Mar

2022

March 2nd, 2022 by Richard

Very revealing how the SPX reacts to the ratios in a time of war.

Nb. Our comment from the 02/23/22

The February settlement price was 4383.70, so a little way below the zone (which finished at 4445-4455) but easily within the Y1 ratio, so as good as it was going to get.

Of course, US markets were closed on Monday, so this is only the second day of the first triple witching expiry of 2022, an expiry that was always destined to start life below its zone.

Which should have come as no surprise, as this market has been in bear territory for some time, on top of which the zone had started falling, having threatened to for so long.

So, with everything else going on, the overriding question was where, or if, this market would get some support.

As one can see in the tables above Y2 was 4390, last Friday as well as Tuesday, but has fallen today to 4345. Considering the market closed on Friday at 4348.87 this was a moot point anyway.

The real level to watch would have been R1, which has remained the same since last Friday. So, yesterday’s intraday low of 4267.11 gives us a very good insight as to what level of sensitivity exits in this expiry. And, although it did overshoot by twenty odd points, this is not disappointing because firstly, yesterday was the first day so the market naturally takes a bit of time to adjust, and secondly, it was always going to react to the geopolitical news and be playing catch-up with Europe.

The telling point was the close, back above R1.

Then, the fact R1 has remained at this level today is also reassuring.

It is by no means out of the fire yet, but as an early indication that it will respond to the dynamic delta is a good sign, as irrational fear (or greed) is never good.

Now, we just have to see how the ratio levels evolve, and as they are already dropping below the zone this is a bearish sign but, early days.

Range: 4295 to 4495

Activity: Poor

Type: Neutral

Nb. Our comment for 03/02/22

The very reason we include our previous comment (above) is for easy reference and continuity. Therefore, following directly on from the test of R1 then at 4295 on the 22^nd Feb we saw the market the very next day blast straight past that to R2, then at 4220, with the intraday low of 4221.51.

There is no denying that these were very nervous times so, for the ratios to have any affect at all, was very remarkable.

The day of the invasion the intraday low was 4114.65, just (again) twenty odd points above R3, but with the spike in the vega and the alacrity of the fall a bit of pre-emption was always very likely.

On the 25^th Feb the zone moved down to 4395-4405, which is roughly where the market gravitated to but, very noticeably, it never tested the bottom boundary at 4395.

Yesterday, the 1^st March, we saw the intraday low of 4279.54, when Y2 was at 4295.

And as we said last time “that it will respond to the dynamic delta is a good sign, as irrational fear (or greed) is never good” but as a triple expiry coupled with the fact there was so much Y ratio around it was always going to be extremely volatile even without the added issues of the invasion, so the fact that the ratios are even an influence can only be a good sign.

However, that’s pretty much where the good signs end, as the zone will almost definitely move down to 4295-4305, making the third downwards move in this expiry already.

Well, perhaps there maybe one more good sign, as if the zone does move down AND the market stays above 4305 then, by default, this market will find itself in bullish territory, and it has been a while since we have last seen that.

For the record the Y1 ratio bandwidth has shrunk from 260 to 210-points, and the overall Y ratio bandwidth from 435 to 360, so still ridiculously wide, meaning that even under normal conditions we would expect a trading range of at least 5% this expiry and yet, here we are, seven days in and the market literally hasn’t moved, albeit in a very exciting way.

Range: 4295 to 4395

Activity: Moderate

Type: On balance decently 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.

Posted in Uncategorized Tagged with: derivatives, Futures, indices, investing, Markets, Options, shares, SP500, spx, stock market, stocks, trading

Feb

23

2022

February 23rd, 2022 by Richard

The March triple expiry starts deep in bear territory.

Nb. Our comment from the 02/18/22 (Not published)

Nb. Our comment for 02/23/22

The February settlement price was 4383.70, so a little way below the zone (which finished at 4445-4455) but easily within the Y1 ratio, so as good as it was going to get.

Of course, US markets were closed on Monday, so this is only the second day of the first triple witching expiry of 2022, an expiry that was always destined to start life below its zone.

Which should have come as no surprise, as this market has been in bear territory for some time, on top of which the zone had started falling, having threatened to for so long.

So, with everything else going on, the overriding question was where, or if, this market would get some support.

As one can see in the tables above Y2 was 4390, last Friday as well as Tuesday, but has fallen today to 4345. Considering the market closed on Friday at 4348.87 this was a moot point anyway.

The real level to watch would have been R1, which has remained the same since last Friday. So, yesterdays intraday low of 4267.11 gives us a very good insight as to what level of sensitivity exits in this expiry. And, although it did overshoot by twenty odd points, this is not disappointing because firstly, yesterday was the first day so the market naturally takes a bit of time to adjust, and secondly, it was always going to react to the geopolitical news and be playing catch-up with Europe.

The telling point was the close, back above R1.

Then, the fact R1 has remained at this level today is also reassuring.

It is by no means out of the fire yet, but as an early indication that it will respond to the dynamic delta is a good sign, as irrational fear (or greed) is never good.

Now, we just have to see how the ratio levels evolve, and as they are already dropping below the zone this is a bearish sign but, early days.

Range: 4295 to 4495

Activity: Poor

Type: Neutral

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: derivatives, Futures, indices, investing, Markets, Options, shares, SP500, spx, stock market, stocks, trading

Feb

16

2022

February 16th, 2022 by Richard

At last the SPX's zone moves, but is it too little too late?

Nb. Our comment from the 02/08/22

As we said last week, the rally told us nothing until it reached its zone.

Which it did on Wednesday 2^nd with the intraday high of 4595.31 just touching the bottom boundary of its zone.

The fact that the market is well below 100-points this level now just tells us how thin it all is out there, and that the bulls last week were just not interested in taking on any futures at all.

Unfortunately, after Wednesday it gets a little bit more complicated as, although the bulls are still waiting in the wings, it seems like so are the bears.

The real problem for us is the total lack of interest in getting the zone to move down to 4495-4505, and thereby confirming the down trend.

To make matters worse, it hasn’t really changed at all. So, a small push could easily still see 4500 become the next zone, but it seems practically frozen in time. Made all the weirder when you consider this market has been at or below it for the last three days, providing ideal conditions for it to actually decide.

Obviously, we would love this to be all cut and dried for you, but the fact remains that if the market doesn’t know what it wants to do then it will quite simply reflect that here.

We have seen a pickup in bullish activity over the last few days, but this has hardly been conclusive.

So, all we can say, is that being below its current zone the market is in bear territory. And that, as evidenced by the pullback from the zone, the bulls are currently in hiding.

However, there is one further aspect we should add, and this is that sometimes, just like the turning of the tide, you get that indecisive period where it just doesn’t know whether it’s meant to be coming or going.

Basically, watch this space, as we will let you know as soon as possible when we get something more definitive.

Range: 4320 to 4595

Activity: Moderate

Type: On balance just bearish

Nb. Our comment for 02/08/22

When we said last week “to watch this space…until we get something more definitive”, well that was last Wednesday 9^th. Basically, with the intraday high of 4590.03 falling just shy of the then zones bottom boundary, having tested it the week before with 4595.31, then this should have been the definition you were looking for.

Of course, many, including us, would have very probably waited until the open the next day, as it could have easily been one of those instances when they stop just shy (knowing full well what awaits them in real time) and then use the opening auction to leap-frog the problematic level. Although 5-points in this index is quite a gap.

Anyway, the rest is history as they say as we come onto our next point, which is that the focus this week, being rollover and expiry, is the zone.

And, as we mentioned in Monday’s comment on the FTSE that although their zone was below the market, here, even if the zone here moved to 4500, it would still be above the market.

The delay in moving persisted, and although it was increasingly obvious from Thursday last week, the actual move down didn’t occur until yesterday.

Happily coinciding with a bit of a rally, which sadly stopped short.

And this is part of the problem when the zone takes so long to move, although in its defence this is the first meaningful backwards move it has made in years, so perhaps a bit understandable, is that the ratios underneath continue to erode. Especially so if the market goes way below it.

The end result being that 4470-4480 is now where 4500 was a week ago, so perhaps it hasn’t stopped short? In fact, it could even be 4445-4455, such is the dearth of ratio.

And this is the big takeaway at the moment, by delaying the move down in the zone, the ratios below the intended target have eroded so much that the entire Y1 ratio bandwidth now stretches for an amazing 340-points. So, wherever the zone does end up, it will be a blessing that this index is even close to it as it could literally be anywhere within this enormous bandwidth.

The only other saving grace might be that the first triple of the year, the March expiry, may just affect proceedings to a degree.

Range: 4365 to 4495

Activity: Moderate

Type: Neutral

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: derivatives, Futures, indices, investing, Markets, Options, shares, SP500, spx, stock market, stocks, trading

Feb

08

2022

February 8th, 2022 by Richard

Is the tide turning for the SPX?

Nb. Our comment from the 01/26/22

Well, they have certainly stabilised the ship, but whether the initial issue has been corrected we feel the jury is still out on that one.

As this index has plumbed the depths, well R2 to be precise, then it is no surprise at all that there has been a considerable change in the ratios.

Though the question is this; has the “norm” been reversed?

By this we mean the normality of the last couple of years where the ratios recede above a rising zone while the market just keeps knocking on the door until it relents.

The answer is that it did change, with the “very good” activity resulting in the ratios above the zone advancing while those below receded. And, although 4500 came within a whisker of being the new zone, we haven’t had a down move yet.

This is not to say this may not happen again but, at the moment at least, normal service has been resumed.

However, the huge changes in the ratios can be seen in the above table, where our old friend 4295 is now R1. Incidentally, both R2 and R3 have been lower, today has seen them recover slightly. Seemingly, the biggest changes have been saved for above the zone, where Y2 has gone altogether and R3 makes an appearance, which doesn’t happen often these days, especially in an intermediary expiry. But, both R1 and R2 have made considerable inroads, something we are just simply not used to these days.

Looking ahead, then 4495-4505 is still an important level, and therefore what the market does today may well decide whether or not it still has any designs on becoming the next zone, at least for the rest of this week that is.

Otherwise, this market has bounced of R2, and has now powered all the way back up through the minimal Y ratio, so no prizes there. And, as we have said so many times before, this is just how it is these days because of the amazingly wide Y ratio bandwidths.

Depending on what happens with 4500, this rally tells us very little, and it won’t until, or if, it reaches the current zone. So, enjoy the Y ratios volatility and potential whipsaw, but don’t fooled into believing it’s something it is not.

Range: 4295 to 4595

Activity: Poor

Type: Bearish

Nb. Our comment for 02/08/22

As we said last week, the rally told us nothing until it reached its zone.

Which it did on Wednesday 2^nd with the intraday high of 4595.31 just touching the bottom boundary of its zone.

The fact that the market is well below 100-points this level now just tells us how thin it all is out there, and that the bulls last week were just not interested in taking on any futures at all.

Unfortunately, after Wednesday it gets a little bit more complicated as, although the bulls are still waiting in the wings, it seems like so are the bears.

The real problem for us is the total lack of interest in getting the zone to move down to 4495-4505, and thereby confirming the down trend.

To make matters worse, it hasn’t really changed at all. So, a small push could easily still see 4500 become the next zone, but it seems practically frozen in time. Made all the weirder when you consider this market has been at or below it for the last three days, providing ideal conditions for it to actually decide.

Obviously, we would love this to be all cut and dried for you, but the fact remains that if the market doesn’t know what it wants to do then it will quite simply reflect that here.

We have seen a pick up in bullish activity over the last few days, but this has hardly been conclusive.

So, all we can say, is that being below its current zone the market is in bear territory. And that, as evidenced by the pullback from the zone, the bulls are currently in hiding.

However, there is one further aspect we should add, and this is that sometimes, just like the turning of the tide, you get that indecisive period where it just doesn’t know whether it’s meant to be coming or going.

Basically, watch this space, as we will let you know as soon as possible when we get something more definitive.

Range: 4320 to 4595

Activity: Moderate

Type: On balance just bearish

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: derivatives, Futures, indices, investing, Markets, Options, SP500, spx, stock market, trading

Feb

01

2022

February 1st, 2022 by Richard

Can the SPX continue up through the Y ratios to its zone?

Nb. Our comment from the 01/26/22

They tried so very very hard in the January expiry to get it to settle in its zone, with the (in the end) valiant effort to get the market up to 4602.11. The fact that after so much effort they still couldn’t hold it there was the first clue there were stronger undertones at work. The fact that it settled at 4472.07 was a result therefore, as at least it was still in the Y ratios.

However, and also why we have included the ratio table for Feb on the 20^th above, is that on Friday the intraday low was 4395.34, coincidentally R1.

The second warning perhaps? Either way the open on Monday was way below this, and the market even went below R2 (which was unchanged from the 20^th) before it staged what was a truly spectacular recovery.

This meant that the close at 4410.13 was back above both R2 and R1, which could have easily been job done on one of the most amazing starts to an expiry recently.

Sadly, the ratios below the zone then collapsed on Tuesday and, although they are mostly unchanged today, this weakness was a new experience.

The market yesterday did go below R1 at 4345 (intraday low 4287.11) but didn’t get as far as R2 now at 4245, before recovering to close back above R1. Giving just a glimmer of hope that all hands were rushing to stabilise the ship.

This makes today critical as the ratios are still weak below the zone, which in itself could easily move down to 4495-4505, as it tries to re-establish normal sensitivity and therefore reaction to the ratios, and thereby dispense with any panic.

We have said for quite a while now that these are not risk-free markets, and Monday’s huge test of R2 should also be a lesson as, although it rebounded spectacularly, it could also have gone the other way it was such a close call. Especially as over a great many of the previous expiries this index has been sensitive to just Y2 ratio, so this could just also be a sea change in tolerance levels as well.

Range: 4345 to 4595

Activity: Moderate

Type: Bearish

Nb. Our comment for 01/26/22