Sep
11
2024
September 11th, 2024 by Richard

The SPX goes from R1 to R1 traversing the entire 260-point Y ratio bandwidth.

Nb. Our comment for 10/09/24

We do sincerely hope you paid heed to what we said last week, as that was quite some ride.

We didn’t need to have worried about whether or not Thursday 29th August was or was not another test of R1 at 5655, as the market never went there again. So, whether that was two or three tests is now a moot point.

However, there is no denying that the SPX is “still maintaining its rather unhealthy relationship with R1”.

As Wall St. was closed on Monday 2nd September, it only took three-days to traverse across the entire Y ratio bandwidth to go from one R1 to the other corresponding R1 at 5395.

Albeit with a pitstop on the Tuesday, after it bounced off Y2 at 5495 with the intraday low of 5504.33.

Friday saw the intraday low of 5402.62, clearly getting considerable support from all the dynamic delta from R1 at 5395, as it spent a very considerable time there throughout the day.

So, no surprise to us at least, with the bounce this week but, the real question, is what’s next.

The problem here, is that there have only been a couple of changes in the ratio table (R3 & DR below the zone), and they were at least four-days ago.

This means there has been virtually no movement and so no clue as to which way the pendulum might now be swinging.

On top of which, there is still two-weeks to go, so all this is about a week too early to get the perfect expiry, which would now be to see the settlement in the zone. As the market is still entrenched in its Y ratio bandwidth it could whizz around very easily with minimal interference. The best outcome, would be for it to get back to its zone and then decide.

 

Range:            5395   to    5655

Activity:          Only just registered

Type:              Not bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment for 03/09/24

Can’t quite make up its mind, but in the meantime the SPX has still maintained this rather unhealthy relationship with R1.

Apologies for not posting last week, especially as we now realise that this is the first you would have realised that R1 above the zone has moved to 5655.

In fact, it did this way back on the 21st August, which gave the market the green light to move past 5605 of course.

It was a very significant change as well, as had you known that R1 was standing at 5655 then you would have appreciated why the SPX topped out where it did on three of the five trading days last week.

The exceptions being the Tuesday and Wednesday when it only got to 5631.18 and 5627.03 respectively.

Other than this, there have been a few other changes, easily seen in today’s table, but none nearly as impactful.

Looking ahead, and obviously R1 at 5655 is the critical level and it has now been tested thrice, although there is bit of a question mark over Thursday, so it’s now just a question of how resilient it can be.

The problem for us, is that the intraday lows last week were 5602.34, 5593.48, 5560.95, 5583.71 and 5581.79, which were all in the Y ratio bandwidth, and by some considerable margin.

The point being, is if the bulls were that committed it wouldn’t pull back that far, but rather keep knocking on R1’s door.

If it can get past R1, then there is 70-points before R2 but, worth noting, there is a considerable step-up in the ratios at 5705.

However, the real aspect to be very aware of, is that the corresponding R1 level doesn’t start until 5395. It’s your risk profile but, for us, that’s too rich.

 

Range:            5555   to    5655

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com

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May
06
2024
May 6th, 2024 by Richard

The SPX enters the final two-weeks of the May expiry in the middle of its Y1 Ratio bandwidth.

Nb. Our comment for 06/05/24

We think the market must have read what we said, as it did exactly that.

Starting on the very day we last published, Tuesday 30th April, when the market dropped 80.48-points.

Then the Wednesday neatly encapsulated everything we had said, with the market performing an 80-point round trip.

The final two days were more one-way traffic, but were still quite chunky moves.

However, at the end of the day and as you can see in the ratio table, nothing has changed in our respect, as the market remains in its Y1 ratio bandwidth.

In fact, and despite last week being an exciting ride, the net gain is only 11-points. Virtually nothing.

Therefore, what we said last week still holds true for this week. That is apart from the part about the bulls’ fence-sitting, as since the market touched its zone (6-points away on the 2nd) they have obviously been tempted back in.

Although, it must be said, not in any great stampede, otherwise this index would have already tested Y2 by now.

Otherwise, the ratios are all a little firmer below the zone. Above the zone, only the higher ratios have firmed, although the fact that the others have held steady is significant.

On balance the bulls’ just about edge it but, the real game changer might be what we said at the very start of this expiry, that it is easier to recover lost ground than win it in the first place.

We are of course referring to the zone and today we have seen a definite move towards 5100 and/or 5150. With two-weeks still to go, we think that this will be the main driving force, especially in the absence of so many players.

 

Range:            5005     to      5205

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com

 

 

 

Nb. Our comment from the 30/04/24

 

In comparison to the FTSE the SPX has been far more reticent and, although we didn’t specifically say so last week, it hasn’t disappointed in producing the very much expected usual volatility and whipsaw associated with being in the absolutely minimal Y1 ratio.

In fact, it has been the whipsaw that has most impressed us, flipping 20/30 or even 40-points in minutes, especially pre-market.

However, even though it is up just over 100-points on the week, in ratio terms it really hasn’t gone anywhere.

However, don’t get lulled into a false sense of security, as it could easily motor, albeit in either direction.

As one can see from the ratio table, the Y1 ratio bandwidth, which is entirely above the zone, is an impressive 210-points wide.

As this index is circa 5115, that means it could jump 100-points in either direction with very little impetus at all.

And then, that just takes it to Y2 and, this bandwidth, stretches for a further 165-points on top of Y1. Albeit mainly above the zone as well.

Don’t forget this index challenged R1 in the last expiry, when it established its new all-time high and just before that 5% pullback to its zone.

Therefore, and again referencing the FTSE, one does have to wonder why the bulls aren’t taking advantage.

It’s not as if they don’t know by now how little ratio currently surrounds them.

The ratios tell us this index could move 100-points very easily in either direction, or more with just a little incentive.

However, our head says with the bulls obviously fence-sitting, weakness is the more likely outcome unless a spark is ignited.

 

Range:            5005     to      5205

Activity:          Poor

Type:              Bullish

www.hedgeratioanalysis.com

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Apr
19
2024
April 19th, 2024 by Richard

Wow, the SPX ends the April expiry in its zone

Nb. Our comment for 19/04/24

So, here we are at the expiry of the SPX April expiry and just a week ago who would have thought we would be anywhere near the zone.

Actually, on rollover Wednesday when this index hit its intraday low of 5007.25, just 2.25-points above the zones’ upper boundary, we were more than happy with that.

So, today is just the icing on the cake.

To put this in perspective, the market for the rollover and expiry have been within a few points of its very narrow zone and, that is after, it has dropped from 5265, a whopping 5% drop.

So, to get within just a few points is exceptional.

To be fair, it could easily have gone the other way, and it is perhaps interesting to reread what we said way back on the 9th and interpret that with the value of hindsight.

Perhaps, the most significant aspect of all this is not so much where this index has ended this expiry, but rather the manner in which it has.

The point is that, and this is true for the FTSE100 as well, that this retrenchment has been very controlled and calm, despite the magnitude of it.

Coincidence or not, it is worth considering the fact that both the FTSE100 and SPX have ended up this expiry in or around their respective zones, and that is after both had been tangling with their respective R ratios.

We have always maintained, that every expiry the market, or more pertinently, the Fourth Estate attribute the move to, either geopolitical, interest rate/economic or technical reasons.

The point being, is that every market ignores the fact that this is a natural outcome of the derivative influence.

Finally, perhaps we should actually be grateful, as if panic or fear had been the dominant factor, then an orderly expiry around the zone would not have been even remotely possible.

 

Range:            5005     to      5255

Activity:          Moderate

Type:              On balance just bullish

www.hedgeratioanalysis.com

 

 

Nb. Our comment from the 09/04/24

 

It has been two trading days since our last comment, but sadly the picture isn’t that much clearer.

Friday saw the market recapture all that it had lost on the Thursday, adding weight to our expectation of whipsaw and volatility now the SPX is in the midst of a very wide Y ratio bandwidth.

Then yesterday, Monday, saw it stagnate. The entire trading range was just 23-points.

And in just two trading days we have seen the ratios below the zone slip back and recover.

Whereas, above the zone, they have pretty much consistently given up ground.

To us this means the bulls are still there, but not as active as before.

The key is going to be the zone, and everything we have seen so far this expiry says to us it is going to move up…so it really is just a question of to where?

Naturally, its never as simple as that, as please don’t lose sight of the fact that the Y ratio bandwidth currently goes from 4970 all the way up to 5305.

That is 335-points of absolutely minimal ratio, so the market could easily move anywhere within this bandwidth.

However, based on those very small margins, at the moment it is still looking good for the bulls.

Sometimes though, it can be prudent to ask oneself why there is so much Y ratio about. The only answer is that when uncertain less money is put down on the table and, with less participation, less ratio.

So, from what little there is, it is looking bullish, but there is precious little support under this market. Why we are not seeing 100 plus point moves a day is the real surprise, and if we start seeing those, then we could see a bit of momentum build.

 

Range:            5005     to      5305

Activity:          Poor

Type:              On balance bearish

www.hedgeratioanalysis.com

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Jun
13
2023
June 13th, 2023 by Richard

Seems like we have a street fight on our hands in the SPX...ding ding...round 1

Nb. Our comment for 06/13/23

 

The SPX has definitely become fixated with R2, and has most certainly continued to “knock on the retreating door of R2”.

Although, when one drills down into the data, it is not quite as vanilla as it looks.

First things first though, and last week was all about the levels we mentioned. On the day we published 4270 had its affect first thing, but then it swiftly changed to 4280.

Then the next two days were all about 4305, which gave way on Friday, also strike three of course.

What we also mentioned last week, was this week it is the rollover and expiry. The first of which is tomorrow.

So, this is where it now becomes very interesting.

Basically, the zone hasn’t moved. Although, yesterday and today we have seen 4150 state a really strong claim. However, please note that this is still a long way below where the market is now, despite it being a lot higher than 4000. However, from past experience and with Y2 now stretching all the way up to 4305, it has happened in the past that the zone ends up at 4295-4305 come Friday.

The odd part is that today and yesterday, the ratios have started falling beneath the current zone. So much so in fact, that R1 has reappeared down there.

Putting this aside, and seeing how aggressive this index has been last week and, so far this week, it means it looks like a good old fashioned street fight between equities and derivatives.

Equities have obviously taken to heart no rate rise, so either derivatives adapt or end up losing some serious money.

As you can see R2 now starts at 4330 (below where the market closed), so there is a step up at 4355 and then again at 4405. But, at the end of the day, the SPX is going to have to absorb an awful lot of dynamic delta futures, especially this close to the rollover, so decide whom to back…equities or derivatives, simple.

 

Range:            4305  to  (4355 & 4405) 4505           

Activity:          Very poor

Type:              Bearish

 

www.hedgeratioanalysis.com

 

Nb. Our comment from the 06/06/23

 

As compliant as the FTSE is being here, on the other side of the pond, the SPX is being rather aggressive.

We did point out last week that sometimes this index can “get a bee in its bonnet” and, we did suspect as much, otherwise we would not have mentioned it.

Essentially, it was looking for a fight, or that was the way it appeared to us at least.

To be fair, it needed something to give it a shake as, up until the middle of last week, the SPX had gone absolutely nowhere. It started this expiry by opening at 4190.78 and by last Wednesday 1st it had closed at 4179.83.

The only question that remains, is whether or not it has now bitten off more than it can chew…or more precisely, more futures than it can handle courtesy of the dynamic delta that comes with encountering R2 ratio level.

Judging by the reaction yesterday, when it should have “sobered up”, the answer is yes, it looks decidedly uncomfortably with this many futures coming out onto the market.

Luckily, for the market, by shaking things up a bit then we are seeing the ratios above the zone recede quite quickly now.

Amazingly though, the actual zone itself hasn’t moved.

Obviously, today R2 starts at 4270 but, by the end of play we would expect it to have slipped to 4280. Then, during the week, it will slip further to 4305.

The SPX can of course continue to knock on the retreating door of R2 but, next week is the rollover and expiry, and where that will end up is going to become increasingly important.

So, enjoy it while you can, but we feel the bulk of the upside potential has been achieved for this expiry and the downside risk only grows.

 

Range:            4005  to  4270 (4305)           

Activity:          Poor

Type:              On balance only just bearish

 

www.hedgeratioanalysis.com

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Jun
06
2023
June 6th, 2023 by Richard

Has the SPX bitten off more than it can chew?

Nb. Our comment for 06/06/23

 

As compliant as the FTSE is being here, on the other side of the pond, the SPX is being rather aggressive.

We did point out last week that sometimes this index can “get a bee in its bonnet” and, we did suspect as much, otherwise we would not have mentioned it.

Essentially, it was looking for a fight, or that was the way it appeared to us at least.

To be fair, it needed something to give it a shake as, up until the middle of last week, the SPX had gone absolutely nowhere. It started this expiry by opening at 4190.78 and by last Wednesday 1st it had closed at 4179.83.

The only question that remains, is whether or not it has now bitten off more than it can chew…or more precisely, more futures than it can handle courtesy of the dynamic delta that comes with encountering R2 ratio level.

Judging by the reaction yesterday, when it should have “sobered up”, the answer is yes, it looks decidedly uncomfortably with this many futures coming out onto the market.

Luckily, for the market, by shaking things up a bit then we are seeing the ratios above the zone recede quite quickly now.

Amazingly though, the actual zone itself hasn’t moved.

Obviously, today R2 starts at 4270 but, by the end of play we would expect it to have slipped to 4280. Then, during the week, it will slip further to 4305.

The SPX can of course continue to knock on the retreating door of R2 but, next week is the rollover and expiry, and where that will end up is going to become increasingly important.

So, enjoy it while you can, but we feel the bulk of the upside potential has been achieved for this expiry and the downside risk only grows.

 

Range:            4005  to  4270 (4305)           

Activity:          Poor

Type:              On balance only just bearish

 

www.hedgeratioanalysis.com

 

 

Nb. Our comment from the 06/01/23

 

Nothing at all to do with the SPX to begin with as we must point out that hopefully you took heed of the dubious nature of the support R1 ratio would provide the FTSE100 at 7550.

Furthermore, also what we said about 7450, as today, in this index, this is what it will all be about, no question.

Looking at the SPX now, and as you can see there hasn’t been a great deal of change.

However, there have been significant developments regardless.

Firstly, although the zone hasn’t changed, it seems like 4145-4155 has eventually made up its mind in the last few days to becoming the very likely new zone.

Secondly, on Tuesday (the first trading day this week) this index hit two very important ratio levels.

Initially it hit R2 then at 4230 with the intraday high of 4231.10.

Then it closed at 4205.52, right on R1.

Overall, this shows that the ratios are retreating above the zone (which we knew anyway), that the zone should move up and, what is not evident in the table, is that the ratios are growing below the current zone.

This is all bullish. However, a lot of this has been already reflected in the market, as the market still remains just below R1 and R2. So, the downside risks still remain, as the corresponding R1 & R2 levels don’t start until 3995-see trading range below.

As there is a lot of potential news to come out, debt and rates to name two, so just to warn you that sometimes if the SPX gets a bee in its bonnet, then it can blast through ratio levels, only sobering up the next trading day.

 

Range:            4005  to  4205           

Activity:          Poor

Type:              On balance only just bearish

 

www.hedgeratioanalysis.com

 

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Dec
28
2022
December 28th, 2022 by Richard

The SPX on the 20th Dec had the opportunity to rally...

 

Nb. Our comment for 12/20/22

 

It was bit of a tough end to the December expiry for the SPX but, we were more than happy to see the index finish on rollover Wednesday at 3995.32, just inside its zone.

Of course, the SPX was trying to go up to get inside its zone, whereas the FTSE was pulling in the exact opposite direction.

So, being in its zone for just the rollover is not ideal, but it is sometimes as good as you are going to get.

For the FTSE, this meant it was above its zone on the rollover, but managed the actual expiry in its zone.

And don’t forget this was the mighty Dec expiry, the biggest of the big, so with this in mind as well, we are more than happy to take that. And if we had known this at the start of the expiry, we would most definitely have taken it.

However, once the rollover was out of the way, there was precious little left for this index to fight for over the last two days of last week.

Which meant, the January expiry, started life (or being the front month) at 3852.

Prior to Friday 16th in the Jan expiry R2 was at 3845, only jumping that day. Well, it was more like a leap-frog, as the close on that Thursday was 3895.75, so by the time Dec actually expired it was already below it.

The point being, is that the Jan expiry was born in the R2 bandwidth.

Quite often a new expiry can be “born” into a level of ratio it is uncomfortable with and, we strongly suspect, that this is the case here.

If there was ever an opportunity for a Christmas rally to take place, then this is it.

 

 

Range:            3670  to  3895           

Activity:          Poor

Type:              On balance bullish

 

www.hedgeratioanalysis.com

 

 

 

Nb. Our comment from the 12/13/22 (Nb. The December expiry)

 

And they were doing so well, getting the market back to 3990 and just below the zone as we entered the final week of the December expiry.

Also, don’t forget, this was when London was going the other way and trying to get back inside its zone, below 7450.

Still got a few days yet, so it certainly isn’t over this expiry. It just means they are going to have to work for it if they want a successful outcome.

Of course, this is a success for derivatives, so please bear that in mind.

As we are now on substack it is perhaps worth pointing out that when this research was valued by institutions, or pre-MiFID II, we used to cover the FTSE100, DAX, CAC, HSI, DJIA, NDX and the SPX. And our reports were daily but, more importantly, before the respective market opened.

Which makes this look a tad curve-fitting but, above the zone, although R3 now starts at 4180, we would have mentioned there is what we call a significant step-up at 4105.

Anyway, last week we did get our test of R1 at 3945 (please see comment below), but not the one we were hoping for, R2 at 3895.

Evidently this was enough, especially for a “meandering market”, but it seems the CPI figures have scuppered that.

Also, we do take pains to point out that the huge increase in overall activity in the final week of the biggest of the big expiries very often get misdiagnosed. This to us is such a case in point. It’s not as if the Fed tapering rate rises is new news after all.

What it does mean is that this expiry has a good bit of fight left in it, which is always exciting, if not tradable.

Finally, at least as yet, no pretenders to being the new zone, so 4000 is the bullseye.

 

Range:            3995  to  4005           

Activity:          Only just registered

Type:              On balance not bearish

 

www.hedgeratioanalysis.com

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Dec
06
2022
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

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Nov
22
2022
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

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Nov
15
2022
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

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Sep
27
2022
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

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