July 28th, 2021 by Richard

Is Y2 Ratio fighting a losing battle with the SPX?

 

Nb. Our comment from the 07/21/21

 

It has certainly been an exciting start to the August expiry, but regular readers should not have been at all surprised.

Although it is a shame, as back in the day, throughout the rollover week (last week) we would publish daily the expiring month on the left and the upcoming month on the right, in the table above.

This always gave more of a sense of how the upcoming front month was shaping up.

Our only moan is that the market, once it gets below its zone, doesn’t bounce off Y2 – even our step-up level was just below 4200.

Anyway, a lot of the recent fallout was courtesy of Europe, and didn’t the FTSE break out of its zone crying “freedom at last”. Although it was perhaps not the freedom many expected.

Getting back to the August SPX and only today have they brought it up to speed (adding 75 strikes no less), which just goes to show how incredibly underdeveloped it was before.

However, the first couple of days of this expiry have shaken a few awake, so activity has been good, today not so much, and overall, it’s still dismal.

This leaves the Y1 ratio bandwidth at 235-points, and the complete Y ratio bandwidth 460-points, so these moves are only to be expected.

In fact, so much so that should we not be seeing these moves it would then be more of a worry.

We suspect it is going to feel like a very long five-week expiry, as it is really the same old song that we have seen and heard for the last several expiries, with the only prospect of breaking this monotony might be the next triple coming up, September.

 

Range:            4305  to  4405           

Activity:          Moderate

Type:              On balance just bearish

 

   

Nb. Our comment for 07/28/21

 

The exciting start to this expiry, as having scrambled straight back into bullish territory like a scalded cat, it continued on its upward trajectory.

Which was really the least we would expect, having found being below its zone so distasteful.

The first real ratio test came last Friday 23rd August when the market hit Y2 for the first time.

And it did a very reasonable job of stemming what was a very strong tide at that time, as having been as low as 4233.13, by the time it hit 4405, this was a rally of 172-points, or 4.06%. The high was 4407.54 for almost 2 hours.

And in just 5 trading days, so that is some momentum behind it, so, hence, good job.

Obviously, the market then hit a new all-time-high, which is always difficult to compete against, that day, and again on Monday, but only managing to add just 10 more points to Friday’s level.

The drop yesterday was significant, but also because it ended below 4405.

Interestingly, today is the first time that Y2 has fallen, and as you can see from the table above, it is now standing at 4415.

Overall, the picture remains much the same as the Y1 ratio bandwidth has increased slightly, but the overall Y ratio one has decreased.

Also, there is blatantly far more ratio below than above, revealing a fairly obvious path of least resistance.

Adding to all this is that the zone will move up to 4345-4355.

We could see the next four-weeks of this index knock knock knocking on the retreating Y2 ratio door, after all it wouldn’t be the first time. But, please do not loose sight on the fact that it continues to sit atop an abyss of ratio, and one which continues to not want to fill in behind the rising market, which is a real worry.

 

Range:            4305  to  4415           

Activity:          Moderate

Type:              On balance bearish

 

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July 26th, 2021 by Richard

So many changes in the FTSE that it's almost a new start.

 

Nb. Our comment from the 07/19/21

We did get our perfect expiry in July, in ratio terms that is, so we are very pleased naturally. And, we were more than happy with the index staying inside its zone all day on the rollover (Wednesday), but just to add that bit of extra icing on the cake, the market spiked up on the actual expiry to make the EDSP 7058.71, which was just in the zone as well. Happy days.

However, derivatives are a forward-looking game, so getting straight into the August expiry and you can see the zone is the same.

And, if you cast your mind back to the start of the July expiry, the market went down to test R1 at 6950 with the intraday low of 6948.63 on the 21st June before recovering to end the day in its zone.

We are not saying that this is going to happen, but that is exactly where R1 is at the start of the August expiry, and in another twist of fate, the market opened that day at 7017.47, where the open today will be 7008.09. Hmmmmm.

The good news, for the bulls at least, is that above the zone R1 does not kick in until 7250, and then it’s not R1 but R2.

This is a huge jump up in the dynamic delta from the Y ratios, so that will be like running into a brick wall should the market get there.

Should be a lot more fun this expiry, as there was no doubt about it that the FTSE was getting extremely frustrated being corralled within its zone for pretty much the entire four weeks of the last expiry.

So, if it only continues on with the level of sensitivity it had in the July expiry, then we have a potential trading range over the 5-weeks in the August expiry of 6950 all the way up to 7250, a probably very welcome 300-points. Enjoy.

 

Range:            6950  to  7050        

Activity:          Very good

Type:              Neutral

 

 

Nb. Our comment on 07/26/21

 

The FTSE certainly got its “freedom” but perhaps not in the way many expected.

Ourselves included, as we reckoned on a drop down to test R1, then at 6950, was most likely, followed by a bounce just like the July expiry.

Sadly, we didn’t anticipate a very bad opening last Monday, which by our reckoning was circa 6944 (the official 7008.09 is rubbish) which meant it was below our level before the dynamic delta even had a chance to kick in.

Bit like going limit-down in commodities.

Furthermore, holding our hand up, the incursion past R2, then at 6850, was far deeper than we would have liked, but in our defence, we are unsure when it changed.

By which we mean, and as you can see in the table above, that today R2 is at 6800, but when we checked at the end of last week, it was actually at 6750.

And the significant changes in the ratio table above can only be caused by a significant amount of activity.

Of course, it doesn’t take much to change the Y ratios, as that is what they are designed for, but shifting R2 around like a chess piece, takes quite a lot.

And, whilst on the subject of R2, please note that above the now changed zone it is at 7150, albeit only just.

Also, worth noting, is that every 50-points after this the exponential ratios climb steeply.

Final point of note, is that last Thursday the intraday low was 6956.24, which was either R1 or R1 and the bottom boundary of the zone, depending on when it changed.

Whichever it was, as it stands now, the market is back inside its zone, and it knows what is beneath it now, so all that remains is to find out how aggressive it might be should it test the upper boundary. And, please do keep an eye out on where the SPX is in relation to its ratios.

 

Range:            6950  to  7050       

Activity:          Very good

Type:              On balance 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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July 21st, 2021 by Richard

We would be more surprised if the SPX wasn’t this volatile.

Nb. Our comment from the 07/19/21 (Not published)

 

Nb. Our comment for 07/21/21

 

It has certainly been an exciting start to the August expiry, but regular readers should not have been at all surprised.

Although it is a shame, as back in the day, throughout the rollover week (last week) we would publish daily the expiring month on the left and the upcoming month on the right, in the table above.

This always gave more of a sense of how the upcoming front month was shaping up.

Our only moan is that the market, once it gets below its zone, doesn’t bounce off Y2 – even our step-up level was just below 4200.

Anyway, a lot of the recent fallout was courtesy of Europe, and didn’t the FTSE break out of its zone crying “freedom at last”. Although it was perhaps not the freedom many expected.

Getting back to the August SPX and only today have they brought it up to speed (adding 75 strikes no less), which just goes to show how incredibly underdeveloped it was before.

However, the first couple of days of this expiry have shaken a few awake, so activity has been good, today not so much, and overall, it’s still dismal.

This leaves the Y1 ratio bandwidth at 235-points, and the complete Y ratio bandwidth 460-points, so these moves are only to be expected.

In fact, so much so that should we not be seeing these moves it would then be more of a worry.

We suspect it is going to feel like a very long five-week expiry, as it is really the same old song that we have seen and heard for the last several expiries, with the only prospect of breaking this monotony might be the next triple coming up, September.

 

Range:            4305  to  4405           

Activity:          Moderate

Type:              On balance just 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.

Posted in Uncategorized Tagged with: , , , , ,

July 19th, 2021 by Richard

First look at Aug as freedom beckons for the FTSE.

 

Nb. Our comment from the 07/12/21 (Not published)

Nb. Our comment on 07/12/21

 

We did get our perfect expiry in July, in ratio terms that is, so we are very pleased naturally. And, we were more than happy with the index staying inside its zone all day on the rollover (Wednesday), but just to add that bit of extra icing on the cake, the market spiked up on the actual expiry to make the EDSP 7058.71, which was just in the zone as well. Happy days.

However, derivatives are a forward-looking game, so getting straight into the August expiry and you can see the zone is the same.

And, if you cast your mind back to the start of the July expiry, the market went down to test R1 at 6950 with the intraday low of 6948.63 on the 21st June before recovering to end the day in its zone.

We are not saying that this is going to happen, but that is exactly where R1 is at the start of the August expiry, and in another twist of fate, the market opened that day at 7017.47, where the open today will be 7008.09. Hmmmmm.

The good news, for the bulls at least, is that above the zone R1 does not kick in until 7250, and then it’s not R1 but R2.

This is a huge jump up in the dynamic delta from the Y ratios, so that will be like running into a brick wall should the market get there.

Should be a lot more fun this expiry, as there was no doubt about it that the FTSE was getting extremely frustrated being corralled within its zone for pretty much the entire four weeks of the last expiry.

So, if it only continues on with the level of sensitivity it had in the July expiry, then we have a potential trading range over the 5-weeks in the August expiry of 6950 all the way up to 7250, a probably very welcome 300-points. Enjoy.

 

Range:            6950  to  7050       

Activity:          Very good

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.

Posted in Uncategorized Tagged with: , , , , ,

July 13th, 2021 by Richard

Everything now on the move in the SPX, Yay.

 

Nb. Our comment from the 07/07/21

 

If the first week of this expiry was all about the SPX getting back to its zone, then the second week was all about finding out where Y2 was.

As one can see from the above table, this is now 4355, which is where the intraday highs of the last two trading days were.

Fridays came in at 4355.43, while Tuesdays was 4356.46, which was also the open.

Therefore, it was not surprising, to us at least, when the market recoiled from this encounter with Y2, although the bulls are evidentially resilient judging by the bounce.

While looking at the above table, noticing the increase in the ratios below the zone as well as the decrease above, then this suggests a bullish market.

This is true, of course, but again to us this is rather by default than design, as the bandwidths are actually exactly the same.

The Y1 ratio bandwidth remains at 235-points, while the overall Y ratio bandwidth is steadfast at 410-points.

The zone itself is also likely to move up.

The best analogy we can come up with is that the market is like an automatic car in neutral, designed to creep ahead (or at least steady on an incline).

The overall lack of ratio, also denotes a very undecided market.

There is very little else we can add, as the way the ratios are behaving is translated as bullish, and that is about the extent of it.

However, the lack of players participating is a very troublesome aspect, as is, should anything rock the boat, the corresponding Y2 (support) ratio doesn’t come into play until you get down to 4120, a full 5.41% below here.

Enjoy, but just don’t fall into the trap of believing this is a one-way street.

 

Range:            4255  to  4355           

Activity:          Poor

Type:              Neutral

 

 

 

Nb. Our comment for 07/13/21

 

All we can say, is thank goodness the zone has eventually moved as we getting a tad irked having to repeat it every comment.

However, it is worth noting the level of activity, as it is not only the same as yesterday’s, which are both a marked improvement on recent levels, but more importantly it is the “type” that has eventually broken the impasse, and so much so, we are very likely to see it move up again, as 4345-4355 is now staking a claim.

Although, this is still below the current market, it is not that far away in reality.

And, if our analogy of the SPX being like an automatic car (please see above) where we mention “at least steady on an incline” we are of course referring to when it encounters Y2, or what we have called in the past, “a speed bump”.

Although, last Thursday, when the market fell 68.76-points before recovering, was a very visible example of our “one-way street trap” (again please see above).

Apart from the fact it fell down to circa 4300, which was the then zone, before recovering, it was obviously the catalyst that this market needed to gear up for the rollover and expiry this week.

With the zone moving up, naturally the ratios below have strengthened while above weakening but, this is not as bullish as it may appear at first glance.

We say this because, the Y1 ratio bandwidth has gone from 235 to 260-points overall, while the Y ratio bandwidth itself has grown from 410 to 460-points.

Out of interest, Y2 did move to 4380 yesterday, from 4355, so this market is still being sensitive to it.

And that is the entire market in a nutshell, as it may still be an automatic car encountering a retreating speed bump as it grinds forward leaving a void behind it, but we are still just talking about Y2, there to display small changes such is its sensitivity, which just highlights the utter lack of overall participation.

 

Range:            4305  to  4405           

Activity:          Average

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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