November 30th, 2022 by Richard

The SPX back below its zone and into bearish territory, again.

 

Nb. Our comment from the 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

 

 

 

Nb. Our comment for 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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November 8th, 2022 by Richard

The SPX proved rather sensitive by bouncing off just Y2 Ratio.

 

Nb. Our comment from the 11/01/22

 

The excitement factor has certainly been high so far, especially considering that from the settlement price in October to the end of the first week in November the SPX gained an incredible 245-points, or 6.70%. That is in just a week, to spell it out.

Interestingly, where the ratio is concerned, this is actually quite mundane…as it hasn’t even got close to testing Y2 yet.

The only thing the market has done is move up through the Y1 ratio bandwidth.

So, it may seem exciting, but the reality is that this is exactly what one should have been expecting.

And the only significant change in the ratios has been the move up in the zone.

This has taken it to 3845-3855 and actually happened last Friday 28th Oct.

Therefore, Thursday’s price action was all about the old zone and Fridays about the new one, but water under the bridge now.

The main point is that the market is now back above their zone, and so by definition, back into bullish territory.

Which is not something we have seen for a while.

Now, what would be interesting is if the zone moved back up to 4000. And, if it did do so, in front of or in reaction to the market.

We still feel that there is plenty of life left in this market and, although the ratios are rising below the zone, there is still ample room down there.

In fact, the overall Y ratio is still 460-points, which is down from the 510 it was, but this remains scarily wide.

The big takeaway from all this, is don’t get fooled into thinking that this recent rise means anything but the fact that there was no ratio there to provide even the smallest bit of traction to give the bulls any concern at all.

This, of course, works both ways, and worth noting activity for the last 5 days has been abysmal.

 

Range:            3855  to  4005           

Activity:          Very poor

Type:              Bullish

www.hedgeratioanalysis.com

 

Nb. Our comment for 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

 

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November 1st, 2022 by Richard

It may seem exciting but the SPX is just moving up in the Y1 Ratio bandwidth.

 

Nb. Our comment from the 10/25/22

 

Before we get onto the November expiry, we should mention that the settlement price for the October one was 3656.28.

Which was close enough for us, as the zone did move down, and to 3695-3705, so it got quite close but, regardless of this, this meant that it finished in the Y ratios, so no great harm done really.

Coming back to November, and the zone here was following Octobers down. In fact, the Oct expiry actually pre-empted November, dropping down to 3795-3805 on the 20th, which is why we have made that the comparison in table above.

We think that, had the market not started moving sharply higher immediately after the October expiry, then the zones would have dovetailed circa 3700.

As it happens, with the market reaching the zone by the close yesterday, this is no longer an undue influence.

This also gives November a chance to start on a normal footing.

And the ratio alignment is as textbook as you can get, literally going up in sequence.

If anything, it is slightly skewed towards the upside, as there is a bit more Y ratio northwards than southwards.

However, the real issue, is that we are now back to the situation where the Y1 ratio bandwidth is a massive 360-points, and the overall Y ratio bandwidth is a colossal 510-points.

The problem now, is that back when we were getting these enormous bandwidths of minimal ratio the market was extremely sensitive, reacting to just Y2 sometimes.

Well, just over a week ago it took R3 at 3495 to turn this market around, so we fear that sensitivity ship has sailed long ago.

Of course, only time will tell with this new expiry but, we for one, are expecting a very very exciting ride for the next four weeks.

 

Range:            3645  to  4005           

Activity:          Moderate

Type:              On balance bullish

 

 

Nb. Our comment for 11/01/22

 

The excitement factor has certainly been high so far, especially considering that from the settlement price in October to the end of the first week in November the SPX gained an incredible 245-points, or 6.70%. That is in just a week, to spell it out.

Interestingly, where the ratio is concerned, this is actually quite mundane…as it hasn’t even got close to testing Y2 yet.

The only thing the market has done is move up through the Y1 ratio bandwidth.

So, it may seem exciting, but the reality is that this is exactly what one should have been expecting.

And the only significant change in the ratios has been the move up in the zone.

This has taken it to 3845-3855 and actually happened last Friday 28th Oct.

Therefore, Thursday’s price action was all about the old zone and Fridays about the new one, but water under the bridge now.

The main point is that the market is now back above their zone, and so by definition, back into bullish territory.

Which is not something we have seen for a while.

Now, what would be interesting is if the zone moved back up to 4000. And, if it did do so, in front of or in reaction to the market.

We still feel that there is plenty of life left in this market and, although the ratios are rising below the zone, there is still ample room down there.

In fact, the overall Y ratio is still 460-points, which is down from the 510 it was, but this remains scarily wide.

The big takeaway from all this, is don’t get fooled into thinking that this recent rise means anything but the fact that there was no ratio there to provide even the smallest bit of traction to give the bulls any concern at all.

This, of course, works both ways, and worth noting activity for the last 5 days has been abysmal.

 

Range:            3855  to  4005           

Activity:          Very poor

Type:              Bullish

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October 25th, 2022 by Richard

Conventional Ratio alignment for the SPX Nov expiry, but has the world moved on now?

 

Nb. Our comment from the 10/20/22 (Not published)

 

Nb. Our comment for 10/25/22

 

Before we get onto the November expiry, we should mention that the settlement price for the October one was 3656.28.

Which was close enough for us, as the zone did move down, and to 3695-3705, so it got quite close but, regardless of this, this meant that it finished in the Y ratios, so no great harm done really.

Coming back to November, and the zone here was following Octobers down. In fact, the Oct expiry actually pre-empted November, dropping down to 3795-3805 on the 20th, which is why we have made that the comparison in table above.

We think that, had the market not started moving sharply higher immediately after the October expiry, then the zones would have dovetailed circa 3700.

As it happens, with the market reaching the zone by the close yesterday, this is no longer an undue influence.

This also gives November a chance to start on a normal footing.

And the ratio alignment is as textbook as you can get, literally going up in sequence.

If anything, it is slightly skewed towards the upside, as there is a bit more Y ratio northwards than southwards.

However, the real issue, is that we are now back to the situation where the Y1 ratio bandwidth is a massive 360-points, and the overall Y ratio bandwidth is a colossal 510-points.

The problem now, is that back when we were getting these enormous bandwidths of minimal ratio the market was extremely sensitive, reacting to just Y2 sometimes.

Well, just over a week ago it took R3 at 3495 to turn this market around, so we fear that sensitivity ship has sailed long ago.

Of course, only time will tell with this new expiry but, we for one, are expecting a very very exciting ride for the next four weeks.

 

Range:            3645  to  4005           

Activity:          Moderate

Type:              On balance bullish

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October 18th, 2022 by Richard

After the huge bounce off R3 at 3495 on Thu 13th the SPX now needs help with the actual expiry.

 

Nb. Our comment from the 10/12/22

 

The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.

Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.

On Friday 30th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.

However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.

For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.

The real issue now, is the zone.

Especially as next week is the rollover and expiry.

So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.

First the rate of decline in the ratios below the zone, especially R3, has to be arrested.

Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.

This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.

The trick will be in the timing.

 

Range:            3495  to  3645           

Activity:          Poor

Type:              Neutral

 

 

Nb. Our comment for 10/12/22

 

Well, you didn’t have to wait long, so we sincerely hope you managed to get your timing right.

The very day after we last published, we saw the inflation figures and the market plummeted…all the way down to R3 at 3495 with the intraday low of 3491.58.

We then saw an almost 200-point bounce before the market trimmed its gains to finish up 177 from its low, but only up 92.88-points from the previous day.

The next day, Friday 14th, was essentially all about trying to get back into the Y ratios. Which to most actually meant trying to get a close above 3695.

It did get up to 3712.00, so it had a chance, but couldn’t quite cement the deal.

Now we are into the rollover and expiry, things are going to get a little tense, especially as the zone has stubbornly refused to move.

Furthermore, the ratios above it haven’t moved, so are applying no pressure at all.

However, below the zone, the ratios are now in freefall.

This can be both good and bad. Good, as it may see the zone move, and 3800 & 3750 are the current frontrunners here. Although don’t rule out 3700 as an outside shot.

Bad, because it further dilutes what little ratio support there was down there. As you can see in the above table all the R ratios have slid back, and by a considerable amount as well.

Basically, this market needs the ratios above the market to lend a hand in determining where the correct zone should be, and not just leaving it down to where the undermining finishes when the music stops.

After all, the Y ratio bandwidth below the zone, is now 350-points wide all on its own.

And that, just has volatility written all over it, large.

 

Range:            3645  to  3995           

Activity:          Moderate

Type:              Bullish

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October 12th, 2022 by Richard

The SPX continues with its ratio stepping-stone decline, but will the rollover and expiry rescue it?

 

Nb. Our comment from the 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

 

 

Nb. Our comment for 10/12/22

 

The SPX has certainly continued with its “stepping-stone decline”, which has been quite relentless in fact.

Also, apologies for the lack of comment as we appreciate without it this is perhaps not so obvious to you as it is to us.

On Friday 30th September the market intraday low was 3584.13 when R3 had fallen to 3595. Sadly, without any updates, our last published table had R3 AT 3645. Funnily enough, between these two dates, R3 paused ever so briefly at 3620, coincidentally the day when the intraday low was 3623. Anyway, the following Monday and Tuesday, saw this index put on over 200-points.

However, and as one can see in the above table, the decline in the ratios below the zone has continued unabated. So much so, that now R3 is standing at 3495, having been 3520 yesterday. Which was never going to help the bulls of course.

For the record, a more solid line would be 3545, and anticipating the rate of decline is very haphazard but we nevertheless thought it worth mentioning.

The real issue now, is the zone.

Especially as next week is the rollover and expiry.

So far, it hasn’t budged, which honestly is bit of a surprise. However, with Y1 now appearing below said zone, and the final week approaching, we are certain it won’t stay like this for much longer.

First the rate of decline in the ratios below the zone, especially R3, has to be arrested.

Then the zone needs to drop to an attainable level. These do not have to happen independently either by the way.

This will then pave the way for derivatives to rescue some semblance of control over this expiry and, very probably, mitigate some of those losses that must be staring someone in the face.

The trick will be in the timing.

 

Range:            3495  to  3645           

Activity:          Poor

Type:              Neutral

www.hedgeratioanalysis.com 

 

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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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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.

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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

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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

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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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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.

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