Dec

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 (29^th 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 6^th 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

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: derivatives, finance, FTSE, ftse100, Futures, indices, investing, Markets, Options, shares, stockmarket, stocks, trading

Dec

07

2021

December 7th, 2021 by Richard

With the rollover and expiry next week the zone really needs to decide.

Nb. Our comment from the 12/01/21

For all its apparent weirdness, rather bizarrely, it is actually acting as we would expect.

By which we mean it is whizzing around in its Y ratio bandwidth, meaning volatility is up and whipsaws abound…brilliant.

Of course, the big difference is that the zone here has jumped up to 4695-4705, which it did the day after our last comment, so on the 24^th Nov and which we did mention on twitter (@hedgeratio).

It is a symbolic move really, as the Y1 ratio bandwidth remains at 310-points and the overall Y ratio bandwidth is still an absolutely staggering 460-points.

In fact, this would be staggering in an intermediary expiry, so in a triple there really are no words for it.

Nevertheless, as long as it stays there it will remain the target and, even more so, towards the expiry.

Although we allude to this above, another fascinating aspect of this expiry is the fact that despite the zone moving none of the other ratios below it have budged an inch, that is apart from R2 which only begrudgingly moved today. Rather odd to say the least.

Another odd aspect is the fact that 4495-4505, the previous zone, didn’t really look like it wanted to relinquish its crown, or at least this was the case until today, when the ratio here has eventually started to fill in. Which should help the bulls nerves a bit at least.

Sadly, we are no closer to discerning the sensitivity of this expiry yet but, now at least, people may have a greater appreciation of what we mean when we say “Y2 and R1 ratio levels below the zone are still a very long way away indeed”.

Range: 4395 to 4695

Activity: Poor

Type: Neutral

Nb. Our comment for 12/07/21

And today supplies the first real surprise of this expiry, as the zone returns to 4495-4505.

When we last commented we did say that this level seemed very reluctant to relinquish its crown but, over the intervening period, 4700 had been consolidating its presence.

This is why, the sudden reversal today comes as such a surprise.

We do normally point out that the triples are a bit like turning a supertanker, in that it takes time and that sometimes all the effort required is not that obvious.

But, as it is the rollover next week, where the zone is, or where it will be, now takes on a huge importance.

In the meantime, and totally in character with the inherent weirdness ever present in this expiry, the market continues to behave as if the zone is still at 4695-4705.

As we quite often say, we just crunch the numbers and the only subjective view of that is our interpretation of the resultant answers.

Who is to say it won’t revert straight back?

But, for today at least, there has been a steep fall in the ratios below 4700.

And again, in keeping with the weirdest expiry ever, who’s to say that the zone could not in fact stretch from 4495 all the way up to 4705.

In a way we now look back with fondness when this market just kept on knocking on the retreating R1 ratio door, as at least then we knew where we were, as even now we still don’t really have an idea of this market’s sensitivity this trip.

On a more positive note, with essentially 200-points of absolutely minimal ratio there could be some decent moves. By which we don’t meant the one to one and a half percent point moves of late, but some more meaty three to four percent moves. Just don’t forget whipsaw is just as much as likely under these conditions. Good luck.

Range: 4505 to 4705

Activity: Poor

Type: On balance only just bullish

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: derivatives, finance, Futures, indices, investing, Markets, Options, shares, SP500, spx, stockmarket, stocks, trading

Dec

01

2021

December 1st, 2021 by Richard

The SPX Dec expiry still weird, but oddly acting normally.

Nb. Our comment from the 11/23/21

Apologies for the lack of comment last week, but unfortunately preoccupied.

For the record, the November zone did end up at 4695-4705, so the settlement price was close enough, but the Y1 ratio bandwidth was so wide anywhere in that would have done.

This brings us rather neatly around to this rather weird December expiry, as we would expect the zone here to jump up to that level as well.

This in itself is not weird, well a 200-point hulk-like bound is certainly unusual, so verging on the weird but, the really odd aspects are more like the fact that this would means Y2 starts just above it, and R1 just 50-points above that.

And it’s not as if the respective bandwidths have narrowed, quite the reverse in fact, with the Y1 one being 310-points and overall, 460-points. And to have Y ratio in a triple at all is a new phenomenon, so to have so much is also weird.

However, the crowning eerie aspect is that here we are in the biggest of the big (which is borne out by the numbers) but the way the ratios are aligned we could be just in an intermediary, they are so similar.

All this abnormality certainly makes for a difficult read of this expiry, on top of which the last expiry saw this index go on to test rather emphatically R1 ratio so, when you also factor in this is a triple, then we have to say Y2 very probably won’t be enough while the jury remains out on how it will react to R1.

However, while there is considerable doubt over how sensitive this index will prove to be this expiry, there is one unmissable truth, which is that the downside risks remain.

If not actually increased, as the corresponding Y2 and R1 ratio levels below the zone are still a very long way away indeed.

Range: 4505 to 4705

Activity: Poor

Type: On balance bearish

Nb. Our comment for 12/01/21