October 26th, 2021 by Richard

The bulls are definitely back in the SPX, but for how long?


Nb. Our comment from the 10/19/21


Although we are now in the November expiry, we just can’t not mention the end of October’s, as in our last comment the market had just closed at 4361.19 and our zone was stubbornly still at 4445-4455, and come the expiry the settlement price was 4463.66, which is definitely a bit hit in our books.

Nevertheless, this is still very pertinent for this expiry, as markets still being slaves to misdiagnosing the derivative influence, means that there is more than likely a bit of latent momentum remaining.

Which is essentially what we subscribe yesterday’s move to.

However today, there are more than likely to encounter Y2 at 4505 above the zone, and it is this reaction which will tell us what we need to know.

Namely being whether the recent rally was indeed all down to the expiry, or that the bulls are back in town, committed and in control.

Obviously, you know what we think, but best to spell it out.

Don’t forget this is still an intermediary expiry, and it is a five-week one, which may go some way to explaining why it is developing so slowly.

For the record the Y1 ratio bandwidth is 210-points and the overall Y ratio bandwidth 410-points, so actually wider (worse?) than last trip.

It has been a long time since this market faced dynamic delta of the variety that means futures selling, in fact it never got past just testing its zones upper boundary in the first week of the last expiry, so how the market reacts if/when it tests Y2 will define the rest of this week and very probably the next we suspect.

Whatever the outcome, it is definitely a good way to start a new expiry as at the very least it gets people engaged.


Range:            4445  to  4505           

Activity:          Average

Type:              On balance only just bearish



Nb. Our comment for 10/26/21


Exactly as we said at this time last week, how the market would react to Y2, then at 4505, would tell us all we need to know.

Last Tuesday the market opened at 4497.34, and then hardly blinked at Y2 as it went past. Well perhaps it held them up for 15 or 20 minutes, but that was all.

Y2 then quickly retreated to where it was at the very start of this expiry, namely 4530, but the market was already way past this point and had new all-time-highs in its sights. As you can see it has now slipped even further.

This expiry is always a strange one, as the US markets do love to hit new all-time highs just before Thanksgiving, and that is still a month away.

Can the market maintain this level of aggressiveness for that long? Unlikely, and anyway, this trip expires on the 19th November, so there is that battle it has to face as well.

However, we have no doubt the zone will move up, and already there is the distinct possibility it will move to 4495-4505, but if it follows the recent game plans then this will always be a catch-up exercise.

Overall, the Y1 ratio bandwidth is actually slightly wider, and although the overall Y ratio bandwidth has come in to “just” 365-points it is still far wider than previously.

Admittedly, at least the Y ratios are moving up below and receding above, both bullish, but if the distance between them doesn’t change any zone move is more by default than design.

Therefore, we are back to the old mantra, that it is like an automatic car in neutral, designed to creep forward, but that even though it is just contending with the minimal Y2 ratio, and very possibly even attack R1, this is not a risk-free market, as that is an 8% bandwidth it is sitting at the top of. Great trading though.


Range:            4445  to  4610           

Activity:          Moderate

Type:              Neutral

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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.

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