December 14th, 2021 by Richard

Can the SPX regain 4700 for the rollover and expiry?

 

Nb. Our comment from the 12/07/21

 

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

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

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

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

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

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

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

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

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

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

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

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

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance only just bullish

 

 

Nb. Our comment for 12/14/21

 

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

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

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

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

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

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

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

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

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

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

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

 

Range:            4495  to  4695           

Activity:          Very poor

Type:              On balance only just bearish

 

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December 13th, 2021 by Richard

As we enter the rollover and expiry for the mighty Dec might the FTSE just get a quiet one?

 

Nb. Our comment from the 12/08/21

Well thankfully we didn’t have to wait very long before the writing was on the wall, as the very day we published (29th Nov) the FTSE finished at 7109.95, comfortably back above its zone.

And, as we pointed out, that now it had a lot more Y ratio above it. In fact, 200-points worth of it back then.

However, it wasn’t very gung-ho last week, as on the Tuesday it closed just above the top boundary, and on Wednesday the intraday low was 7059.35. Furthermore, the next day it never even came close.

Obviously, not out of the woods, but the signs were there.

Apologies for not publishing on our usual Monday, as we will now never know when R1 disappeared at 7250, although it may have provided a speed bump on Monday 6th Dec as the intraday high was 7246.25.

It will be very interesting and revealing how this market will react to R2 at 7350, the first real test it has had for some considerable time. And as such, it may just come as a surprise to the bulls.

However, if they are committed enough to push through it is clear up to R3 at 7450, but we feel we should point out that this is just below the DR threshold, so would be a very tough ask indeed. Then if it does break through this it is just in a world of dynamic delta futures selling that we just can’t see it coping with.

Of course, everything can change rapidly as we approach the rollover and expiry, but as this is next week and will bring its own peculiar pressures to bear, we see a limited upside as things stand.

Still, it has been an absolute corker of an expiry so far, so it’s nice to see the mighty Dec holding true to form.

 

Range:            7050  to  7350       

Activity:          Very poor

Type:              On balance not bearish

 

 

Nb. Our comment on 12/13/21

 

Again, it was rather fortuitous timing on our publication, as from the 8th onwards it was all about R2 at 7350.

As one can see in the above table, 7350 is still R2 and 7450 remains at R3. However, we must point out that after the battering it has taken R2 is now only just above the threshold and, R3 is now no longer just below the DR threshold, but rather nearer midway.

So, now it will be all about the bull’s commitment versus the impending rollover and expiry.

Now, this would be a very serious battle considering where the zone is currently as well as all that Y ratio in-between but, in another development, we can easily see 7250-7350 becoming the new zone, having fallen 43.49% in just the last three days.

When the biggest expiry of the big ones enters its final week, it can get very excitable as there is a naturally created derivative inspired giant leap in activity, both futures and equity based, and this can always lead to a misdiagnosis.

But, in the absence of this, then with R2 still at 7350, and assuming the zone does move, then holding this market between 7250 and 7350 should be the order of the week.

7350 speaks for itself, and there is no longer any ratio surprise at that level anymore, and another visit would be strike 3 anyway but, it is the other end that provides the concern.

As, even if the zone does shift, then the new bottom boundary will only be reinforced by Y2 ratio so, should the market test this level, then that will be the harder one to hold.

Always good to get past the mighty Dec rollover and expiry, then the market can concentrate on the Santa rally, but this final week is always an exciting time.

 

Range:            7050  to  7350       

Activity:          Moderate

Type:              Bearish

 

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December 8th, 2021 by Richard

First real test for the FTSE rally up from its zone dead ahead.

 

Nb. Our comment from the 11/29/21

Again, yet another perfect example of why we start by repeating our previous comment (see above) as not only does it act as an aide memoire but, it also saves us having to reference it when our levels are hit.

We are of course referring to 7050, and last Friday the market dropped like a stone, some would even argue hitting terminal velocity it was so quick, all the way down to 7051.24, which remained the intraday low until the last few minutes.

And it was a spectacular bounce off this level, made all the more obvious by being on the end of a very long wick (if you are into candlesticks of course), ending up in a rally of about 70-points.

However, it is the end of the day that counts and so, with little surprise from a ratio perspective, it ended up safely in its zone.

This will make today a very crucial day, and both the upper and bottom boundaries now become very significant.

Of course, there is no way we could have predicted a new mutant variant strain, but in truth what the ratios tell you is what is possible, not the cause. If it wasn’t this it would very probably have been something economical for example.

Obviously, for sanity alone, we would love to see this market excitedly whizz around in its zone for the next two weeks. But, failing this, don’t forget below the bottom boundary it is bear territory, and so, should this market get there, this move will take on an entirely different complexion.

Back above the upper boundary, and we are just back to where we were. Although, there has been quite a shake up in the ratios, so there is a lot more minimal Y ratio around now.

Hopefully we will see soon enough, relax in its zone or will one or the other of the bulls or bears take control?

 

Range:            6950  to  7050       

Activity:          Poor

Type:              On balance only just bullish

 

 

Nb. Our comment on 12/08/21

 

Well thankfully we didn’t have to wait very long before the writing was on the wall, as the very day we published (29th Nov) the FTSE finished at 7109.95, comfortably back above its zone.

And, as we pointed out, that now it had a lot more Y ratio above it. In fact, 200-points worth of it back then.

However, it wasn’t very gung-ho last week, as on the Tuesday it closed just above the top boundary, and on Wednesday the intraday low was 7059.35. Furthermore, the next day it never even came close.

Obviously, not out of the woods, but the signs were there.

Apologies for not publishing on our usual Monday, as we will now never know when R1 disappeared at 7250, although it may have provided a speed bump on Monday 6th Dec as the intraday high was 7246.25.

It will be very interesting and revealing how this market will react to R2 at 7350, the first real test it has had for some considerable time. And as such, it may just come as a surprise to the bulls.

However, if they are committed enough to push through it is clear up to R3 at 7450, but we feel we should point out that this is just below the DR threshold, so would be a very tough ask indeed. Then if it does break through this it is just in a world of dynamic delta futures selling that we just can’t see it coping with.

Of course, everything can change rapidly as we approach the rollover and expiry, but as this is next week and will bring its own peculiar pressures to bear, we see a limited upside as things stand.

Still, it has been an absolute corker of an expiry so far, so its nice to see the mighty Dec holding true to form.

 

Range:            7050  to  7350       

Activity:          Very poor

Type:              On balance not bearish

 

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December 7th, 2021 by Richard

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

 

Nb. Our comment from the 12/01/21

 

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

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

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

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

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

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

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

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

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

 

 

Range:            4395  to  4695           

Activity:          Poor

Type:              Neutral

 

 

 

Nb. Our comment for 12/07/21

 

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

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

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

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

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

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

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

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

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

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

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

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

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance only just bullish

 

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December 1st, 2021 by Richard

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

 

Nb. Our comment from the 11/23/21

 

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

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

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

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

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

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

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

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

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

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance bearish

 

 

 

Nb. Our comment for 12/01/21

 

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

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

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

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

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

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

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

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

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

 

 

Range:            4395  to  4695           

Activity:          Poor

Type:              Neutral

 

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November 29th, 2021 by Richard

FTSE ends in its zone after new variant scare.

 

Nb. Our comment from the 11/22/21

 

Welcome to the big one, the cumulation of everything done so far this year.

Although easily the biggest of the year, by a huge margin over the intermediaries but, even over the previous three triples, it is ahead by a very decent amount.

Therefore, by this very nature, it is more cumbersome and unwieldly which should be borne in mind. As should the fact that because it is so massive there is normally a significant uptick in the derivative related equity business, which more often than not gets misdiagnosed, but also means they get emboldened to take on higher ratio levels than they normally would.

However, just looking at the table above and the main issue is going to be the zone.

It is currently 6950-7050, which is actually lower than it was in the Nov expiry, but it could very easily move to 7050-7150 and there is even an outside chance of it getting to 7250-7350 further down the line during this expiry.

This means, to us at least, that where the zone is will play a crucial role for this trip so we will keep you posted as best we can.

Otherwise, the other critical levels to watch are R3 at 7350, as although R3 should not be particularly troublesome in the mighty Dec expiry it does have history and proved to be an important level in Nov. Then 7450 is a far more robust resistance level, and DR ratio amount of dynamic delta there is enough for even this expiry to sit up and take notice.

On the support side, well this will really be down to the bottom boundary of the zone. So, currently at 6950, but also keep a wary eye on 7050.

Otherwise, just enjoy the ride and surf along on the volume spike.

 

Range:            7150  to  7350       

Activity:          Poor

Type:              Neutral

 

 

Nb. Our comment on 11/29/21

 

Again, yet another perfect example of why we start by repeating our previous comment (see above) as not only does it act as an aide memoire but, it also saves us having to reference it when our levels are hit.

We are of course referring to 7050, and last Friday the market dropped like a stone, some would even argue hitting terminal velocity it was so quick, all the way down to 7051.24, which remained the intraday low until the last few minutes.

And it was a spectacular bounce off this level, made all the more obvious by being on the end of a very long wick (if you are into candlesticks of course), ending up in a rally of about 70-points.

However, it is the end of the day that counts and so, with little surprise from a ratio perspective, it ended up safely in its zone.

This will make today a very crucial day, and both the upper and bottom boundaries now become very significant.

Of course, there is no way we could have predicted a new mutant variant strain, but in truth what the ratios tell you is what is possible, not the cause. If it wasn’t this it would very probably have been something economical for example.

Obviously, for sanity alone, we would love to see this market excitedly whizz around in its zone for the next two weeks. But, failing this, don’t forget below the bottom boundary it is bear territory, and so, should this market get there, this move will take on an entirely different complexion.

Back above the upper boundary, and we are just back to where we were. Although, there has been quite a shake up in the ratios, so there is a lot more minimal Y ratio around now.

Hopefully we will see soon enough, relax in its zone or will one or the other of the bulls or bears take control?

 

Range:            6950  to  7050       

Activity:          Poor

Type:              On balance only just bullish

 

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November 23rd, 2021 by Richard

There is so much weirdness in this SPX Dec expiry.

 

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

 

Nb. Our comment for 11/23/21

 

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

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

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

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

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

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

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

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

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

 

Range:            4505  to  4705           

Activity:          Poor

Type:              On balance bearish

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November 22nd, 2021 by Richard

Looks like the zone will be crucial as we kick-off the mighty Dec expiry.

 

Nb. Our comment from the 11/15/21 (Not published)

Nb. Our comment on 11/22/21

 

Welcome to the big one, the cumulation of everything done so far this year.

Although easily the biggest of the year, by a huge margin over the intermediaries but, even over the previous three triples, it is ahead by a very decent amount.

Therefore, by this very nature, it is more cumbersome and unwieldly which should be borne in mind. As should the fact that because it is so massive there is normally a significant uptick in the derivative related equity business, which more often than not gets misdiagnosed, but also means they get emboldened to take on higher ratio levels than they normally would.

However, just looking at the table above and the main issue is going to be the zone.

It is currently 6950-7050, which is actually lower than it was in the Nov expiry, but it could very easily move to 7050-7150 and there is even an outside chance of it getting to 7250-7350 further down the line during this expiry.

This means, to us at least, that where the zone is will play a crucial role for this trip so we will keep you posted as best we can.

Otherwise, the other critical levels to watch are R3 at 7350, as although R3 should not be particularly troublesome in the mighty Dec expiry it does have history and proved to be an important level in Nov. Then 7450 is a far more robust resistance level, and DR ratio amount of dynamic delta there is enough for even this expiry to sit up and take notice.

On the support side, well this will really be down to the bottom boundary of the zone. So, currently at 6950, but also keep a wary eye on 7050.

Otherwise, just enjoy the ride and surf along on the volume spike.

 

Range:            7150  to  7350       

Activity:          Poor

Type:              Neutral

 

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November 3rd, 2021 by Richard

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

 

Nb. Our comment from the 10/26/21

 

Exactly as we said at this time last week, how the market would react to Y2, then at 4505, would tell us all we need to know.

Last Tuesday the market opened at 4497.34, and then hardly blinked at Y2 as it went past. Well perhaps it held them up for 15 or 20 minutes, but that was all.

Y2 then quickly retreated to where it was at the very start of this expiry, namely 4530, but the market was already way past this point and had new all-time-highs in its sights. As you can see it has now slipped even further.

This expiry is always a strange one, as the US markets do love to hit new all-time highs just before Thanksgiving, and that is still a month away.

Can the market maintain this level of aggressiveness for that long? Unlikely, and anyway, this trip expires on the 19th November, so there is that battle it has to face as well.

However, we have no doubt the zone will move up, and already there is the distinct possibility it will move to 4495-4505, but if it follows the recent game plans then this will always be a catch-up exercise.

Overall, the Y1 ratio bandwidth is actually slightly wider, and although the overall Y ratio bandwidth has come in to “just” 365-points it is still far wider than previously.

Admittedly, at least the Y ratios are moving up below and receding above, both bullish, but if the distance between them doesn’t change any zone move is more by default than design.

Therefore, we are back to the old mantra, that it is like an automatic car in neutral, designed to creep forward, but that even though it is just contending with the minimal Y2 ratio, and very possibly even attack R1, this is not a risk-free market, as that is an 8% bandwidth it is sitting at the top of. Great trading though.

 

Range:            4445  to  4610           

Activity:          Moderate

Type:              Neutral

 

   

Nb. Our comment for 11/03/21

 

Exactly as we said at this time last week, how the market would react to Y2, then at 4505, would tell us all we need to know.

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

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

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

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

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

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

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

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

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

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

 

Range:            4505  to  4665           

Activity:          Very poor

Type:              Bullish

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October 26th, 2021 by Richard

The bulls are definitely back in the SPX, but for how long?

 

Nb. Our comment from the 10/19/21

 

Although we are now in the November expiry, we just can’t not mention the end of October’s, as in our last comment the market had just closed at 4361.19 and our zone was stubbornly still at 4445-4455, and come the expiry the settlement price was 4463.66, which is definitely a bit hit in our books.

Nevertheless, this is still very pertinent for this expiry, as markets still being slaves to misdiagnosing the derivative influence, means that there is more than likely a bit of latent momentum remaining.

Which is essentially what we subscribe yesterday’s move to.

However today, there are more than likely to encounter Y2 at 4505 above the zone, and it is this reaction which will tell us what we need to know.

Namely being whether the recent rally was indeed all down to the expiry, or that the bulls are back in town, committed and in control.

Obviously, you know what we think, but best to spell it out.

Don’t forget this is still an intermediary expiry, and it is a five-week one, which may go some way to explaining why it is developing so slowly.

For the record the Y1 ratio bandwidth is 210-points and the overall Y ratio bandwidth 410-points, so actually wider (worse?) than last trip.

It has been a long time since this market faced dynamic delta of the variety that means futures selling, in fact it never got past just testing its zones upper boundary in the first week of the last expiry, so how the market reacts if/when it tests Y2 will define the rest of this week and very probably the next we suspect.

Whatever the outcome, it is definitely a good way to start a new expiry as at the very least it gets people engaged.

 

Range:            4445  to  4505           

Activity:          Average

Type:              On balance only just bearish

 

   

Nb. Our comment for 10/26/21

 

Exactly as we said at this time last week, how the market would react to Y2, then at 4505, would tell us all we need to know.

Last Tuesday the market opened at 4497.34, and then hardly blinked at Y2 as it went past. Well perhaps it held them up for 15 or 20 minutes, but that was all.

Y2 then quickly retreated to where it was at the very start of this expiry, namely 4530, but the market was already way past this point and had new all-time-highs in its sights. As you can see it has now slipped even further.

This expiry is always a strange one, as the US markets do love to hit new all-time highs just before Thanksgiving, and that is still a month away.

Can the market maintain this level of aggressiveness for that long? Unlikely, and anyway, this trip expires on the 19th November, so there is that battle it has to face as well.

However, we have no doubt the zone will move up, and already there is the distinct possibility it will move to 4495-4505, but if it follows the recent game plans then this will always be a catch-up exercise.

Overall, the Y1 ratio bandwidth is actually slightly wider, and although the overall Y ratio bandwidth has come in to “just” 365-points it is still far wider than previously.

Admittedly, at least the Y ratios are moving up below and receding above, both bullish, but if the distance between them doesn’t change any zone move is more by default than design.

Therefore, we are back to the old mantra, that it is like an automatic car in neutral, designed to creep forward, but that even though it is just contending with the minimal Y2 ratio, and very possibly even attack R1, this is not a risk-free market, as that is an 8% bandwidth it is sitting at the top of. Great trading though.

 

Range:            4445  to  4610           

Activity:          Moderate

Type:              Neutral

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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