December 6th, 2022 by Richard

The SPX retreats back to the safety of its zone after testing R2.

 

Nb. Our comment for 12/06/22

 

We made the point in our last comment (30th Nov – please see below-) that in the absence of a meaningful test of a ratio/delta level the SPX was in essence just meandering.

Luckily, we didn’t have to wait very long, courtesy of the Fed mentioning it might ease the pace of rate hikes, the market leapt up to 4080 on the very day we published.

Obviously, the market got carried away with itself and, no surprise, having been so aimless for so long it was crying out to let off some steam.

The trouble with that was, for the next two days, Thursday and Friday, it was stuck in the R2 bandwidth not being able to make any progress in either direction.

We actually thought, that they had solved the problem on the Friday, what with that massive gap down at the open which took the market down to 4040.17, and below R2 at 4055.

Can’t explain why it finished back at where it started but, as the ratio/delta levels hadn’t changed, a repeat was always a distinct possibility.

Coincidence or not, we were also not surprised to see the market finish yesterday back within its zone when it did repeat this yesterday.

Our problem is, that it is a week early, as the rollover and expiry are not until next week.

In a perfect world, we would like to see this market test R1 at 3945, or even R2 at 3895, as don’t forget there is no minimal Y ratio above the zone, so the market is now well accustomed to R1.

Just to remind everyone, the perfect expiry is when the market test one level of ratio on one side of the zone, then goes on to test the same level on the other side before finishing in or around its zone. Although anywhere in the Y ratio for the SPX is more than acceptable.

 

Range:            3995  to  4005           

Activity:          Only just registered

Type:              On balance not bearish

 

www.hedgeratioanalysis.com

 

 

Nb. Our comment from the 11/30/22

 

Well, the market did try, getting as high as 4034.02 last week, before capitulating.

So, not really very aggressive, as it was only R1 ratio it was dealing with.

Although, it is perhaps worth noting that it may have been just too early in the expiry for the market to deal with R1 ratio but, it could also have been, it just didn’t want to be in bullish territory above the zone.

Both are not good news for the bulls but, one at least, is not so bad as the other. As the market can always become just a bit more aggressive and committed and so therefore become accustomed to R1, but it is a lot harder to swing sentiment as a whole from bearish to bullish.

In the meantime, it seems happy enough to just languish in the Y ratio bandwidth below the zone.

We would be a lot happier had it tested R2 at 4055, and we will be a lot happier when it tests R1 at 3895, as in the absence of either it is just meandering really.

Compounding all this, is the fact that the FTSE is at the other end of the spectrum, having taken on, and beaten, DR ratio, on gone on to challenge B1.

These are very significant levels of ratio, that result in a huge number of futures selling courtesy of the dynamic delta. There is nothing wrong of course with a market that is happy to buy all these futures coming out onto the market. Our issue is that this seems peculiar to London, as the SPX is certainly not exhibiting the same bullish exuberance.

Generally, it is unlikely that both are right.

So, choose your horse and, for what it’s worth, we always go for the SPX in circumstances such as this. Even though the better trading opportunities are this side of the pond.

 

Range:            3895  to  4005           

Activity:          Very poor

Type:              Bearish

 

www.hedgeratioanalysis.com

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: ,

November 22nd, 2022 by Richard

After a near perfect Nov expiry, Dec will bring its own uniqueness to bear.

 

Nb. Our comment from the 11/16/22 (Not published)

 

Nb. Our comment for 11/22/22

 

Firstly, a final comment on the November expiry, where the settlement price was 3983.42.

So, just over 10-points below the zone. After traversing all the way back up from testing Y2 at 3695 (3698.15 3rd) it then tested Y2 at 4005 (4008.97 14th) and, albeit did go a bit higher, to then fall back to 3906.54 before recovering to end within spitting distance of its zone is more than good enough for us.

Hopefully December will be as perfect but, being the biggest of the big, this is a very tall order.

Especially when one considers that this expiry always contains Thanksgiving, and therefore also the usual rally.

Which we have already seen a chunk of we suspect.

More importantly, it means the first week is holiday restricted (actual closures but also absenteeism) so normality doesn’t really return until the last two weeks. Which means, this week and the next, anything can happen.

Apart from the fact it always takes a day or so for everyone to get up to speed with the sheer magnitude of increased activity courtesy of this being a triple and already being about three times the size of an intermediary expiry at the same stage.

Looking at the table above, no surprise the zone is where it is and, in fact, it probably moved before Novembers did.

Slight surprise there is a bandwidth of Y ratio. Although, only time will tell, how long this remains in place.

While it does, this does give the SPX a decent enough trading range to play around in. At least that is, until it decides to get a bit more aggressive.   

 

Range:            3895  to  4005           

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com

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: ,

November 15th, 2022 by Richard

From Y2 at 3695 all the way up to the corresponding Y2 at 4005 so, all we need now, is a finish in its zone.

 

Nb. Our comment from the 11/08/22

 

It was good timing to publish our last comment on the 1st, as that very day this market ended at 3856.10, right on its zone.

This made the next day, Wednesday the 2nd, the critical day.

Basically, the market had to choose to stay above the zone and therefore remain in bullish territory, or to relinquish its newly established beachhead.

We hope it came across that we were a bit sceptical of the rise, and saw it mainly as the market drifting upwards in absence of any ratio “traction” whatsoever.

And in keeping with our belief that this expiry will be an exciting one, the following day, Thursday 3rd, saw this index capitulate all the way down to Y2 at 3695, with the intraday low of 3698.15.

We are not convinced that the intraday low of 3708.84 was another test of Y2, as being a bit far away from 3695, we think it was more like one of those cases where it was you first.

Of course, when nobody wants to be the first to test a level again, the market often reverses short of the actual level.

Decent recovery though, but now the market is stranded in no-man’s land.

Not a bad place to be, especially when there is no ratio to speak of.

However, you now know that the market knows that the zone is at 3850 and Y2 is at 3695.

We have no idea which way it will jump next, and there have been no meaningful ratio developments to indicate a preference either way, so we can’t really help at the moment.

What we can say though, is although activity has been truly abysmal so far this expiry, in the last couple of days we have seen a small tick up. Which, if this continues and grows, means the current fence-sitting shouldn’t last much longer.

 

Range:            3695  to  3845           

Activity:          Poor

Type:              On balance only just bullish

www.hedgeratioanalysis.com

 

Nb. Our comment for 11/15/22

 

It didn’t take long from our last comment before the market knew which way it wanted to “jump”.

Where the ratio is concerned, it can only offer clues as to which way and even then, nothing is guaranteed.

What the ratio does tell you, is that a) a big move is very likely, and b) the potential, or extent, of that move.

We often think that people now want to be spoon fed with everything as, to us at least, this knowledge seems inadequate nowadays.

Anyway, in our last comment we covered the bounce up off Y2 at 3695, the intraday and expiry low being 3698.15 on the 3rd November.

Last Friday and this Monday, the 11th and 14th respectively, it was the turn of the corresponding Y2 ratio, at 4005.

Those two days saw intraday highs of 4001.48 and 4008.97.

As we said on twitter, although 4005 is still Y2 today, it is so by the narrowest of margins, and anyway, another test would be strike 3.

So, from our viewpoint, we have got the expiry low, and pretty much nailed the high (although being on strike 3 and with the rollover tomorrow we would say our job was done on Friday 11th). And that makes a nice run of 310-points between 3695 and 4005, or 8.4% and, equally importantly, in just one expiry.

Getting back to the present, for us to claim a perfect expiry, all we need now is for it to either rollover or expire in its zone.

The trouble is, in this final week, this is a very fluid situation.

And partly why we took pains to point out the 4005 was on strike 3, is that we also suspect the zone will end up at 3995-4005.

So, a bit of overshoot is highly likely but, at the end of the day…or expiry if you like…we are more than happy with what the ratios have achieved in this expiry already.

 

Range:            3855  to  4005           

Activity:          Very poor

Type:              Bearish

www.hedgeratioanalysis.com

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: ,

September 27th, 2022 by Richard

Classic Ratio stepping-stone decline by the SPX, but can R3 turn the tide?

 

Nb. Our comment from the 09/20/22

 

And before you know it, here we are in the October expiry.

Which means we have returned to the intermediary ones, and not only that, but this is a five-week expiry as well.

This can sometimes mean the first week can be a slow-burner, however from the overall level of activity, as well as the daily one, this does not appear to be the case this time.

Reinforcing this, is the change we have seen in the ratios so far this expiry already.

Below the zone, we have seen the appearance of Y1, while at the same time, both R1 and R2 have seen significant dips.

However, the big changes have come above the zone, where in the space of just a few trading days, all the ratios have come in significantly. To the tune of a 100-points, or more.

Admittedly, the zone is unchanged but, the way the ratios are developing, is very bearish.

Of course, October is but two days old, so one shouldn’t jump to conclusions.

On top of which, from R1 to R1, it is now 3795 up to 4205, a whopping 410-points. Not as bad as we have seen, but a widening from September.

Which in itself is not good, as the Y ratio bandwidth has been ridiculously wide for far too long now, and to see the narrowing in Sept now reversed is simply not good.

Unless you are a vol trader that is, as such a wide trading range is certainly not going to hurt your cause any.

For the rest of us, the bearish movement in the ratios is what it is. All it really needs is the confirmation of a move down in the zone.

Or, for the market to break back up over it, and therefore back into bullish territory, which they singularly failed to hold onto in the last expiry, so that’s not a good sign either. All told, not an auspicious start really.

 

Range:            3795  to  3995           

Activity:          Average

Type:              On balance only just bullish

 

Nb. Our comment for 09/27/22

 

The last five trading days has simply been a ratio stepping-stone decline.

We last published on Tuesday 20th. On Wednesday 21st the market intraday low was 3789.49 and close was 3789.93.

R1 was, and still is, at 3795. Of course, this was the day the Fed hiked by 0.75%, but it was the rhetoric that did the damage, so for R1 to even have an influence was pretty amazing. The fact that the market closed just a few points below it, was also rather significant…as we have seen in the past.

Next stepping-stone was R2 at 3745, on the Thursday, and the market duly obliged with the intraday low of 3749.45.

Could this have been pivotal? Obviously not, but as the market gapped down at the open on Friday to 3727.14 this was a moot point anyway.

So, Friday and Monday (yesterday) were all about the next stepping-stone, R3 at 3645.

Fridays intraday low was 3647.47 and yesterdays was 3644.76.

Apologies, we probably should have warned you when R3 fell from 3670 to 3645, sorry.

Anyway, it is still there but, having had two severe battering’s over the last two days, it is understandably weakened. In fact, so much so, it is only just above the threshold, and if the rate of decline continues today then it won’t be for much longer.

Actually, you now have to be looking at the low 3600’s to see the same level of R3 ratio that this market first encountered on Thursday.

Sometimes, strike two can be enough of a confirmation and can turn a market around (especially with the FTSE rebounding so well off 6950, giving it a friend), but please remember that the next time it goes down there, not only is it only just R3 but that would be strike three.

At least the bulls have the dynamic delta batting in their corner now, so the only question that remains is whether or not they want to make use of it?

 

Range:            3645  to  3745           

Activity:          Poor

Type:              On balance 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.

Available to buy now

Posted in Uncategorized Tagged with: ,

August 30th, 2022 by Richard

The SPX has retreated all the way back to its zone at the start of the big Sept expiry.

 

Nb. Our comment from the 08/22/22 (Not published)

 

Nb. Our comment for 08/30/22

 

It is a shame we couldn’t get a note out last week on the SPX, as just like the FTSE this index started the September expiry knocking on a high ratio door.

For the SPX this was R1, historically not particularly high but, under recent conditions, this index has even proved sensitive to just Y2 ratio.

Of course, this all came about because there was an absolute vacuum of ratio in the last expiry that allowed this index to be sucked higher. Very impressively finishing the August expiry +418.40-points, or 10.9%. Even exceeding our forecast at the start “that it could be one for the bulls”.

So, worth noting that the expiry intraday high in Aug was 4325.28 (16/08/2022), which made the closing high that very same day of 4305.20, the day before the rollover.

Again, and just like the FTSE, the zone here had been steadfast at 4000, 300-points below where the market was.

The good news, is that there is no Y ratio below said zone, which is not so good for the bears admittedly, but may prove very handy for the bulls as the market is just 30-points away now.

This therefore also means that we are seeing the smallest Y1 ratio bandwidth that we have for a very long time, coming in at just 110-points.

However, and as we have just experienced, the overall Y ratio bandwidth is still a very impressive 310-points, but which is nothing compared to what we have been seeing of late.

More importantly, it reverses the recent trend of ever-expanding bandwidths, which can only be good.

Plenty of life left in this index, and the bulls have nothing to worry about quite yet, that will only come with a test and fail of R1 at 3995. In the meantime, enjoy the wide-open expanse of the Y ratio.

 

Range:            4005  to  4305           

Activity:          Poor

Type:              On balance bullish

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: , , , , , , , , , , ,

August 10th, 2022 by Richard

Well, so far, it certainly has been one for the bulls, but what's next is the real question now?

 

Nb. Our comment from the 07/26/22

 

Well, so far it has definitely been the case that this “expiry might actually turn out as one for the bulls”.

On Monday 18th, the first day of this expiry, the intraday low was 3818.63, another test of Y2 at 3820. Since then, and after we highlighted the stubbornness of the August zone, the market closed on Thursday 21st at 3998.95, right in it. Not bad that, 4.6% in as many days, and why we feel slightly vindicated about our comments.

The question is, what happens next?

It was all done rather hastily, and let’s face it, there is still 4-weeks to go in this expiry.

The intraday high on Friday was 4012.44, and we mention this as there is some doubt as whether or not this was a test of Y2. The reason is, that Y2 after the 19th had moved down to 4015 but, on the Friday, actually slipped back out to 4020, before moving back for today.

If it was a test, then that is the market having performed a complete Y1 bandwidth test.

The fact that it is now almost 100-points below this, suggests that it was in fact a test.

Generally, this means the market languishing for a while in this bandwidth.

However, if one compares where the ratios were on the 19th to where they are today, then it is obvious that they are strengthening on both sides of the zone.

If this continues at the same pace, then the zone will have to move, and downwards.

The prognosis is that everything now rests on how the ratios now evolve. If they continue to strengthen as they are above the zone, this will eventually force it down. Or will the ratios below the zone get enough support to keep it up.

Whichever side wins this new battle, we suspect will then dominate the rest of this expiry. But, don’t lose sight of the fact that the Y1 ratio bandwidth is now only 170-points, whereas the overall Y ratio bandwidth is still a massive 460-points. So, although these are a lot narrower than they have been, they are still plenty wide enough to satisfy most traders.

 

Range:            3845  to  3995           

Activity:          Poor

Type:              On balance only just bearish

 

Nb. Our comment for 08/10/22

 

As we said, this one (expiry) may be one for the bulls, and so it has with a whopping rise of 7.96% so far.

In fact, if you go from the expiry high of 4186.62 it is actually 9.64%…and not many others saw this coming back on 18th July when this expiry started.

But, more importantly, is what might happen next?

The first aspect we have noted is that activity is going through a normal mid-expiry doldrum. While this is quite common, it does mean a degree of loss of control by the derivatives.

The second aspect to note is that, despite such a huge Y ratio bandwidth, the zone hasn’t moved, and more interestingly, not made any sign that it is likely to.

Thirdly, and this holds true in any expiry, don’t get fooled into believing any 4th Estate hyperbole about what is driving this market. There isn’t anything. It is simply because there is no ratio to speak of to get in the way. Although, almost 10% is a very long way we concede, so we understand why they have to try to label it, but it was nothing that wasn’t seen as possible meaning that the reason was also foreseeable.

Bearing these three aspects in mind, one might want to now consider that the rollover and expiry are next week.

Therefore, activity will pick up, so will volatility in all likelihood, and this will then determine if the zone remains steadfast, or looks likely to adapt.

In the meantime, it is worth remembering that this index is in Y2 ratio. Not difficult to handle, but with low activity, it would certainly make things uncomfortable.

Both Y2 and R1 have been higher, 4105 and 4255 respectively, so where they stand today is actually them strengthening, adding weight to the zone remaining where it is.

Bearing all this in mind, and as things stand, we have to start thinking about this index returning to its zone for next week.

The all-important question, is will the zone shift in the meantime?

 

Range:            4005  to  4230           

Activity:          Very poor

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 26th, 2022 by Richard

A ratio battle now looms for control of the SPX for the rest of the Aug expiry.

 

Nb. Our comment from the 07/19/22

 

We have to start the comment on the August expiry with one final one on the July, where the final resting spot for the zone was in fact 3800. Therefore, the settlement price of 3839.81 was about as close as they needed to be. In fact, we did say it was not so much about where the July expiry ended, but rather about keeping a lid on the potential volatility, which certainly seemed to be the case for us. Job done then.

Moving on to August, and as the SPX closed last Friday at 3863.16, it was happily in the new Y1 ratio bandwidth already.

Although, a point to note is that the intraday low on Friday was 3817.18, and yesterday, 3818.63, both right on Y2.

However, the really interesting aspect between the two expiries is that the zone did not make any significant attempt to join with the July level, staying stubbornly at 4000.

So, if Y2 can hold, then the August expiry might actually turn out as one for the bulls.

Also, R1 at 3695, as it stands, is a very solid level, so the downside has some far more significant support not that far away.

On the other side, we have already mentioned the zone being at 4000, then Y2 comes very quickly after that but, it is a very long way above this before you get to the R1 resistance ratio.

Another little pointer, our Delta Ratio, is currently standing at 49.3%, where a reading below 50% is considered bullish.

It is a 5-week expiry, so even longer than normal to go, and the first week of these extended expiries can be somewhat slow to develop, so caution perfectly understandably but, as the ratios are now aligned, there is definitely more upside potential than downside.

 

Range:            3820  to  3995           

Activity:          Average

Type:              On balance bearish

 

 

 

 

Nb. Our comment for 07/26/22

 

Well, so far it has definitely been the case that this “expiry might actually turn out as one for the bulls”.

On Monday 18th, the first day of this expiry, the intraday low was 3818.63, another test of Y2 at 3820. Since then, and after we highlighted the stubbornness of the August zone, the market closed on Thursday 21st at 3998.95, right in it. Not bad that, 4.6% in as many days, and why we feel slightly vindicated about our comments.

The question is, what happens next?

It was all done rather hastily, and let’s face it, there is still 4-weeks to go in this expiry.

The intraday high on Friday was 4012.44, and we mention this as there is some doubt as whether or not this was a test of Y2. The reason is, that Y2 after the 19th had moved down to 4015 but, on the Friday, actually slipped back out to 4020, before moving back for today.

If it was a test, then that is the market having performed a complete Y1 bandwidth test.

The fact that it is now almost 100-points below this, suggests that it was in fact a test.

Generally, this means the market languishing for a while in this bandwidth.

However, if one compares where the ratios were on the 19th to where they are today, then it is obvious that they are strengthening on both sides of the zone.

If this continues at the same pace, then the zone will have to move, and downwards.

The prognosis is that everything now rests on how the ratios now evolve. If they continue to strengthen as they are above the zone, this will eventually force it down. Or will the ratios below the zone get enough support to keep it up.

Whichever side wins this new battle, we suspect will then dominate the rest of this expiry. But, don’t lose sight of the fact that the Y1 ratio bandwidth is now only 170-points, whereas the overall Y ratio bandwidth is still a massive 460-points. So, although these are a lot narrower than they have been, they are still plenty wide enough to satisfy most traders.

 

Range:            3845  to  3995           

Activity:          Poor

Type:              On balance only 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, 2022 by Richard

Could the SPX Aug expiry turn out to be one for the bulls?

 

Nb. Our comment from the 07/15/22 (Not published)

 

Nb. Our comment for 07/19/22

 

We have to start the comment on the August expiry with one final one on the July, where the final resting spot for the zone was in fact 3800. Therefore, the settlement price of 3839.81 was about as close as they needed to be. In fact, we did say it was not so much about where the July expiry ended, but rather about keeping a lid on the potential volatility, which certainly seemed to be the case for us. Job done then.

Moving on to August, and as the SPX closed last Friday at 3863.16, it was happily in the new Y1 ratio bandwidth already.

Although, a point to note is that the intraday low on Friday was 3817.18, and yesterday, 3818.63, both right on Y2.

However, the really interesting aspect between the two expiries is that the zone did not make any significant attempt to join with the July level, staying stubbornly at 4000.

So, if Y2 can hold, then the August expiry might actually turn out as one for the bulls.

Also, R1 at 3695, as it stands, is a very solid level, so the downside has some far more significant support not that far away.

On the other side, we have already mentioned the zone being at 4000, then Y2 comes very quickly after that but, it is a very long way above this before you get to the R1 resistance ratio.

Another little pointer, our Delta Ratio, is currently standing at 49.3%, where a reading below 50% is considered bullish.

It is a 5-week expiry, so even longer than normal to go, and the first week of these extended expiries can be somewhat slow to develop, so caution perfectly understandably but, as the ratios are now aligned, there is definitely more upside potential than downside.

 

Range:            3820  to  3995           

Activity:          Average

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.

Posted in Uncategorized Tagged with: , , , , , , , , , , ,

July 12th, 2022 by Richard

Volatility to worsen as the R1 safety net drops in the SPX

 

Nb. Our comment from the 07/05/22

 

Well, it took a while with the market interacting with R1 at 3745 before “the money normally rises to the top” came about.

The fact that the first two days of this expiry, despite intraday lows deep inside the R1 bandwidth, always closed above 3745 gave a glimmer of hope.

The Thursday 23rd therefore could have gone either way, it being strike three at 3745, but a strong opening followed by the intraday low of 3743.52 just set the scene for the Friday.

We would like to have seen this market get back up to its zone, like the FTSE100, before capitulating, but we can’t have everything we suppose.

And last week, the last two days returned us back to literally where we were on the first two days of this expiry. The intraday lows being 3738.67 and 3752.10, yet again testing R1 at 3745.

It might not be Thursday 23rd again, but it might as well be, as it is looking increasingly likely that today we will see a further test of R1. This is some resolute defence going on here, as once again this is strike three.

Naturally R1 has weakened after such a prolonged assault, and the picture is further complicated by the second US holiday falling within this expiry, and so we would not expect 3745 to remain R1 by tomorrow, and probably not even by the end of today.

For a more robust R1, and at a commensurate level to the first week, you have to be looking at 3720, or at a pinch 3730.

In essence, should the market go there yet again, it goes in full knowledge of what to expect, and is therefore not frightened by that, or it pulls up short, pretty much for the same reason.

Don’t forget, last week having hit R1 this market rallied 47 and the 73-points respectively, so the bulls are far from dead, but at the same time, hardly galvanised either. Apologies it’s not more definite, but today or tomorrow should go a long way to sorting out who wants to be in charge for the remainder of this expiry we suspect.

 

Range:            3745  to  3995           

Activity:          Poor

Type:              Neutral

 

 

Nb. Our comment for 07/12/22

 

Well, that was some test, or should we say examination, of R1 at 3745 last Tuesday 5th. The market basically spent the entire morning flatlining on R1, before eventually the bulls gained control. In fact, it was so impressive, that even after a multitude of tests, the intraday low was still only 3742.06.

The trouble is that the bulls, although happy to capitalise on the support generated by the R1 dynamic delta, they still can’t quite muster enough enthusiasm to really push ahead, and get this market back up to its zone.

And that is the problem, but with an added twist for the derivative players, as this expiry ends this week, so they are literally running out of time.

Up until today, the pertinent ratios hadn’t changed from when we last published.

So, R1 has remained at 3745, with Y2 at 3895.

Of course, as you can readily see in the above table, this has changed significantly today.

Basically, derivatives have blinked first.

In fact, so much so, that there are four candidates to being the potential new zone, each having lost almost 50% of their ratio value.

Therefore, as it stands, the Y1 ratio bandwidth below the zone now stretches from 3795 all the way up to 3995.

And, the “resolute” R1 has dropped to 3695.

Essentially, no one is going to get badly hurt, even if this index expires in the Y2 ratio bandwidth but, with so little ratio around it could get extremely volatile.

And not only is this terribly difficult to control, but with a falling R1, the safety net has also been lowered.

We think this particular expiry now will not be so much about where it finishes, but rather keeping it calm and rational.

 

Range:            3695  to  3995           

Activity:          Moderate

Type:              On balance bullish

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 5th, 2022 by Richard

Are we going to see the SPX test R1 at 3745 for the second strike three of this expiry?

 

Nb. Our comment from the 06/22/22

 

We can’t not start without mentioning the end of the June expiry, which most certainly proved very expensive for someone.

But despite it getting out of control from a derivative perspective, it did adhere to some ratio levels, so at least the dynamic delta was having an effect right until the end.

Our final trading range was either 3645 to 3745 or 3745 to 3895. The fact that the market failed to close above 3745 when we last published on the 14th was a warning. It still could have made the zone by the Friday, but getting back to 4000 by the next day, rollover Wednesday, was obviously not going to happen. The bottom of that trading range was 3645, and the intraday lows on the Thursday and Friday were 3639.77 and 3636.87 respectively.

Evidently, “derivatives didn’t reassert their authority”.

Anyway, and more importantly, this, the July expiry, and what is the ratio picture telling us for this trip.

And if anything, the enormous Y ratio bandwidths have actually got worse.

Now the Y1 one stands at 260-points, but the overall one is the widest ever, coming in at the humongous 815-points wide.

Perhaps a saving grace, for the bulls at least, is at least this time the market is actually at the bottom of this huge bandwidth.

As we have seen, the dynamic delta denoted by the ratio levels has continued to work, it is really now just a question of who is in charge?

The highly strung emotions of the equity mob, or the money on the table of the derivative players?

Sadly, we can’t answer this question, all we can do is say that historically, once the over-excitement of a triple is over, money normally rises to the top.

 

Range:            3745  to  3995           

Activity:          Poor

Type:              Bullish

 

 

Nb. Our comment for 07/05/22

 

Well, it took a while with the market interacting with R1 at 3745 before “the money normally rises to the top” came about.

The fact that the first two days of this expiry, despite intraday lows deep inside the R1 bandwidth, always closed above 3745 gave a glimmer of hope.

The Thursday 23rd therefore could have gone either way, it being strike three at 3745, but a strong opening followed by the intraday low of 3743.52 just set the scene for the Friday.

We would like to have seen this market get back up to its zone, like the FTSE100, before capitulating, but we can’t have everything we suppose.

And last week, the last two days returned us back to literally where we were on the first two days of this expiry. The intraday lows being 3738.67 and 3752.10, yet again testing R1 at 3745.

It might not be Thursday 23rd again, but it might as well be, as it is looking increasingly likely that today we will see a further test of R1. This is some resolute defence going on here, as once again this is strike three.

Naturally R1 has weakened after such a prolonged assault, and the picture is further complicated by the second US holiday falling within this expiry, and so we would not expect 3745 to remain R1 by tomorrow, and probably not even by the end of today.

For a more robust R1, and at a commensurate level to the first week, you have to be looking at 3720, or at a pinch 3730.

In essence, should the market go there yet again, it goes in full knowledge of what to expect, and is therefore not frightened by that, or it pulls up short, pretty much for the same reason.

Don’t forget, last week having hit R1 this market rallied 47 and the 73-points respectively, so the bulls are far from dead, but at they same time, hardly galvanised either. Apologies its not more definite, but today or tomorrow should go a long way to sorting out who wants to be in charge for the remainder of this expiry we suspect.

 

Range:            3745  to  3995           

Activity:          Poor

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: , , , , , , , , , , ,