changed, and the upper boundary remains 200-points to the south, which is going to hurt should the market want to get there for the final reckoning. In the meantime, obviously 7350 remains significant, but now 7300 takes on a whole new importance. As below that it is now just Y2 ratio, which will seem like an absolute dawdle having mixed it with R3.

We have no doubt that there will still be a few more twists and turns in this expiry yet but, as it draws to a close it will become far far harder for equities to ignore derivatives. But it is great they have given it a go, as with the mighty Dec expiry up next, they will certainly welcome the step up in activity.

And having mentioned the Dec expiry, which is already three times the size of this one although, which you may find surprising, this is somewhat disappointing, the zone is actually currently below where November’s is currently, but we fully expect it to match it by the time it becomes the front month. Still sobering though.

 

Range:            7300  to  7350       

Activity:          Moderate

Type:              Bearish

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Nov
08
2021
November 8th, 2021 by Richard

The FTSE's R3 Hedge Ratio problem not gone, just moved.

 

Nb. Our comment from the 11/01/21

Well, if the first week was all about R1 holding the line at 7200, the second week was all about the other end of the bandwidth.

This meant we did get our test of R2 at 7250, in fact it was the very day we published, being Monday 25th October with the intraday high of 7247.53 before closing 25-points below. Actually, there were two tests that day, several hours apart which made for a very plain chart highlighting the effects of the dynamic delta there.

As one can see in the table above, R2 above the zone has gone, now being part of the R1 ratio bandwidth. The question is when? As on the Tuesday and Wednesday last week the intraday highs were 7281.17 and 7280.45 respectively, both being tantalisingly close to the next level, R3 at 7300. Therefore, we suspect that this change happened then, if not on the Tuesday, then the breach that day probably precipitated the change by the Wednesday.

Either way, hitting R3 is a very serious number of futures selling as our grading of the hedge ratios depicting the dynamic delta are exponential, so going from R1 to R3 is not just a linear experience, but more like a doubling.

This is a shame, as it is plain to see that the FTSE wants to go better, it just can’t seem to get past all those futures coming out onto the market.

Making this all seem so much worse, is the fact the other indices, especially the SPX, are also happily making significant new all-time-highs as they are just fighting the Y ratios, while the FTSE languishes.

In fact, the opening price of the FTSE on the first day of this expiry was 7234.03, meaning in the two intervening weeks the market has only moved 3-points.

In conclusion, our view hasn’t changed as we still see this index eventually beat a retreat back to its zone, the only question is when.

If similar to the last expiry, soon would be best, then it can spend two weeks excitably pinging around in there, before cutting loose for the final week.

 

Range:            (7150) 7200  to  7250       

Activity:          Poor

Type:              Bullish

 

Nb. Our comment on 11/01/21

 

Well, we certainly didn’t get the retreat back to its zone but, there is definitely no doubt now that wants to go better. It’s just a question of will the ratios let it.

This time last week, Monday 1st, saw the intraday high of 7303.39 giving us the first definite test of R3 at 7300.

We then had to wait until the Thursday 4th before the market ventured back there again, this time with the intraday high of 7292.96.

The next test would be strike 3 and anyway we are 99% certain that by Friday 7300 had dropped to R2. Don’t forget the last time we saw R2 it was at 7250, the level that had such an influence on this market in the second week of this expiry, so it is no pushover in itself.

This is probably why the market hovered around 7300 for most of that Friday but, R2 is obviously a lot less of a hurdle than R3.

And if there was any doubt as to how much activity there must have been to bring about such a change, then all you need to see is that B1 has now gone.

The problem for the FTSE is that it hasn’t really got rid of its R3 problem, it has just pushed it back to 7350 now.

It does mean though that everyone is hitting new all-time-highs, with the FTSE managing a rise of 0.91% on the week. However, with the ratios holding it back this a very poor comparison to the DAX, CAC and SPX which managed 2.33%, 3.07% and 2.00% respectively.

There is still two weeks to go in this expiry but towards the end of this week the rollover and expiry will start to play a more important role, and this is across all markets. On top of this, next up is the mighty Dec expiry, the biggest of the big, so it’s no bad thing the markets are getting used to dealing with higher levels of ratio but, at the end of the day, one or the other will have to give way.

 

Range:            7300  to  7350       

Activity:          Moderate

Type:              Bearish

 

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
01
2021
November 1st, 2021 by Richard

The first week the FTSE was all about the bottom of its R1 bandwidth, the second all about the top.

 

Nb. Our comment from the 10/25/21

We appreciate it must have been “a rude awakening” starting the Nov expiry off in R1 ratio, but we honestly didn’t think it would be that torpid.

Although we do apologise for not mentioning that this is a five-week expiry, and quite often the first “extra” week can be as dull as dishwater for this very reason.

However, there were two surprises last week, the first being that every day the market broke down below 7200, the bottom of our trading range, but recovered.

In fact, on Thursday it actually closed below it, so we thought job done, but Friday had other ideas, and the market got dragged right back into the R1 arm-wrestle.

The second surprise, was with 7200 proving so resilient, the market didn’t once test R2 at 7250, which would be our expectation.

But we feel very confident that this won’t last, as activity has continued to be high, and overall is already almost double what we were seeing at this stage last trip.

Obviously, this is still nowhere near what we would see in a triple, but at least Nov will hold its head up in comparison to any other intermediary now, and still four-weeks to go.

The only change in the ratio table despite all this, is the introduction of R2 below the zone at 6950.

Looking ahead, we see no reason to change our view, being that the market should be looking at a return to its zone. And after five tests, we don’t think 7200 should provide much more support at all. Therefore, the only real question, for us at least, is whether or not we are going to see the market test R2 or even R3 first?

 

Range:            (7150) 7200  to  7250       

Activity:          Good

Type:              Neutral

 

 

 

Nb. Our comment on 11/01/21

 

Well, if the first week was all about R1 holding the line at 7200, the second week was all about the other end of the bandwidth.

This meant we did get our test of R2 at 7250, in fact it was the very day we published, being Monday 25th October with the intraday high of 7247.53 before closing 25-points below. Actually, there were two tests that day, several hours apart which made for a very plain chart highlighting the effects of the dynamic delta there.

As one can see in the table above, R2 above the zone has gone, now being part of the R1 ratio bandwidth. The question is when? As on the Tuesday and Wednesday last week the intraday highs were 7281.17 and 7280.45 respectively, both being tantalisingly close to the next level, R3 at 7300. Therefore, we suspect that this change happened then, if not on the Tuesday, then the breach that day probably precipitated the change by the Wednesday.

Either way, hitting R3 is a very serious number of futures selling as our grading of the hedge ratios depicting the dynamic delta are exponential, so going from R1 to R3 is not just a linear experience, but more like a doubling.

This is a shame, as it is plain to see that the FTSE wants to go better, it just can’t seem to get past all those futures coming out onto the market.

Making this all seem so much worse, is the fact the other indices, especially the SPX, are also happily making significant new all-time-highs as they are just fighting the Y ratios, while the FTSE languishes.

In fact, the opening price of the FTSE on the first day of this expiry was 7234.03, meaning in the two intervening weeks the market has only moved 3-points.

In conclusion, our view hasn’t changed as we still see this index eventually beat a retreat back to its zone, the only question is when.

If similar to the last expiry, soon would be best, then it can spend two weeks excitably pinging around in there, before cutting loose for the final week.

 

Range:            (7150) 7200  to  7250       

Activity:          Poor

Type:              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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Oct
25
2021
October 25th, 2021 by Richard

The FTSE still in an arm-wrestle with R1 ratio.

 

Nb. Our comment from the 10/18/21

 

And October certainly did “boil over” but as the market had been zone-bound for so long they certainly had the meat out of the sandwich.

And anyway, the EDSP of roughly where it closed was still in the Y ratios, and but 80-points above the top of its zone.

But at least it eventually made full use of all that Y ratio as it made a new all-time-high on Friday, but boy does it not like to make a meal out of it all.

Sadly, this door has now been firmly slammed shut in its face, as all but a little bit of Y ratio has disappeared above the zone.

Below it, it has gone altogether, which is a win for the bulls at least.

However, as a quick glance at the above table will tell you, the market is going to start the 5-week long November expiry already in R1 ratio, which no doubt will be a somewhat rude awakening.

But R2 is directly ahead, and then just 50-points above that R3 is lurking in ambush.

These are not impossible levels of hedge ratio, but when one considers that the market has been used to only seeing the level of futures selling generated by the minimal Y ratios, R2 and R3 are going to take some getting used to.

Also, please don’t forget that this is still an intermediary expiry, so sensitivity should also be heightened, although overall activity is very good considering.

The market might still be emboldened by Octobers bounce off R1, and the SPX may have some input here, but, for the moment at least, we can only see London skulking back to its zone.

 

Range:            7200  to  7250       

Activity:          Outstanding

Type:              On balance only just bearish

 

 

Nb. Our comment on 10/25/21

 

We appreciate it must have been “a rude awakening” starting the Nov expiry off in R1 ratio, but we honestly didn’t think it would be that torpid.

Although we do apologise for not mentioning that this is a five-week expiry, and quite often the first “extra” week can be as dull as dishwater for this very reason.

However, there were two surprises last week, the first being that every day the market broke down below 7200, the bottom of our trading range, but recovered.

In fact, on Thursday it actually closed below it, so we though job done, but Friday had other ideas, and the market got dragged right back into the R1 arm-wrestle.

The second surprise, was with 7200 proving so resilient, the market didn’t once test R2 at 7250, which would be our expectation.

But we feel very confident that this won’t last, as activity has continued to be high, and overall is already almost double what we were seeing at this stage last trip.

Obviously, this is still nowhere near what we would see in a triple, but at least Nov will hold its head up in comparison to any other intermediary now, and still four-weeks to go.

The only change in the ratio table despite all this, is the introduction of R2 below the zone at 6950.

Looking ahead, we see no reason to change our view, being that the market should be looking at a return to its zone. And after five tests, we don’t think 7200 should provide much more support at all. Therefore, the only real question, for us at least, is whether or not we are going to see the market test R2 or even R3 first?

 

Range:            (7150) 7200  to  7250       

Activity:          Good

Type:              Neutral

 

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Available to buy now

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