January 20th, 2022 by Richard

The market drags the SPX's zone back to its starting level.

 

Nb. Our comment from the 01/11/22

 

Looks like the door was Y2.

Which was slammed shut very unequivocally. So much so, being above 4800 seems a distant memory now.

What did surprise us however, was the fact that 4805 has held onto being Y2, although it did slip on the 6th to 4810 it recovered the very next day and has since quietly strengthened.

This is not that pertinent at the moment as the last five trading days have been all about the zone.

The -92.96-point fall on the 5th took this market right into the safety of the middle of its zone, 4700.58. The next day the market meandered 20-points either side of its zone, before eventually finishing back in it for the second day.

This made Friday quite the important day, as above the zone the bulls are in charge, whereas below it and it is the bears. In the end it closed below it, but not after an intraday high of 4707.95, giving that upper boundary one more test for good measure.

And with Monday also closing below the zone we would normally say that the decision has been made, making the first line of support the corresponding Y2 below the zone, currently standing at 4570.

Our only misgiving is that the intraday low on Monday was 4582.24, which considering was a fall of 94.79-points inflating the vega, is close enough under these conditions to count as a hit. So, basically, has it done it already?

Either way it is certainly going to make for an entertaining end to the Jan expiry we think, and it could just turn out to be a very original finale as well, as it has been a very long time since this index has been south of its zone when the sharp end of the expiry comes about.

For the record the Y1 ratio bandwidth has returned to the 235-points we were used to seeing for the first few weeks of this expiry.

 

Range:            4570  to  4695           

Activity:          Moderate

Type:              Neutral

 

Nb. Our comment for 01/20/22

 

Hopefully you saw it as soon as you looked at the above table, but the big news is that the zone has returned to its starting point of 4595-4605.

Hugely significant, and not just for the fact it has fallen, which is a bearish sign in the same way that a rising zone is bullish.

It was also the fact that the previous Monday, the 10th Jan, this market had tested Y2 at 4570 before staging a remarkable recovery. A recovery that took it back above the then zone of 4695-4705 for a couple of days. So, the bulls were evidently not spent yet.

However, dropping back below 4700 on the Thursday and Friday was the first indication that the bulls had run out of steam and that the bears were flexing their muscles. And, it was into this scenario that the zone dropped.

So, it looks like we are going to get that recent rarity, an expiry where the zone is actually above the current market level. In fact, so rare of late, they have probably forgotten what to do or how to act.

And, if there was still any doubt as to who is in charge, the market actually closed deep into the fallen Y2 level of 4545.

Worth noting is that when Y2 was still at 4570 the intraday low on Tuesday was 4568.70.

Don’t forget all these problems started when this index messed with Y2 at 4805 in the second week of this expiry, and doesn’t that seem like a very long ago now.

There is still a day to go, but essentially time has run out. So, we feel that this market would be doing very well in our estimation just to get the settlement price in the Y1 ratio bandwidth.

Although, there is a lot of finger-crossing that we might see this index finish in its zone, as that would give us the perfect expiry. Being from one ratio level, in this instance Y2, all the way back to the corresponding one on the other side of the zone before reversing once more to finish in said zone. If you do get these turning points right, it can turn a 5% trip over the length of an expiry into a 10% one, which annualised is “fair dinkum” as they say.

 

Range:            4445  to  4545        or        4545  to  4595           

Activity:          Moderate

Type:              On balance only just bearish

 

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January 11th, 2022 by Richard

If last week was all about the zone, this week the SPX's focus is on Y2

 

Nb. Our comment from the 01/05/22

 

A lot has happened since we last posted, both in the ratios and in the market.

Although a Santa rally, or what we like to call the year end performance bonus rally, was not the hardest call to make.

Way back on the 23rd December this market hit Y2, then at 4730 (please see above) with the intraday high of 4740.74 and a close at 4725.79.

This set the tone, as such a deep incursion into Y2 was quite the hint, and the very next trading day saw Y2 capitulate, and over the next few days we saw it slide from 4755 down to 4805.

The three intraday highs last week of 4807.02, 4804.06 and 4808.93 tell their own story, and so, when it came to yesterday’s 4818.62 it was already on strike 3.

Also, we would be very surprised if Y2 remains at 4805 much past today.

Talking of today, only now has the zone moved, standing at 4695-4705, meaning it has taken just over two-weeks to get back to where it was in the Dec expiry.

And, we very much doubt it is going to stop here either.

All in all, quite a few changes, but none of which that can take us away from the fact that this year looks like picking up from where most of last year ended.

Basically, knock, knock knocking on the retreating ratio door. The big question is which door, Y2 or R1?

In the meantime, the Y1 ratio bandwidth has gone from 235 to 285-points, while the overall Y ratio bandwidth has gone from 435 to 460-points.

This is not symptomatic of hugely committed bull market, but rather more like one stuck in automatic, while all the time there is the potential for a blink of the eye 10% correction.

 

Range:            4705  to  4805           

Activity:          Very poor

Type:              Neutral

 

 

Nb. Our comment for 01/11/22

 

Looks like the door was Y2.

Which was slammed shut very unequivocally. So much so, being above 4800 seems a distant memory now.

What did surprise us however, was the fact that 4805 has held onto being Y2, although it did slip on the 6th to 4810 it recovered the very next day and has since quietly strengthened.

This is not that pertinent at the moment as the last five trading days have been all about the zone.

The -92.96-point fall on the 5th took this market right into the safety of the middle of its zone, 4700.58. The next day the market meandered 20-points either side of its zone, before eventually finishing back in it for the second day.

This made Friday quite the important day, as above the zone the bulls are in charge, whereas below it and it is the bears. In the end it closed below it, but not after an intraday high of 4707.95, giving that upper boundary one more test for good measure.

And with Monday also closing below the zone we would normally say that the decision has been made, making the first line of support the corresponding Y2 below the zone, currently standing at 4570.

Our only misgiving is that the intraday low on Monday was 4582.24, which considering was a fall of 94.79-points inflating the vega, is close enough under these conditions to count as a hit. So, basically, has it done it already?

Either way it is certainly going to make for an entertaining end to the Jan expiry we think, and it could just turn out to be a very original finale as well, as it has been a very long time since this index has been south of its zone when the sharp end of the expiry comes about.

For the record the Y1 ratio bandwidth has returned to the 235-points we were used to seeing for the first few weeks of this expiry.

 

Range:            4570  to  4695           

Activity:          Moderate

Type:              Neutral

 

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January 5th, 2022 by Richard

Zone up, retreating ratios...sound familiar in the SPX

 

Nb. Our comment from the 12/21/21

 

We have to start with the recently ended Dec expiry and, boy did they try hard to beat Y2 at 4705, with the ultimate failure resulting in an expiry nearer 4600 than 4700. However, this was still in the middle of the absolutely minimal Y1 ratio.

So, no problem, and just to add some icing on the cake the Jan expiry has its zone at 4600, so all in all a win: win situation.

That’s pretty much it for the good news though…unless you’re a vol trader that is.

The respective Y ratio bandwidths are actually slightly wider this expiry (Y1 = 235 & overall 435) but what is different is that they are almost evenly spaced out on either side of the zone.

This makes today very interesting for this expiry, as currently they are below their zone and therefore in bear territory.

To put this into perspective, yesterday in the FTSE it opened very weak, then went below its zone, but once it recovered from this dip it traded for the rest of the day right in the middle of its zone, around 7200 for those that don’t know.

So, for the SPX, the first target for today should be to regain its zone, then after that to hold onto it. Should it be particularly confident then it could even reclaim the bullish territory above its zone.

Considering what’s happening covid-wise at present, we think this is actually a very positive outcome considering. The question is whether it is just as a result of the market rebalancing itself post the Dec expiry (which gets our vote) or the bulls are back in town and have their sights still set on a Santa rally.

Of course, it could be a combination of these factors or something else entirely, but whatever it is then, you won’t get any ratio support until 4495 or resistance until 4730, so best plan accordingly.

 

Range:            4495  to  4595           

Activity:          Moderate

Type:              On balance decently bearish

 

 

 

Nb. Our comment for 01/05/2022

 

A lot has happened since we last posted, both in the ratios and in the market.

Although a Santa rally, or what we like to call the year end performance bonus rally, was not the hardest call to make.

Way back on the 23rd December this market hit Y2, then at 4730 (please see above) with the intraday high of 4740.74 and a close at 4725.79.

This set the tone, as such a deep incursion into Y2 was quite the hint, and the very next trading day saw Y2 capitulate, and over the next few days we saw it slide from 4755 down to 4805.

The three intraday highs last week of 4807.02, 4804.06 and 4808.93 tell their own story, and so, when it came to yesterday’s 4818.62 it was already on strike 3.

Also, we would be very surprised if Y2 remains at 4805 much past today.

Talking of today, only now has the zone moved, standing at 4695-4705, meaning it has taken just over two-weeks to get back to where it was in the Dec expiry.

And, we very much doubt it is going to stop here either.

All in all, quite a few changes, but none of which that can take us away from the fact that this year looks like picking up from where most of last year ended.

Basically, knock, knock knocking on the retreating ratio door. The big question is which door, Y2 or R1?

In the meantime, the Y1 ratio bandwidth has gone from 235 to 285-points, while the overall Y ratio bandwidth has gone from 435 to 460-points.

This is not symptomatic of hugely committed bull market, but rather more like one stuck in automatic, while all the time there is the potential for a blink of the eye 10% correction.

 

Range:            4705  to  4805           

Activity:          Very poor

Type:              Neutral

 

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December 21st, 2021 by Richard

Covid vs the Santa rally as the SPX starts the Jan expiry.

 

Nb. Our comment from the 12/15/21 (Not published)

 

Nb. Our comment for 12/21/21

 

We have to start with the recently ended Dec expiry and, boy did they try hard to beat Y2 at 4705, with the ultimate failure resulting in an expiry nearer 4600 than 4700. However, this was still in the middle of the absolutely minimal Y1 ratio.

So, no problem, and just to add some icing on the cake the Jan expiry has its zone at 4600, so all in all a win: win situation.

That’s pretty much it for the good news though…unless you’re a vol trader that is.

The respective Y ratio bandwidths are actually slightly wider this expiry (Y1 = 235 & overall 435) but what is different is that they are almost evenly spaced out on either side of the zone.

This makes today very interesting for this expiry, as currently they are below their zone and therefore in bear territory.

To put this into perspective, yesterday in the FTSE it opened very weak, then went below its zone, but once it recovered from this dip it traded for the rest of the day right in the middle of its zone, around 7200 for those that don’t know.

So, for the SPX, the first target for today should be to regain its zone, then after that to hold onto it. Should it be particularly confident then it could even reclaim the bullish territory above its zone.

Considering what’s happening covid-wise at present, we think this is actually a very positive outcome considering. The question is whether it is just as a result of the market rebalancing itself post the Dec expiry (which gets our vote) or the bulls are back in town and have their sights still set on a Santa rally.

Of course, it could be a combination of these factors or something else entirely, but whatever it is then, you won’t get any ratio support until 4495 or resistance until 4730, so best plan accordingly.

 

Range:            4495  to  4595           

Activity:          Moderate

Type:              On balance decently bearish

 

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December 14th, 2021 by Richard

Can the SPX regain 4700 for the rollover and expiry?

 

Nb. Our comment from the 12/07/21

 

And today supplies the first real surprise of this expiry, as the zone returns to 4495-4505.

When we last commented we did say that this level seemed very reluctant to relinquish its crown but, over the intervening period, 4700 had been consolidating its presence.

This is why, the sudden reversal today comes as such a surprise.

We do normally point out that the triples are a bit like turning a supertanker, in that it takes time and that sometimes all the effort required is not that obvious.

But, as it is the rollover next week, where the zone is, or where it will be, now takes on a huge importance.

In the meantime, and totally in character with the inherent weirdness ever present in this expiry, the market continues to behave as if the zone is still at 4695-4705.

As we quite often say, we just crunch the numbers and the only subjective view of that is our interpretation of the resultant answers.

Who is to say it won’t revert straight back?

But, for today at least, there has been a steep fall in the ratios below 4700.

And again, in keeping with the weirdest expiry ever, who’s to say that the zone could not in fact stretch from 4495 all the way up to 4705.

In a way we now look back with fondness when this market just kept on knocking on the retreating R1 ratio door, as at least then we knew where we were, as even now we still don’t really have an idea of this market’s sensitivity this trip.

On a more positive note, with essentially 200-points of absolutely minimal ratio there could be some decent moves. By which we don’t meant the one to one and a half percent point moves of late, but some more meaty three to four percent moves. Just don’t forget whipsaw is just as much as likely under these conditions. Good luck.

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance only just bullish

 

 

Nb. Our comment for 12/14/21

 

In the end the zone here did “revert straight back”, which we did tweet. So, from the 8th onwards the zone has been 4695-4705, making that one day it slipped the oddity.

But it is always good to keep everyone on their toes as, at the end of the day, the ratios are entirely derived from activity which as we all know that can be very fickle.

And, although we have learned to never say never, the ratios below the zone have now filled in sufficiently for us to feel confident that the zone is really where it wants to be.

The big trouble with this though, is that Y2 starts on the upper boundary.

The upper boundary in itself is a hurdle but, add in Y2, and that just reinforces it.

On Wednesday 8th the intraday high was 4705.06, then we had to wait again until Friday 10th before it ventured back there again, which resulted in the intraday high of 4705.38 for most of the day except the very last 10 minutes.

Which is a bit cheeky. But hey, you get away with what you can naturally. But we can’t help feel that this last-minute try-on on Friday really didn’t help this market come Monday morning.

Which really changed the complexion of this rollover and expiry we feel, as rather than just hold around the zone it now has to try and recover it from bear territory, which we feel is the harder to achieve especially if there is any nervousness about.

Please remember what we said in our comment about the FTSE100 on Monday, in that expiries produce heightened activity which can often be misdiagnosed.

Otherwise, it is really for the derivatives to lose this expiry now, as the market is in or around its zone, with a lot of very minimal ratio around it, and with just a day to go to the rollover. And if they can nail that, then the pressure is off for the actual expiry.

Also, and we appreciate that this expiry is so huge overall that it is hard to register anything but “poor” levels of activity but, even so, the levels we have been seeing over the last few days have been pretty dire.

 

Range:            4495  to  4695           

Activity:          Very poor

Type:              On balance only just bearish

 

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December 7th, 2021 by Richard

With the rollover and expiry next week the zone really needs to decide.

 

Nb. Our comment from the 12/01/21

 

For all its apparent weirdness, rather bizarrely, it is actually acting as we would expect.

By which we mean it is whizzing around in its Y ratio bandwidth, meaning volatility is up and whipsaws abound…brilliant.

Of course, the big difference is that the zone here has jumped up to 4695-4705, which it did the day after our last comment, so on the 24th Nov and which we did mention on twitter (@hedgeratio).

It is a symbolic move really, as the Y1 ratio bandwidth remains at 310-points and the overall Y ratio bandwidth is still an absolutely staggering 460-points.

In fact, this would be staggering in an intermediary expiry, so in a triple there really are no words for it.

Nevertheless, as long as it stays there it will remain the target and, even more so, towards the expiry.

Although we allude to this above, another fascinating aspect of this expiry is the fact that despite the zone moving none of the other ratios below it have budged an inch, that is apart from R2 which only begrudgingly moved today. Rather odd to say the least.

Another odd aspect is the fact that 4495-4505, the previous zone, didn’t really look like it wanted to relinquish its crown, or at least this was the case until today, when the ratio here has eventually started to fill in. Which should help the bulls nerves a bit at least.

Sadly, we are no closer to discerning the sensitivity of this expiry yet but, now at least, people may have a greater appreciation of what we mean when we say “Y2 and R1 ratio levels below the zone are still a very long way away indeed”.

 

 

Range:            4395  to  4695           

Activity:          Poor

Type:              Neutral

 

 

 

Nb. Our comment for 12/07/21

 

And today supplies the first real surprise of this expiry, as the zone returns to 4495-4505.

When we last commented we did say that this level seemed very reluctant to relinquish its crown but, over the intervening period, 4700 had been consolidating its presence.

This is why, the sudden reversal today comes as such a surprise.

We do normally point out that the triples are a bit like turning a supertanker, in that it takes time and that sometimes all the effort required is not that obvious.

But, as it is the rollover next week, where the zone is, or where it will be, now takes on a huge importance.

In the meantime, and totally in character with the inherent weirdness ever present in this expiry, the market continues to behave as if the zone is still at 4695-4705.

As we quite often say, we just crunch the numbers and the only subjective view of that is our interpretation of the resultant answers.

Who is to say it won’t revert straight back?

But, for today at least, there has been a steep fall in the ratios below 4700.

And again, in keeping with the weirdest expiry ever, who’s to say that the zone could not in fact stretch from 4495 all the way up to 4705.

In a way we now look back with fondness when this market just kept on knocking on the retreating R1 ratio door, as at least then we knew where we were, as even now we still don’t really have an idea of this market’s sensitivity this trip.

On a more positive note, with essentially 200-points of absolutely minimal ratio there could be some decent moves. By which we don’t meant the one to one and a half percent point moves of late, but some more meaty three to four percent moves. Just don’t forget whipsaw is just as much as likely under these conditions. Good luck.

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance only just bullish

 

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December 1st, 2021 by Richard

The SPX Dec expiry still weird, but oddly acting normally.

 

Nb. Our comment from the 11/23/21

 

Apologies for the lack of comment last week, but unfortunately preoccupied.

For the record, the November zone did end up at 4695-4705, so the settlement price was close enough, but the Y1 ratio bandwidth was so wide anywhere in that would have done.

This brings us rather neatly around to this rather weird December expiry, as we would expect the zone here to jump up to that level as well.

This in itself is not weird, well a 200-point hulk-like bound is certainly unusual, so verging on the weird but, the really odd aspects are more like the fact that this would means Y2 starts just above it, and R1 just 50-points above that.

And it’s not as if the respective bandwidths have narrowed, quite the reverse in fact, with the Y1 one being 310-points and overall, 460-points. And to have Y ratio in a triple at all is a new phenomenon, so to have so much is also weird.

However, the crowning eerie aspect is that here we are in the biggest of the big (which is borne out by the numbers) but the way the ratios are aligned we could be just in an intermediary, they are so similar.

All this abnormality certainly makes for a difficult read of this expiry, on top of which the last expiry saw this index go on to test rather emphatically R1 ratio so, when you also factor in this is a triple, then we have to say Y2 very probably won’t be enough while the jury remains out on how it will react to R1.

However, while there is considerable doubt over how sensitive this index will prove to be this expiry, there is one unmissable truth, which is that the downside risks remain.

If not actually increased, as the corresponding Y2 and R1 ratio levels below the zone are still a very long way away indeed.

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance bearish

 

 

 

Nb. Our comment for 12/01/21

 

For all its apparent weirdness, rather bizarrely, it is actually acting as we would expect.

By which we mean it is whizzing around in its Y ratio bandwidth, meaning volatility is up and whipsaws abound…brilliant.

Of course, the big difference is that the zone here has jumped up to 4695-4705, which it did the day after our last comment, so on the 24th Nov and which we did mention on twitter (@hedgeratio).

It is a symbolic move really, as the Y1 ratio bandwidth remains at 310-points and the overall Y ratio bandwidth is still an absolutely staggering 460-points.

In fact, this would be staggering in an intermediary expiry, so in a triple there really are no words for it.

Nevertheless, as long as it stays there it will remain the target and, even more so, towards the expiry.

Although we allude to this above, another fascinating aspect of this expiry is the fact that despite the zone moving none of the other ratios below it have budged an inch, that is apart from R2 which only begrudgingly moved today. Rather odd to say the least.

Another odd aspect is the fact that 4495-4505, the previous zone, didn’t really look like it wanted to relinquish its crown, or at least this was the case until today, when the ratio here has eventually started to fill in. Which should help the bulls nerves a bit at least.

Sadly, we are no closer to discerning the sensitivity of this expiry yet but, now at least, people may have a greater appreciation of what we mean when we say “Y2 and R1 ratio levels below the zone are still a very long way away indeed”.

 

 

Range:            4395  to  4695           

Activity:          Poor

Type:              Neutral

 

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November 23rd, 2021 by Richard

There is so much weirdness in this SPX Dec expiry.

 

Nb. Our comment from the 11/19/21 (Not published)

 

Nb. Our comment for 11/23/21

 

Apologies for the lack of comment last week, but unfortunately preoccupied.

For the record, the November zone did end up at 4695-4705, so the settlement price was close enough, but the Y1 ratio bandwidth was so wide anywhere in that would have done.

This brings us rather neatly around to this rather weird December expiry, as we would expect the zone here to jump up to that level as well.

This in itself is not weird, well a 200-point hulk-like bound is certainly unusual, so verging on the weird but, the really odd aspects are more like the fact that this would means Y2 starts just above it, and R1 just 50-points above that.

And its not as if the respective bandwidths have narrowed, quite the reverse in fact, with the Y1 one being 310-points and overall, 460-points. And to have Y ratio in a triple at all is a new phenomenon, so to have so much is also weird.

However, the crowning eerie aspect is that here we are in the biggest of the big (which is borne out by the numbers) but the way the ratios are aligned we could be just in an intermediary, they are so similar.

All this abnormality certainly makes for a difficult read of this expiry, on top of which the last expiry saw this index go on to test rather emphatically R1 ratio so, when you also factor in this is a triple, then we have to say Y2 very probably won’t be enough while the jury remains out on how it will react to R1.

However, while there is considerable doubt over how sensitive this index will prove to be this expiry, there is one unmissable truth, which is that the downside risks remain.

If not actually increased, as the corresponding Y2 and R1 ratio levels below the zone are still a very long way away indeed.

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance bearish

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November 9th, 2021 by Richard

R1 Hedge Ratio takes a battering from the SPX

 

Nb. Our comment from the 11/03/21

 

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.

Apologies for being a day later than normal, but we think we covered the pertinent points last time and, quite frankly, not a lot has changed since then.

The zone has moved up to 4495-4505 as expected.

The market has stayed above Y2, so remaining in its Y2 ratio bandwidth.

R1 has continued to retreat, allowing the market to creep forward.

The only aspect limiting this index is now its sensitivity to what we call “step-up” levels. These are essentially the old higher level of ratio that have fallen, but for a day or so after can remain just below the threshold of the level they once were, so can still represent a hurdle to the market.

This can be evidenced by last Friday, when the market struggled at 4605, the old R1 level.

Then it was 4630, which was what it was all about yesterday, despite the fact that on the 2nd the official R1 level was 4665 and, although today it hasn’t changed, by the time we next publish we would be surprised if it wasn’t 4680 by then (or before).

Either way, it is still exemplary that this market now feels so comfortable taking on Y2 ratio, as it certainly hasn’t prior to this. This actually bodes well for the mighty Dec expiry just round the corner as well.

But, back in the Nov trip, the rollover and expiry are now just a couple of weeks away, and the Y1 and overall Y ratio bandwidths have actually increased, to 235 and 395-points respectively, so the risk is still very much there.

One last point is that although activity started this expiry off like a steam train, the last five days have been rather dire, but then again it is mid-expiry, so it may be a concern for now but we know it won’t last.

 

Range:            4505  to  4665           

Activity:          Very poor

Type:              Bullish

 

 

 

Nb. Our comment for 11/09/21

 

Eventually the SPX traversed the Y2 ratio bandwidth and started mixing it with R1.

As we are sure you know by now, making new all-time highs all the way.

Rather fortuitously we published last Wednesday 3rd, when R1 was at 4665, as the intraday high that very day came in at 4663.46.

The next day R1 moved to 4680, and we saw an intraday high of 4683.00, but importantly a close at 4680.06.

Basically, this market evidently didn’t like the dynamic delta that comes with R1 hedge ratio, but was far from scared of it.

Friday saw R1 move to 4705, where it is today, and although both Friday and Monday saw the close below this level, on both occasions the market got as high as 4718.50 and 4714.92 respectively.

It has been a very long time indeed since we have seen this index being so aggressive, so we are a bit unsure how to take it. Is it a new level of conviction? Or is it just holiday season gone a bit mad? As it stands and without any corroborating data, we have to side with this being an out-of-character seasonal twitch.

Albeit a very persuasive one, as after two days knocking on the R1 ratio door at 4705 not only is it on strike 3 but R1 at 4705 is now only just above the threshold and, the next level with a decent amount of meat on the bone, is 4730.

Meanwhile, both Y ratio bandwidths expand, the big one to a knee-trembling 9.8%, so the risk element is still very much there.

We will try to give you an early “head’s-up” for the Dec expiry, as this will be bringing its dreadnought-like influence to bear soon, as this expiry heads into the rollover and finish next week.

 

Range:            4505  to  4705 / (4730)           

Activity:          Moderate

Type:              On balance bearish

 

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November 3rd, 2021 by Richard

As the ratios still slip the SPX continues to creep up behind.

 

Nb. Our comment from the 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

 

   

Nb. Our comment for 11/03/21

 

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.

Apologies for being a day later than normal, but we think we covered the pertinent points last time and, quite frankly, not a lot has changed since then.

The zone has moved up to 4495-4505 as expected.

The market has stayed above Y2, so remaining in its Y2 ratio bandwidth.

R1 has continued to retreat, allowing the market to creep forward.

The only aspect limiting this index is now its sensitivity to what we call “step-up” levels. These are essentially the old higher level of ratio that have fallen, but for a day or so after can remain just below the threshold of the level they once were, so can still represent a hurdle to the market.

This can be evidenced by last Friday, when the market struggled at 4605, the old R1 level.

Then it was 4630, which was what it was all about yesterday, despite the fact that on the 2nd the official R1 level was 4665 and, although today it hasn’t changed, by the time we next publish we would be surprised if it wasn’t 4680 by then (or before).

Either way, it is still exemplary that this market now feels so comfortable taking on Y2 ratio, as it certainly hasn’t prior to this. This actually bodes well for the mighty Dec expiry just round the corner as well.

But, back in the Nov trip, the rollover and expiry are now just a couple of weeks away, and the Y1 and overall Y ratio bandwidths have actually increased, to 235 and 395-points respectively, so the risk is still very much there.

One last point is that although activity started this expiry off like a steam train, the last five days have been rather dire, but then again it is mid-expiry, so it may be a concern for now but we know it won’t last.

 

Range:            4505  to  4665           

Activity:          Very poor

Type:              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.

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