Nb. Our comment from the 09/07/21
After the first week when the SPX made full use of its enormously wide Y1 ratio bandwidth by effectively traversing the entire width of it, last week must have come as bit of a shock.
And there is no doubt about it, but the last week was all about this index struggling to make any more forward progression now it was deeply into the Y2 ratio.
Although this has not been uncommon of late, it is still rather sad, as even Y2 is classed as “minimal”. Especially in a triple.
Anyway, we have eventually seen some movement in Y2 above the zone, as it has now slipped to 4530.
The significance being that, with this level now in retreat, coupled with the market being practically at the same point now, then it is decision time for this index.
Whether to continue to struggle in Y2, or retreat back into the far more comfortable Y1 ratio bandwidth.
If it does choose the latter, then further forward movement could well be limited to how quickly Y2 continues to retreat.
All the while there remains a spectacularly wide Y1 ratio bandwidth beneath it, which still goes all the way down to 4220, a mere 310-points away.
Of course, there is the zone before then, so should the market indeed turn south, then this should provide the first line of support.
But if the SPX follows the pattern of the last few expiries, then we should see it bumping along behind Y2, knocking on that door and hopefully forcing that retreat to at least continue, if not accelerate.
In the meantime, we haven’t seen an expiry recently that the zone itself hasn’t moved up, so come the rollover and expiry next week, even that target could very easily be a lot higher. But all the time the huge Y ratio bandwidths beneath this market will be there, so that risk will also be ever-present.
Range: 4405 to 4590
Type: On balance bearish
Nb. Our comment for 09/14/21
And there we have it! The SPX’s zone moves up to 4495-4505.
TBH, it has been a bit like watching paint dry, this move having been flagged for so long.
Furthermore, it has created bit of a schizophrenic index in all truth, as on the one hand the siren-like call of the zone when it was down at 4395-4405 had the market being called in that direction.
However, it was obviously somewhat reluctant, and not just for those stale bulls who had fought so hard with Y2 just the week before but, because the move up to 4495-4505 was imminent any day.
Hence it was sort of stuck in no-man’s land between the two.
One sort of feels that now this has eventually happened, the real rollover and expiry can get underway.
In the meantime, it is going to make for a very interesting day today, as for the first time this expiry, the SPX is now actually below its zone, and therefore, by definition, in bear territory.
If nothing else, this should at least galvanise those bulls, and whether or not they succeed in getting back to the (new) zone for the rollover tomorrow is going to be the big question, a question with very interesting consequences if they don’t.
Interestingly, and as is quite normal these days, we have seen a lot of writing of otm puts, and what with just days to go this can be seen by some as “safe” money, so getting back to the new zone will be rather important to these traders especially.
Overall, the Y1 ratio bandwidth is now 295-points, with the total Y ratio bandwidth coming in at 435-points, so a slight narrowing, but not by anything significant.
This really means that the zone has moved up inside the Y1 ratio bandwidth, rather than being forced in this direction by bullish activity, which is ok, but not representative of a true bull market. Still, it makes for an exciting expiry at least.
Range: 4245 to 4495