Nb. Our comment from the 03/21/22
For the record the FTSE spent the entire rollover Wednesday in its zone, so that was definitely job done. The Thursday and Friday are then just free to do what they want after that really.
Looking at the April expiry and we have to remind everyone that we just crunch the numbers and then try to interpret the results, so we have no control whatsoever as to what those numbers actually are.
We are pointing this out as it does look a very weird expiry.
First up is the fact the zone is 7550-7650 which, when you consider this market just a fortnight ago was battling it out with the ratio at 6950, is just a little odd.
It is basically as if the March expiry never happened.
Secondly, and probably as a direct result of the very high zone, there is a 400-point wide Y1 ratio bandwidth below it. That’s 5.4%, and this is just to start.
Obviously, the zone could easily move anywhere in this bandwidth, which might change the picture somewhat, but one thing that won’t change that quickly is that this is a huge expanse with absolutely minimal ratio in it.
Then when you add in the zone itself and the Y ratio above it, you are then staring at a possible trading range of 7150 all the way up to 7700, a staggering 550-points, or 7.4%. And this is a normal 4-week expiry, well not entirely normal as it expires on Thursday 14th due to the Bank Holiday.
Definitely going to be a fun trip this expiry, so best buckle-up tight.
Range: 7150 to 7550
Activity: Strong
Type: On balance bearish
Nb. Our comment on 03/28/22
We did say the zone could move anywhere within that ridiculously wide Y ratio bandwidth, and it has.
We should, but we don’t calculate this daily, so we don’t know exactly when this happened but, guessing by the lack of impetus in the market from Wednesday onwards, we suspect it was then.
As, don’t forget, when it was at 7550-7650 it would have acted like a magnet but, once it moved down to being below the market, it would be like the poles reversing.
However, at least now we are looking at a far more conventional ratio alignment, even though the Y1 ratio bandwidth is 300 and the overall Y ratio bandwidth 450-points, at least it is now interrupted by the zone in the middle.
And now, just like the SPX, London now finds itself in bullish territory. Which must come as bit of relief after March, but we suspect it probably took the final couple of days last week for the market to actually realise this as it didn’t really have to do anything to achieve it.
The problem the FTSE now faces is that R1 is just 70-points ahead of it. Although, if it can cope with that, and it is only just above the R1 threshold, then there is another 150-points before the far more serious R3 kicks in.
And before you get too carried away, it is a sobering thought that from aforementioned R1 at 7550, the top boundary of the zone is 200-points due south.
Furthermore, as there are still three weeks to go in this expiry there is plenty of time for a lot to happen in.
First things first though, and a test of R1 and a look at how this market reacts to this amount of dynamic delta will tell us an awful lot about what to expect thereafter. What would be worse is for it to drift aimlessly around its current level, although we think that this is unlikely especially considering where the SPX is in relation to their ratios.
Range: 7350 to 7550
Activity: Average
Type: On balance bullish
