June 22nd, 2022 by Richard

Thank goodness for the dynamic delta, otherwise the SPX would really be in a mess.

 

Nb. Our comment from the 06/14/22 (Not published)

 

Nb. Our comment for 06/22/22

 

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

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

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

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

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

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

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

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

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

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

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

 

Range:            3745  to  3995           

Activity:          Poor

Type:              Bullish

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June 14th, 2022 by Richard

Well we certainly got our 2 to 3% moves, and right on cue as well, marvellous.

 

Nb. Our comment from the 06/07/22

 

Well, it promised so much but, after that seismic move down in the zone, the SPX has just stalled.

Although, we did suspect that it was pure and simple a reset, and so we also think that the true nature of this market is yet to emerge.

It was more to do with the sudden shock of hitting R2 on the very first day, the resultant subsequent rebound forcing the radical zone move, rather than a more deliberate market motivation that caused the reset we think.

Once the zone had moved, and the market was above it, had there been any further aspirational bulls out there, they really could have had the mother of all parties.

Still could of course, as R1 is still a massive distance away at 4505, but there just doesn’t seem to be the belief.

Oddly however, we are also not seeing the zone want to move away from where it is. Which is a bit bizarre, because this index has stalled around the low 4100’s, which is in the virtually non-existent Y1 ratio gigantic bandwidth, and yet it hasn’t forced the zone to settle around it.

There may well be technical, or even economic reasons for this torpor but, from a derivative perspective, there is no reason at all as the market should be fizzing about with 2 or 3% moves.

On a positive note, the level of activity has been ok throughout, so we feel certain this particular doldrum won’t last much longer.

At the very least, next week is the rollover and expiry, so this alone should start to agitate this market and get some volatility out there.

So, same as last week, the R ratios below the zone should provide some support, but it has been there already this trip so will be no stranger to what’s there.

On the other side of the coin, there is still an absolute vast swathe of Y ratio above it, so all it would need it a gentle shove in that direction, but what in the current climate could provide said shove we have no idea.

 

Range:            4005  to  4505           

Activity:          Moderate

Type:              Neutral

 

 

Nb. Our comment for 06/14/22

 

Well, we certainly got our 2 to 3% moves, and right on cue into the bargain.

The only question that now remains, is will derivatives reassert their authority for the rollover and expiry?

Interestingly, the zone has still not moved. Nor are we seeing any likely successor making a move.

However, in glorious hindsight, it really was a very big warning when the zone didn’t move up despite the market trading for so long in the low 4100’s.

In fact, reading what we said above, back on the 7th (before the market opened), and again in hindsight, all the signs were there and mentioned, we just didn’t state the probability, sadly.

Anyway, the rollover is this Wednesday but, in all likelihood and considering the magnitude of the move, it will more than likely be down to the actual expiry on the Friday.

It is still a tall order, as emotions are running high naturally, but at least it’s not new news that is spooking the market. Actually, one has to wonder why the same old chestnuts are being regurgitated yet again to explain this recent market move, as this is not something that the market hasn’t been aware of, and for some considerable time. Curve-fitting really, as nobody really wants to explain how it is that this is actually very predictable and yet they still don’t expect it.

On to more important issues, and the move down in R3 and DR below the zone actually happened yesterday, the 13th.

So, just like the FTSE and 7650, the deep incursion below 3745 tells its own story, as does the close, which was just back above it.

Out of interest, the level of ratio at the intraday low yesterday of 3734.30 is not now found today until 3715/3720.

Going to be another epic triple witching expiry, and we would expect no less of course.

 

Range:            3645  to  3745        or        3745  to  3895           

Activity:          Moderate

Type:              On balance just bearish

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June 7th, 2022 by Richard

The SPX has had ample opportunity to cut loose, so why hasn't it?

 

Nb. Our comment from the 06/01/22

 

Well, it certainly was dramatic and it certainly was a seismic move in the zone.

Had one realised what was going on, then last week was like reading a book.

The same day as our last note the market hit the intraday low of 3875.13, a deep incursion into R2.

This was evidently enough of a stimulus to the bulls, happy to piggyback on the futures buying dynamic delta unleashed, to force the zone into the seismic move we had mentioned, as when we crunched the numbers on Wednesday it had indeed moved to 3995-4005.

Therefore, Wednesday was all about the new zone but, the Thursday and Friday, were definitely all about the sudden freedom the market found itself courtesy of that now vast expanse of Y1 above said new zone.

Of course, we have seen the zone in the SPX make big moves before, but we can’t actually recall one of this magnitude before. Nor can we ever think of such a move being so necessary, as it really has “reset” this market for this expiry.

So, from starting off in bear territory below the zone, and testing R2 ratio, we now have the situation where it is happily back in bullish territory in acres of Y ratio.

Therefore, you would be forgiven for thinking that the hard work had now been done but, to us at least, now everything has been reset, the true nature of the market can begin to emerge.

It may well be, that the bulls have now gained sufficient superiority that, in hindsight, the hard work has indeed been done. However, now the market is above its zone the gravitational pull from it is now downwards, not upwards. Plus, there is a chance, that the zone could move back from whence it came.

So, still plenty of risks out there but, the next few days and how they evolve, should go a long way towards either cementing this sea change, or revealing it to be just what we said, a reset.

Nevertheless, playing the cards we now have in front of us, support is the zone and the R ratios immediately below that. Whereas resistance, in the form of R ratios, doesn’t appear until 4605. And, if it remains as aggressive on the upside, then R2 doesn’t appear until 4705. Which is a ridiculous amount of upside for a bull market, let alone the bear one we are meant to be in on a conventional definition, not ours (unless the zone does move back up of course), but even so, it is a lot.

 

Range:            4005  to  4605           

Activity:          Poor

Type:              Neutral

 

Nb. Our comment for 06/07/22

 

Well, it promised so much but, after that seismic move down in the zone, the SPX has just stalled.

Although, we did suspect that it was pure and simple a reset, and so we also think that the true nature of this market is yet to emerge.

It was more to do with the sudden shock of hitting R2 on the very first day, the resultant subsequent rebound forcing the radical zone move, rather than a more deliberate market motivation that caused the reset we think.

Once the zone had moved, and the market was above it, had there been any further aspirational bulls out there, they really could have had the mother of all parties.

Still could of course, as R1 is still a massive distance away at 4505, but there just doesn’t seem to be the belief.

Oddly however, we are also not seeing the zone want to move away from where it is. Which is a bit bizarre, because this index has stalled around the low 4100’s, which is in the virtually non-existent Y1 ratio gigantic bandwidth, and yet it hasn’t forced the zone to settle around it.

There may well be technical, or even economical reasons for this torpor but, from a derivative perspective, there is no reason at all as the market should be fizzing about with 2 or 3% moves.

On a positive note, the level of activity has been ok throughout, so we feel certain this particular doldrum won’t last much longer.

At the very least, next week is the rollover and expiry, so this alone should start to agitate this market and get some volatility out there.

So, same as last week, the R ratios below the zone should provide some support, but it has been there already this trip so will be no stranger to what’s there.

On the other side of the coin, there is still an absolute vast swathe of Y ratio above it, so all it would need it a gentle shove in that direction, but what in the current climate could provide said shove we have no idea.

 

Range:            4005  to  4505           

Activity:          Moderate

Type:              Neutral

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June 6th, 2022 by Richard

After testing R2 the FTSE decided it was best to spend the long Jubilee weekend in its zone, smart.

 

Nb. Our comment from the 05/30/2022

Having fun yet?

Well, we certainly hope so but, and apologies for being the bringer of bad tidings, the FTSE is caught up in bit of a ratio nightmare for the next few weeks.

Last week was all about the zone, which it jumped straight back into on the Monday. Tuesday was all about staying in it. Whereas the Wednesday and Thursday were all about breaking out above it.

With the intraday low on Friday being 7542.78, or the zones upper boundary (7550), we saw resistance turn into support.

But and this is where it gets a bit problematic, as travelling up through the 100-points of the zone, where there is no ratio at all, is the easy bit.

Now the FTSE is in a 100-point bandwidth of R1 ratio. Not impossible to negotiate, especially for a triple. But, nevertheless, a level of ratio that will still produce a degree of futures selling onto the market that will have to be absorbed for it to progress.

The problematic part, is that from 7650 upwards there are some considerably weightier levels of ratio, where even a triple may have difficulty in coping with those quantities of dynamic delta.

In contrast, we saw the SPX’s zone dive down to 4000 but, the side effect of this, was to leave only the minimal Y ratio above it…all the way up to 4605.

And that is the issue in a nutshell. The S&P 500 has 15% of blue skies above it, whereas the FTSE hits the dynamic delta storm after about just 1%.

Of course, the ratios change daily, and significantly so, especially in regard to the lower levels but, even so, where we are concerned, if you are a bull, Stateside is where you need to be and not in London.

 

Range:            7550  to  7650       

Activity:          Average

Type:              On balance only just bearish

 

 

Nb. Our comment on 06/06/22

 

Very short week last week courtesy of the Jubilee, but none the duller for it.

Monday was all about finding its feet in the R1 ratio bandwidth it was in. Testing the water as it were.

Tuesday, having got used to it, saw it push ahead to the next point of resistance. Namely R2, and exactly where we had put the top of our trading range, for this very reason. So, when we saw the intraday high of 7648.26, we hoped you too had noticed and were aware of its significance.

Interestingly, on the Wednesday (the last trading day of last week), we saw the intraday high of 7639.21. This was not another test of R2, but something more valuable, as it is a good sign of everyone opening the door for someone else to go through first.

By this we mean, when you know there is a large futures seller at 7650, having just been there and seen the tip of the iceberg, if you are not a futures buyer, then it is only natural to let, or want to let, someone else go first. And if everyone is of a like mind, then you get a stalled market just below said ratio level.

Finally, the close was back inside its zone.

Nice, safe and cosy for the very long weekend.

Nevertheless, it was over 100-points drop from Tuesday’s high.

For this week, you now know that the market knows that above 7550 it is R1, and at 7650 there is a large futures seller. Otherwise, it is back inside its zone, where there is no ratio at all for the 100-points that this comprises. And something to watch out for, especially as we are only half way through this expiry, is that at the other end of the zone it is only Y ratio.

 

Range:            7450  to  7550       

Activity:          Very poor

Type:              Not bullish

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May 24th, 2022 by Richard

Thanks to May the SPX June expiry was born knocking on R2 Ratios door.

 

Nb. Our comment from the 05/18/22 (Not published)

 

Nb. Our comment for 05/24/22

 

Well, we just have to start with how the May expiry ended, and if you remember the SPX had just bounced off R3 (3880) and had just got back into the Y ratio bandwidth. We then said 4200 looks like a “shoo-in” to be the next zone, but 4100 was also highly probable. So, to see this index close at 4088.85 on the Tuesday we thought it had done it.

Of course, it then went all wrong, and the peril of having so much Y ratio became apparent yet again.

In the end the zone didn’t move, but the R ratios continued to collapse, so much so, by Friday R1 was at 3870. Therefore, in the end, this index did expire in its Y ratios but, there is no denying it, that this was an expensive trip for derivatives.

Looking at June, on Monday, R1 was at 3995, so the fact that the SPX closed on the preceding Friday at 3901.36 meant this expiry opened in the R1 bandwidth.

And, with R2 at 3895 (down from 3945) meant this index was already knocking on this door from the very start.

Not a good baptism really, but one which meant we were not that unduly surprised by the market reaction yesterday.

The question is really what happens next?

The short answer is that this will depend on how, or if, the zone sorts itself out, as being at 4300 is too far above the horizon to have any purposeful influence.

It may sound bizarre, especially as Y2 is at 4095 and R1 3995, but we can see a seismic zone move to 4000, almost as if it is resetting itself.

A lot will depend on today, what and how much business is generated in particular, but this index needs something dramatic to happen. As, once done, then the ratios can start creating a more conventional distribution. Something desperately needed, as currently the overall Y ratio is a gargantuan 635-points (16%) so skittish doesn’t even begin to describe it.

 

Range:            3895  to  3995           

Activity:          Moderate

Type:              On balance only just bullish

 

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May 23rd, 2022 by Richard

What a superb effort to get so close in the May expiry, but will June suffer for it?

 

Nb. Our comment on the expired May series

 

Well, you just have to give them 10 out of 10 for sheer effort alone.

And by this, we are certainly not referring to the first three days of last week. Although the effort involved there was also highly commendable.

Basically, on Monday the market got back into its zone with the close at 7464.80.

Then the Tuesday was all about the top boundary of the zone.

Wednesday was also about the top boundary of the zone but, with the Street collapsing, it was also about the bottom.

Interestingly, the real time close had it still clinging on, right on 7450, and it was the auction that took the market back below.

The Thursday was damage limitation pure and simple, although R2 must have helped with the low of the day.

So, come the actual expiry, and even we were surprised with the intraday high achieving zone status at 7453.49.

But this was nothing when the EDSP actually came in at 7442.99.

It may not be in its zone but, we for one, are not going to quibble with just over 7-points considering the journey and extreme headwinds it faced last week.

Finally, and as you can see from the table above, this is not our usual format, as this week we have decided to calculate the May expiry had it been going for one more day. In other words, as it would have been today, and this is the

right-hand column as you look at it.

Of course, as it is no longer tradable, there is no need for the range, activity or type.

 

 

 

 

Nb. Our comment on 05/23/22 (the June expiry)

 

As we would normally have the ratios for June from a few days ago in the right-hand column for comparison purposes, it will have to suffice when we say that there really hasn’t been a great deal of change in them over the last week, so you aren’t missing anything.

The first thing we must point out is that we are now in the June expiry, the second triple witching one of the year.

These are always considerably larger than the intermediary ones, so everything gets ratcheted up several notches.

Furthermore, these “big” expiries, tend to increase in size as the calendar year progresses. Therefore, June is generally the third biggest, with December being the biggest of them all.

This is important, as equity volumes as well as volatility all naturally increase exponentially over the course of these big expiries. So, don’t get side-tracked by people trying to curve-fit stories to the market moves.

Normally, it takes a while for markets to build up a head of steam to reflect the far larger numbers involved. But, in this instance, we are not sure that is going to be the case, as the moves recently have been quite spectacular in their own right.

Obviously, we would like to see the market get back into its zone. But, if it doesn’t, then we will have to see how sensitive it will be to the dynamic delta. R2 worked in May, and it could do again in June, but a lot will depend on when it interacts with it.

The sooner, the more likely it will have an impact. As the expiry goes on, not only is it less likely, but we would always anticipate it taking the far higher ratios to have the same affect as those that we have seen to be effective in the intermediaries.

And, as ever, a lot will depend on how much, or how little ratio there is present in the SPX, and we have all just witnessed what can happen when there is precious little.

 

Range:            7350  to  7450       

Activity:          Poor

Type:              On balance only just bullish

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May 11th, 2022 by Richard

Can R2 stem the SPX bears?

 

Nb. Our comment from the 05/04/22

 

Apologies for the late update, probably made all the worse as the markets have been so expectedly volatile.

When we last published (26/05/22 and please see above) it was all about R1 at 4195, and as the market closed that day at 4175.20, it was definitely the bears in control.

However, the next day, Wednesday, saw the bulls try to wrest back control with a very decent rally. But, R1 was unchanged, despite the zone falling to where it is today, so the close at 4183.96 did look slightly ominous, despite it being so close.

A very decent gap up at the open gave the market a good start, and with the intraday low of 4183.96 coupled with an unchanged R1 showed it was still being a nuisance.

Friday saw the bears really take it to the ratios, although as we said above, it seems our strike three was rather pertinent.

On Monday and Tuesday this week R1 slipped to 4170 and 4145 respectively.

For those purists the intraday high on Monday was 4169.81, whereas the intraday low on Tuesday was 4147.08.

So, it was still being very much involved, it is just a shame we don’t publish daily anymore, as then you could see the dynamic delta in real time.

Looking forward, and a lot depends now on how the ratios evolve daily of course, but there are still some guidelines we can possibly help you with.

Firstly, the zone is likely to move to 4295-4305.

Depending on sensitivity, the rollover and expiry is next week.

The overall respective Y ratio bandwidths remain unchanged at 310 and 510-points, so really don’t expect any reduction in volatility.

Otherwise, unless you are a bear that is, fingers crossed that the dynamic delta created by R1 continues to do its job.

 

Range:            4145  to  4395           

Activity:          Poor

Type:              Neutral

 

 

 

Nb. Our comment for 05/11/22

 

It is certainly going to be a grandstand finish to this expiry, and derivatives have evidently got their work cut out for them.

A lot has gone on from our last comment but, since then, it has been all about the R ratios.

On Thursday 5th when R1 was at 4145, the market went as low as 4106.01 before finishing at 4146.87. This could have been a good sign, and on another day, it could well have been so, the bulls having fought back so hard to get the market back into the Y ratios.

The Friday saw a bad start but, again, the bulls fought back, getting the market as high as 4157.69 (nb. R1 still at 4145). Then it all went sour, with the market plummeting to R2 at 4070, with the intraday low of 4067.91.

The fact that it bounced off this level, but still closed south of R1 was a warning.

Therefore, the first two days of this week have all been about R2, which had now slipped to 3995. Monday’s intraday low was 3975.48 and the close was 3991.24. Very worrying for Tuesday. Which actually started well, but then went down to 3958.17, before rallying back above R2 for the close.

Classic bull vs bear stuff, each using the dynamic delta to advance their respective causes.

This now makes today rather critical, or should we say, holding above R2 rather critical for the bulls.

We do think there is at least one more day of R2 staying at 3995, but no denying the ratios are slipping below the zone.

Of course, we expect the zone to move down, and don’t lose sight of the fact it is the rollover and expiry next week. However, there is no front-runner at present.

We suspect, the outcome of today, and possibly tomorrow, will go a long way to defining where any likely expiry of this month will be.

We have to side with the bulls, simply because they are backed up by the R2 amount of dynamic delta futures buying but, we haven’t seen this index being so aggressive (either way) for a very long time, so our conviction level is not 100% even if the levels remain unchanged.

 

Range:            3995  to  4095           

Activity:          Poor

Type:              Bullish

 

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May 9th, 2022 by Richard

Having tested R2 on Friday the FTSE has a simple choice, there again or back to its zone.

 

Nb. Our comment from the 05/03/22

All of our assumptions last week were blown out of the water before the market even opened. Or to be more specific when the market opened circa 7387 on Monday 25th, as this was actually below R2 at 7400. Best lain plans and all that.

However, had one realised that the FTSE was stuck in the R2 ratio bandwidth, then the next few days made perfect sense as it tried to fight its way back up and out of it, despite the millstone of HSBC on the Tuesday.

The intraday highs of 7463.15 and 7458.24 on Tuesday and Wednesday respectively, just went to show how hard it was trying to break back into its zone.

Then the Friday was all about the upper boundary of the zone 7550, with the intraday high of 7569.80. So, in a way, last week was mostly all about the zone.

Looking ahead, and this time it will depend on the open as London not only has to react to Friday’s Street fall, but everything from Monday as well.

Despite all this we do still think that this index just wants to be in its zone, plain and simple. Well, at least for this week, as come the rollover and expiry everything tends to change anyway.

For the record R2 has now dropped to 7350, exactly when we of course don’t know, but this is immaterial now. However, going in the opposite direction are the other ratios below this.

Above the zone, the ratios have also strengthened, which means we have lost Y2, but at the same time above the zone is still the only place where we get any Y ratio at all. So, perhaps the scope has reduced now we have hit the halfway stage but, overall, the alignment remains the same.

 

Range:            7450  to  7550       

Activity:          Strong

Type:              On balance bearish

 

 

 

Nb. Our comment on 05/09/22

 

Well, the FTSE did manage to stay in its zone for most of last week, but it was quite a fight.

And this week it was all about the upper boundary of the zone, as opposed to last week being all about the bottom boundary.

For the first three days it battered away at 7550, and on the third day, the Thursday, we thought our strike three rule had come into effect as the market got as high as 7619.39.

Sadly, it couldn’t hold onto it, mainly because of the weak Street, as it finished dead centre of the zone.

Again, the official data is misleading, as the open on Friday was around 7490, not 7503.27. This still meant that the market did open inside its zone.

Then, between 9am and 2pm the market bounced around the bottom boundary 7450.

After 14:00 it became very interesting, as once the bottom boundary was breached it went very quickly down to R2 at 7350, with the intraday low of 7354.06.

So, with two weeks still to go the FTSE is in bear territory just below its zone but, everything it has done so far, leads us to believe that it really doesn’t want to be here.

Of course, only time will tell, but as one can see, it would only take 60-points for it to recapture its zone.

And the fact that it has already tested R2 at 7350, means that we know that the market knows that there will be futures buying at that point, so it should only go there again if it is willing to take that on. And, to add icing to the cake, the next expiry is the second triple of the year, yay.  

 

Range:            7350  to  7450       

Activity:          Moderate

Type:              On balance just bearish

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May 4th, 2022 by Richard

R1 Ratio still being a nuisance to the SPX bears.

 

Nb. Our comment from the 04/26/22

 

Well, it is not very old this expiry, but boy, has there been a lot going on already.

We have been warning about the extremely wide Y ratio bandwidths, and now you have just experienced why.

But, firstly, obviously the zone hasn’t moved. And we think the reason for this has been because 4395-4405 has taken over as the new potential home for the zone, rather than our suspected 4445-4455.

Nevertheless, we think a move is still imminent. However, a lot may well depend on what happens now after yesterday’s extraordinary moves.

Now, R1 hasn’t moved throughout this expiry, and even before it became the front month, so we have had it at 4195 since the 13th April. So, no excuses for not knowing it was there.

However, we may give you a bit of licence as the intraday low was 4200.82, but not much, as after plunging all the way down from its zone on Friday (intraday high 4512.94), which is a drop of over 300-points in two days making the vega spike, so we are hardly surprised the market reacted a bit early.

And, the astute, would have also noted that the close on Monday was 4296.12, just a fingertip north of Y2.

Which brings us back round to the “what happens now” bit. Was yesterday’s 100-point rally just a knee-jerk reaction to encountering the dynamic delta inspired futures buying? Or have the bulls wrested back control?

Always difficult to tell we have found. The best scenario is that the market goes back down to R1. If the bears are in charge, it will test it again, and it’s still formidable, then its either put up or shut up. If the bears are lacklustre, or wavering, and the bulls are circling, then it shouldn’t need a second test.

Finally, don’t forget our strike three rule, as this may yet be pertinent.

 

Range:            4195  to  4495           

Activity:          Moderate

Type:              On balance bearish

 

 

 

Nb. Our comment for 05/04/22

 

Apologies for the late update, probably made all the worse as the markets have been so expectedly volatile.

When we last published (26/05/22 and please see above) it was all about R1 at 4195, and as the market closed that day at 4175.20, it was definitely the bears in control.

However, the next day, Wednesday, saw the bulls try to wrest back control with a very decent rally. But, R1 was unchanged, despite the zone falling to where it is today, so the close at 4183.96 did look slightly ominous, despite it being so close.

A very decent gap up at the open gave the market a good start, and with the intraday low of 4183.96 coupled with an unchanged R1 showed it was still being a nuisance.

Friday saw the bears really take it to the ratios, although as we said above, it seems our strike three was rather pertinent.

On Monday and Tuesday this week R1 slipped to 4170 and 4145 respectively.

For those purists the intraday high on Monday was 4169.81, whereas the intraday low on Tuesday was 4147.08.

So, it was still being very much involved, it is just a shame we don’t publish daily anymore, as then you could see the dynamic delta in real time.

Looking forward, and a lot depends now on how the ratios evolve daily of course, but there are still some guidelines we can possibly help you with.

Firstly, the zone is likely to move to 4295-4305.

Depending on sensitivity, the rollover and expiry is next week.

The overall respective Y ratio bandwidths remain unchanged at 310 and 510-points, so really don’t expect any reduction in volatility.

Otherwise, unless you are a bear that is, fingers crossed that the dynamic delta created by R1 continues to do its job.

 

Range:            4145  to  4395           

Activity:          Poor

Type:              Neutral

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May 3rd, 2022 by Richard

That has been one of the hardest fights the FTSE has ever had to hang on to its zone.

 

Nb. Our comment from the 04/25/22

Looks like the lowly Y2 at 7650 provided enough dynamic delta futures selling to scare the FTSE into turning tail.

Although, it did take over half an hour at or around its intraday high of 7656.47 on Thursday 21st to make up its mind.

And, when you couple this with a weak Street overnight and then again on the Friday, you had the FTSE in a full-blown retreat back into the safety of its zone.

What is more, is that this expiry is still only a week old. So, plenty more time for some fun and games.

On the upside, Y2 has now moved out to 7700. Although, and as we said back on the 19th, the real test should come at 7750. Even more so now, as it goes up to R2 from R1.

Of course, this is assuming the bulls wrest back control. But, as we said, there is still three weeks to go, so plenty of time.

But first, we should see a test of the bottom boundary of the zone at 7450, Which is also strengthened by the fact it is also R1. The fact that there is no Y ratio at all below the zone should give any bulls out there an excuse, even if the dynamic delta inspired futures buying doesn’t do it for them.

If the bears are really in control, and R1 isn’t enough, then backing it up is R2 immediately underneath at 7400. The big concern will be if this is not enough, then there is a very long way before we hit the next level of support, R3 at 7150.

The other alternative is that the market could just stay zone bound, which is not unheard of. If it does decide to take this easy option, then it could bounce around excitedly within its zone for the next two weeks, only breaking out in the final week, which we have seen quite a lot of in the past.

 

Range:            7450  to  7550       

Activity:          Very good

Type:              On balance only just bullish

 

 

Nb. Our comment on 05/03/22

 

All of our assumptions last week were blown out of the water before the market even opened. Or to be more specific when the market opened circa 7387 on Monday 25th, as this was actually below R2 at 7400. Best lain plans and all that.

However, had one realised that the FTSE was stuck in the R2 ratio bandwidth, then the next few days made perfect sense as it tried to fight its way back up and out of it, despite the millstone of HSBC on the Tuesday.

The intraday highs of 7463.15 and 7458.24 on Tuesday and Wednesday respectively, just went to show how hard it was trying to break back into its zone.

Then the Friday was all about the upper boundary of the zone 7550, with the intraday high of 7569.80. So, in a way, last week was mostly all about the zone.

Looking ahead, and this time it will depend on the open as London not only has to react to Friday’s Street fall, but everything from Monday as well.

Despite all this we do still think that this index just wants to be in its zone, plain and simple. Well, at least for this week, as come the rollover and expiry everything tends to change anyway.

For the record R2 has now dropped to 7350, exactly when we of course don’t know, but this is immaterial now. However, going in the opposite direction are the other ratios below this.

Above the zone, the ratios have also strengthened, which means we have lost Y2, but at the same time above the zone is still the only place where we get any Y ratio at all. So, perhaps the scope has reduced now we have hit the halfway stage but, overall, the alignment remains the same.

 

Range:            7450  to  7550       

Activity:          Strong

Type:              On balance bearish

 

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