September 26th, 2022 by Richard

Big Ratio battle looming for the FTSE, which could determine the rest of this expiry.

 

Nb. Our comment from the 09/21/2022

 

Well, the September expiry did end up a textbook one.

On the Wednesday and Thursday, the intraday lows were 7259.24 and 7258.67 respectively, and the EDSP was 7264.45. So, there was no doubt at all they held it in its zone over the rollover and expiry, which when you consider what was happening in the US, then this is even more impressive.

Moving swiftly on to more important matters…October, and the new 5-week expiry.

Obviously, the close last Friday was south of the zone, so the grand intentions of September evidently didn’t carry across into the October expiry.

With the short notice Bank Holiday on Monday no doubt affecting things, Tuesday was going to be crucial in determining what the possible intentions might be for this expiry.

And having been almost 100-points higher at one stage seemed to answer that. However, it really didn’t take much to knock the legs out from under that rally, and very early on into the proceedings as well.

More importantly, the bottom boundary of the zone (7250) hardly put up any resistance at all. In stark contrast to the week before.

The next level of support is not until it hits Y2 at 7150.

After that, you have to wait until 7050 before it hits R1.

Even from the very start the ratios were lopsided (no Y ratio above the zone), so it always had the potential to be a hard slog this expiry for the bulls.

Therefore, the only question that really remains, is what will tempt them back in to the fray, Y2, R1 or might it take R3 at 6950?

 

Range:            7050  to  7250      

Activity:          Average

Type:              Neutral

 

 

Nb. Our comment on 09/26/22

 

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

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September 20th, 2022 by Richard

The SPX starts the Oct intermediary expiry with few, if any, positive signs.

 

Nb. Our comment from the September Expiry

 

Apologies we didn’t get the chance to publish one last comment in the expiry week.

Regardless of this though, you should have all had a decent experience as our “serious Ratio level for the SPX”, namely 3895, did indeed prove to be the turning point of the entire expiry.

Well, at least until the final couple of days. Which by then the entire ratio picture had changed anyway, as is the norm with these things.

But, in-between, the market bounced from R2 at 3895 all the way back up to 4119.28, a very impressive 224.28-points, which made our expiry, so the final few days were not that significant to us really.

For the record, the settlement price was 3871.24, but 3895 had slipped from R2 to R1. With R2 finishing at 3845.

The zone was still at 4000, so although the sharp fall in the ratios eased the pain, the end result was not that good for derivatives.

At the end it was just Y2 ratio from the zone down to 3895, so not enormously painful, but still enough to smart.

 

 

 Nb. Our comment for 09/20/2022

 

And before you know it, here we are in the October expiry.

Which means we have returned to the intermediary ones, and not only that, but this is a five-week expiry as well.

This can sometimes mean the first week can be a slow-burner, however from the overall level of activity, as well as the daily one, this does not appear to be the case this time.

Reinforcing this, is the change we have seen in the ratios so far this expiry already.

Below the zone, we have seen the appearance of Y1, while at the same time, both R1 and R2 have seen significant dips.

However, the big changes have come above the zone, where in the space of just a few trading days, all the ratios have come in significantly. To the tune of a 100-points, or more.

Admittedly, the zone is unchanged but, the way the ratios are developing, is very bearish.

Of course, October is but two days old, so one shouldn’t jump to conclusions.

On top of which, from R1 to R1, it is now 3795 up to 4205, a whopping 410-points. Not as bad as we have seen, but a widening from September.

Which in itself is not good, as the Y ratio bandwidth has been ridiculously wide for far too long now, and to see the narrowing in Sept now reversed is simply not good.

Unless you are a vol trader that is, as such a wide trading range is certainly not going to hurt your cause any.

For the rest of us, the bearish movement in the ratios is what it is. All it really needs is the confirmation of a move down in the zone.

Or, for the market to break back up over it, and therefore back into bullish territory, which they singularly failed to hold onto in the last expiry, so that’s not a good sign either. All told, not an auspicious start really.

 

Range:            3795  to  3995           

Activity:          Average

Type:              On balance only just bullish

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September 5th, 2022 by Richard

The FTSE condenses an entire expiry into just two weeks, a sign or is it now done?

 

Nb. Our comment from the 08/30/2022

And too much for them it certainly was.

A very interesting thing also happened last Monday 22nd as the intraday high was in fact 7550.41 (the previous close and Monday’s open being 7550.37).

We never saw it, don’t think anyone did actually, but it’s there in black and white for all eternity despite it being an anomaly IOHO.

The warning signs were there, as on both Tuesday and Thursday the market got back up to the low/mid-thirties.

And we have said this often in the past, that when the market knows there is a huge futures seller at 7550 and then starts playing “you first”, “no, after you” and “please, I insist” but no one is being brave enough to knock on that door again, it’s always a bad sign. Great if you’re a bear though naturally.

Getting back to the present, and the significance of this market closing below 7450 should not be underestimated.

This is because the next level of support is in fact the zone, the upper boundary still being at 7350.

Of course, London is going to be playing catch-up as it was closed yesterday so still has to account for a chunk of Friday’s drop as well as Monday’s.

But, if the FTSE does test its zone, we will be happy to speculate that when we published our comment on the 22nd mentioning the zone at 7300, not many, if any, probably saw that as a likely target.

Means that our trading range is quite a significant one this time, as 7450 will be a big test for any bulls, whereas if the upper boundary at 7350 doesn’t hold then the lower boundary will very probably come into play.

 

Range:            7350  to  7450      

Activity:          Poor

Type:              Bearish

 

 

Nb. Our comment on 09/05/22

We do sincerely hope that you did take notice of our ratio levels, as you should then have had an outstanding week.

In fact, everything we talked about actually played out in London on the very day the market reopened, Tuesday 30th August.

From the open it went on to test R3 at 7450 but, by the end of the day it had also tested the upper boundary of its zone, 7350.

Which did hold, the intraday low being 7351.12, but that did create a bandwidth test. Meaning a breakout was imminent.

As the market closed that day at 7361.63 the odds were in favour of that breakout being down into its zone.

Wednesday saw the zones bottom boundary tested, 7250, which also made that day a zone bandwidth test.

The next level of support was R3 at 7150, and if you knew that then you pretty much had Thursday and Friday covered. Thursday’s intraday low was 7131.69 whereas Fridays was 7148.50.

The trouble is that the FTSE has now crammed into two weeks what we would expect to take the entire expiry. Well, three weeks actually, the final week being needed to get it back to its zone.

We have seen this setup before, and in those instances the market stayed in its zone for the entire third week (excitedly going nowhere) before the final week breakout.

Therefore, we would like to see the same, but we doubt this will happen as there are too many geopolitical things going on.

So, all we can say, is take note of the ratio levels and then watch very carefully what the market does when its around them, as either up or down, it has now been there already.

 

Range:            7250  to  7350      

Activity:          Very poor

Type:              On balance bearish

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August 30th, 2022 by Richard

The SPX has retreated all the way back to its zone at the start of the big Sept expiry.

 

Nb. Our comment from the 08/22/22 (Not published)

 

Nb. Our comment for 08/30/22

 

It is a shame we couldn’t get a note out last week on the SPX, as just like the FTSE this index started the September expiry knocking on a high ratio door.

For the SPX this was R1, historically not particularly high but, under recent conditions, this index has even proved sensitive to just Y2 ratio.

Of course, this all came about because there was an absolute vacuum of ratio in the last expiry that allowed this index to be sucked higher. Very impressively finishing the August expiry +418.40-points, or 10.9%. Even exceeding our forecast at the start “that it could be one for the bulls”.

So, worth noting that the expiry intraday high in Aug was 4325.28 (16/08/2022), which made the closing high that very same day of 4305.20, the day before the rollover.

Again, and just like the FTSE, the zone here had been steadfast at 4000, 300-points below where the market was.

The good news, is that there is no Y ratio below said zone, which is not so good for the bears admittedly, but may prove very handy for the bulls as the market is just 30-points away now.

This therefore also means that we are seeing the smallest Y1 ratio bandwidth that we have for a very long time, coming in at just 110-points.

However, and as we have just experienced, the overall Y ratio bandwidth is still a very impressive 310-points, but which is nothing compared to what we have been seeing of late.

More importantly, it reverses the recent trend of ever-expanding bandwidths, which can only be good.

Plenty of life left in this index, and the bulls have nothing to worry about quite yet, that will only come with a test and fail of R1 at 3995. In the meantime, enjoy the wide-open expanse of the Y ratio.

 

Range:            4005  to  4305           

Activity:          Poor

Type:              On balance bullish

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August 30th, 2022 by Richard

After coming unstuck at DR Ratio at 7550 the FTSE is now in a critical bandwidth.

 

Nb. Our comment from the 08/22/2022

The August expiry was even more bullish than we thought/predicted it would be, ending up with a gain of 416.49-points (5.84%) on the EDSP of 7550.62.

And not only was 7550 the settlement price, it is also the closing level for the FTSE.

This is very significant, as the actual real time closing price of the FTSE was in fact 7539.79, down 2.06-points.

So, not only has the auction turned a loss into a gain (so much for transparent and representative market data then) but it has also taken it to a very significant ratio level as well.

For those not sure of the significance of this it is because in real time both the futures and equity market are open, whereas the auction is the preserve of equities only. Therefore, the auction takes place without allowing for any dynamic delta or hedging to take place from the derivative stock index options and futures.

The end result is that today, this index is going to start right on DR ratio, which is a lot, even for a triple.

By the end of a triple, we always say that they can, and frequently do, trade up to the B ratio levels, such is the huge increase in activity in both derivatives and index equities created via stock index options and futures hedging.

But, at the very start of the expiry, DR is a lot of dynamic delta futures selling for a market to absorb.

On top of which, the zone is down at 7300.

Hat’s off to the bulls if they are that committed, but we suspect this will be too much for them to contend with, at least for this week.

 

Range:            7450  to  7550        or        7550  to  7700      

Activity:          Poor

Type:              On balance bearish

 

 

Nb. Our comment on 08/30/22

 

And too much for them it certainly was.

A very interesting thing also happened last Monday 22nd as the intraday high was in fact 7550.41 (the previous close and Monday’s open being 7550.37).

We never saw it, don’t think anyone did actually, but it’s there in black and white for all eternity despite it being an anomaly IOHO.

The warning signs were there, as on both Tuesday and Thursday the market got back up to the low/mid-thirties.

And we have said this often in the past, that when the market knows there is a huge futures seller at 7550 and then starts playing “you first”, “no, after you” and “please, I insist” but no one is being brave enough to knock on that door again, it’s always a bad sign. Great if you’re a bear though naturally.

Getting back to the present, and the significance of this market closing below 7450 should not be underestimated.

This is because the next level of support is in fact the zone, the upper boundary still being at 7350.

Of course, London is going to be playing catch-up as it was closed yesterday so still has to account for a chunk of Friday’s drop as well as Monday’s.

But, if the FTSE does test its zone, we will be happy to speculate that when we published our comment on the 22nd mentioning the zone at 7300, not many, if any, probably saw that as a likely target.

Means that our trading range is quite a significant one this time, as 7450 will be a big test for any bulls, whereas if the upper boundary at 7350 doesn’t hold then the lower boundary will very probably come into play.

 

Range:            7350  to  7450      

Activity:          Poor

Type:              Bearish

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August 22nd, 2022 by Richard

As the September expiry starts the FTSE is now facing a huge Ratio level.

 

Nb. Our comment from the 08/15/2022 (Not published)

Nb. Our comment on 08/22/22

 

The August expiry was even more bullish than we thought/predicted it would be, ending up with a gain of 416.49-points (5.84%) on the EDSP of 7550.62.

And not only was 7550 the settlement price, it is also the closing level for the FTSE.

This is very significant, as the actual real time closing price of the FTSE was in fact 7539.79, down 2.06-points.

So, not only has the auction turned a loss into a gain (so much for transparent and representative market data then) but it has also taken it to a very significant ratio level as well.

For those not sure of the significance of this it is because in real time both the futures and equity market are open, whereas the auction is the preserve of equities only. Therefore, the auction takes place without allowing for any dynamic delta or hedging to take place from the derivative stock index options and futures.

The end result is that today, this index is going to start right on DR ratio, which is a lot, even for a triple.

By the end of a triple, we always say that they can, and frequently do, trade up to the B ratio levels, such is the huge increase in activity in both derivatives and index equities created via stock index options and futures hedging.

But, at the very start of the expiry, DR is a lot of dynamic delta futures selling for a market to absorb.

On top of which, the zone is down at 7300.

Hat’s off to the bulls if they are that committed, but we suspect this will be too much for them to contend with, at least for this week.

 

Range:            7450  to  7550        or        7550  to  7700      

Activity:          Poor

Type:              On balance bearish

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August 15th, 2022 by Richard

The risk: reward ratio changes in the FTSE as Aug expiry comes to an end and Sept looms large.

 

Nb. Our comment from the 08/08/2022

Why waste time? Which is exactly the attitude of the FTSE at the moment.

Since our last comment, please see above, where we mentioned it had gone to a lot of effort to stay in bullish territory above its zone and that it was clear all the way up to 7450…it has just powered on up until it hit aforementioned 7450.

During the course of this journey, it has also moved the zone up.

This we see as a natural move, occasioned by the lack of ratio in that huge Y ratio bandwidth that was there a couple of weeks ago, rather than any great bullish manipulation.

To underline this point, below the zone, OK 7050 has gone from Y2 to R1, but otherwise R2, R3 and DR have all remained static.

Admittedly, above the zone, the ratios have slipped, but they were doing that two weeks ago, and anyway, with the huge move in this market this is by and large a natural by-product of this.

So, what next?

Well, 7450 is the new critical level. Now because it is the top boundary of the zone but, previously, it was because it was R1.

Don’t forget at the start of this expiry 7450 was Y2, then became R1, so this is it just retuning to where it came from.

However, the difference now to two weeks ago, is that Wednesday’s intraday high and close was 7445, Thursday’s close was 7448 and Friday’s 7439. All inside the zone.

There is still two weeks to go, but the market is certainly not as aggressive as it was a fortnight ago. There is still some upside, R1 now starting at 7550, but there is also now a lot of downside. Apart from the actual zone of course, the corresponding R1 is all the way down there at 7050, so the risk: reward ratio has changed considerably now, at least for us that is.

 

Range:            7350  to  7450      

Activity:          Moderate

Type:              Neutral

 

 

Nb. Our comment on 08/15/22

 

And here we are, at the end of the August expiry, and one which certainly has been “one for the bulls”.

We have said this before but, one of the main aims of looking at the hedge ratios, is so that one can determine when the market is out of kilter with reality. When we say reality, what we actually mean, is that the market fails to respond to the futures coming on to the market via the dynamic delta. If this is futures selling, and the market is a willing buyer, then all is good. But and this is a big but, at some stage this appetite, or emotion, will fade, leaving the dynamic delta to take charge.

For us this is where this market is now.

Essentially, it has broken up through its zone, met with the futures selling generated by the minimal Y1 ratio dynamic delta, and simply stalled.

The desire is there (for the bulls) but the appetite just isn’t. At the end of this week the FTSE has added just 60-points (0.81%) whereas the S&P500 has added 135-points (3.26%).

And on top of this you now have the rollover and expiry for the market to contend with.

Furthermore, next up is the September expiry, the third of the “biggies” this year, and so this makes it the second biggest this year by sheer volume. Only the Dec expiry is bigger.

After Wall Street’s performance on Friday most would anticipate the market opening stronger this side of the pond, and as one can see in the table above, the FTSE is right in the middle of its Y1 ratio bandwidth.

So, although the Y1 dynamic delta has up to now, applied the brakes to the bulls’ exuberance, lurking dead ahead is R1 at 7550. This is also already a significant ratio level in the Sept expiry. So, it might get frisky this week but, as we said previously, “the risk: reward ratio has changed considerably now”.

 

Range:            7450  to  7550      

Activity:          Average

Type:              Bearish

 

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August 10th, 2022 by Richard

Well, so far, it certainly has been one for the bulls, but what's next is the real question now?

 

Nb. Our comment from the 07/26/22

 

Well, so far it has definitely been the case that this “expiry might actually turn out as one for the bulls”.

On Monday 18th, the first day of this expiry, the intraday low was 3818.63, another test of Y2 at 3820. Since then, and after we highlighted the stubbornness of the August zone, the market closed on Thursday 21st at 3998.95, right in it. Not bad that, 4.6% in as many days, and why we feel slightly vindicated about our comments.

The question is, what happens next?

It was all done rather hastily, and let’s face it, there is still 4-weeks to go in this expiry.

The intraday high on Friday was 4012.44, and we mention this as there is some doubt as whether or not this was a test of Y2. The reason is, that Y2 after the 19th had moved down to 4015 but, on the Friday, actually slipped back out to 4020, before moving back for today.

If it was a test, then that is the market having performed a complete Y1 bandwidth test.

The fact that it is now almost 100-points below this, suggests that it was in fact a test.

Generally, this means the market languishing for a while in this bandwidth.

However, if one compares where the ratios were on the 19th to where they are today, then it is obvious that they are strengthening on both sides of the zone.

If this continues at the same pace, then the zone will have to move, and downwards.

The prognosis is that everything now rests on how the ratios now evolve. If they continue to strengthen as they are above the zone, this will eventually force it down. Or will the ratios below the zone get enough support to keep it up.

Whichever side wins this new battle, we suspect will then dominate the rest of this expiry. But, don’t lose sight of the fact that the Y1 ratio bandwidth is now only 170-points, whereas the overall Y ratio bandwidth is still a massive 460-points. So, although these are a lot narrower than they have been, they are still plenty wide enough to satisfy most traders.

 

Range:            3845  to  3995           

Activity:          Poor

Type:              On balance only just bearish

 

Nb. Our comment for 08/10/22

 

As we said, this one (expiry) may be one for the bulls, and so it has with a whopping rise of 7.96% so far.

In fact, if you go from the expiry high of 4186.62 it is actually 9.64%…and not many others saw this coming back on 18th July when this expiry started.

But, more importantly, is what might happen next?

The first aspect we have noted is that activity is going through a normal mid-expiry doldrum. While this is quite common, it does mean a degree of loss of control by the derivatives.

The second aspect to note is that, despite such a huge Y ratio bandwidth, the zone hasn’t moved, and more interestingly, not made any sign that it is likely to.

Thirdly, and this holds true in any expiry, don’t get fooled into believing any 4th Estate hyperbole about what is driving this market. There isn’t anything. It is simply because there is no ratio to speak of to get in the way. Although, almost 10% is a very long way we concede, so we understand why they have to try to label it, but it was nothing that wasn’t seen as possible meaning that the reason was also foreseeable.

Bearing these three aspects in mind, one might want to now consider that the rollover and expiry are next week.

Therefore, activity will pick up, so will volatility in all likelihood, and this will then determine if the zone remains steadfast, or looks likely to adapt.

In the meantime, it is worth remembering that this index is in Y2 ratio. Not difficult to handle, but with low activity, it would certainly make things uncomfortable.

Both Y2 and R1 have been higher, 4105 and 4255 respectively, so where they stand today is actually them strengthening, adding weight to the zone remaining where it is.

Bearing all this in mind, and as things stand, we have to start thinking about this index returning to its zone for next week.

The all-important question, is will the zone shift in the meantime?

 

Range:            4005  to  4230           

Activity:          Very poor

Type:              Neutral

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July 26th, 2022 by Richard

A ratio battle now looms for control of the SPX for the rest of the Aug expiry.

 

Nb. Our comment from the 07/19/22

 

We have to start the comment on the August expiry with one final one on the July, where the final resting spot for the zone was in fact 3800. Therefore, the settlement price of 3839.81 was about as close as they needed to be. In fact, we did say it was not so much about where the July expiry ended, but rather about keeping a lid on the potential volatility, which certainly seemed to be the case for us. Job done then.

Moving on to August, and as the SPX closed last Friday at 3863.16, it was happily in the new Y1 ratio bandwidth already.

Although, a point to note is that the intraday low on Friday was 3817.18, and yesterday, 3818.63, both right on Y2.

However, the really interesting aspect between the two expiries is that the zone did not make any significant attempt to join with the July level, staying stubbornly at 4000.

So, if Y2 can hold, then the August expiry might actually turn out as one for the bulls.

Also, R1 at 3695, as it stands, is a very solid level, so the downside has some far more significant support not that far away.

On the other side, we have already mentioned the zone being at 4000, then Y2 comes very quickly after that but, it is a very long way above this before you get to the R1 resistance ratio.

Another little pointer, our Delta Ratio, is currently standing at 49.3%, where a reading below 50% is considered bullish.

It is a 5-week expiry, so even longer than normal to go, and the first week of these extended expiries can be somewhat slow to develop, so caution perfectly understandably but, as the ratios are now aligned, there is definitely more upside potential than downside.

 

Range:            3820  to  3995           

Activity:          Average

Type:              On balance bearish

 

 

 

 

Nb. Our comment for 07/26/22

 

Well, so far it has definitely been the case that this “expiry might actually turn out as one for the bulls”.

On Monday 18th, the first day of this expiry, the intraday low was 3818.63, another test of Y2 at 3820. Since then, and after we highlighted the stubbornness of the August zone, the market closed on Thursday 21st at 3998.95, right in it. Not bad that, 4.6% in as many days, and why we feel slightly vindicated about our comments.

The question is, what happens next?

It was all done rather hastily, and let’s face it, there is still 4-weeks to go in this expiry.

The intraday high on Friday was 4012.44, and we mention this as there is some doubt as whether or not this was a test of Y2. The reason is, that Y2 after the 19th had moved down to 4015 but, on the Friday, actually slipped back out to 4020, before moving back for today.

If it was a test, then that is the market having performed a complete Y1 bandwidth test.

The fact that it is now almost 100-points below this, suggests that it was in fact a test.

Generally, this means the market languishing for a while in this bandwidth.

However, if one compares where the ratios were on the 19th to where they are today, then it is obvious that they are strengthening on both sides of the zone.

If this continues at the same pace, then the zone will have to move, and downwards.

The prognosis is that everything now rests on how the ratios now evolve. If they continue to strengthen as they are above the zone, this will eventually force it down. Or will the ratios below the zone get enough support to keep it up.

Whichever side wins this new battle, we suspect will then dominate the rest of this expiry. But, don’t lose sight of the fact that the Y1 ratio bandwidth is now only 170-points, whereas the overall Y ratio bandwidth is still a massive 460-points. So, although these are a lot narrower than they have been, they are still plenty wide enough to satisfy most traders.

 

Range:            3845  to  3995           

Activity:          Poor

Type:              On balance only just bearish

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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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July 25th, 2022 by Richard

The FTSE has a very wide potential trading range for the August expiry

 

Nb. Our comment from the 07/20/2022

Firstly, our final comment on the July expiry where the zone did move down to 7150-7250, meaning that 7150 remained a critical level, but now for two reasons. The EDSP was 7134.13, so close and a sterling effort, but still a smidgen shy. Interestingly, the market actually closed at 7159.01.

So, the first day of the August expiry for the FTSE was all about its zone.

The fact that the intraday high was 7268.88 just hides the fact that this index had many hours in a running battle with 7250, the top boundary of its zone.

And as one can see in the table above, above the zone it is only Y1, so to hold the market back at all meant it was punching above its weight.

Worth noting is the fact, that as things stand, Y2 does not even start until 7450, so there is ample room for this market to go ahead into, if it so desires.

However, and especially for those who have read our comment on the SPX yesterday, the difference in the FTSE is that the corresponding Y2 and R1 ratio levels below the zone are 400 and 500-points away respectively.

That is a long way, particularly for this index.

This is also a 5-week expiry, so the first week can be deemed a bit superfluous, and if this is the case then we haven’t seen this expiry true colours yet.

All we can say, is that London has plenty of scope as things stand, to make a significant move, but in either direction.

The fact it has elected to go above its zone and into bullish territory certainly gives further moves in the same direction the upper hand, but don’t lose sight of the risks.

 

Range:            7250  to  7450      

Activity:          Strong

Type:              Neutral

 

 

 

Nb. Our comment on 07/25/22

 

As the FTSE returns to its more usual Monday slot, there are a few interesting things going on.

The main one being this markets insistence on staying above its zone, and therefore in bullish territory. The real test was on Thursday when the intraday low was 7200.14, and the real time close was 7257.98. 7-points is nothing to the closing auction, so it could easily have finished back inside its zone, but it chose to turn a 6-point deficit on the day to a 6-point gain, closing at 7270.51 (after an extended auction as well).

The second interesting aspect is that above the zone there is 200-points of the minimal Y1 ratio, and yet here it is just 26-points above the upper boundary.

This seems a lot of effort and considerable expense to go to and not take advantage of this essentially open space.

Then there is the fact that Y2 above the zone has gone, and been replaced by R1, a considerable strengthening. And yet, R2 has slipped 100-point, from 7550 to 7650, and R3 has gone, a considerable weakening.

Luckily below the zone it is a bit more conventional, but no mistake, above it is somewhat contradictory.

Finally, although the “type” of activity has come in as neutral, this is because as much money has been taken off the table on both sides. The interesting aspect of this is that this is when this 5-week expiry is just but days old, so really rather rare to see.

Now we are into the more normal 4-week timeline, things may start to become clearer but, in the absence of anything concrete, it is exactly as we said last week.

As it is above its zone the bulls have the edge, and it is clear all the way up to 7450 but, the upper boundary of the zone (7250) remains critical, and don’t lose sight of all that Y ratio below the zone as that makes the potential overall trading range for the next four weeks 7000 up to 7450. Enjoy.

 

Range:            7250  to  7450      

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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