Jul

2022

July 20th, 2022 by Richard

The FTSE starts the Aug expiry well, but there is little ratio...either way.

Nb. Our comment from the 07/18/2022 (Not published)

Nb. Our comment on 07/20/22

Firstly, our final comment on the July expiry where the zone did move down to 7150-7250, meaning that 7150 remained a critical level, but now for two reasons. The EDSP was 7134.13, so close and a sterling effort, but still a smidgen shy. Interestingly, the market actually closed at 7159.01.

So, the first day of the August expiry for the FTSE was all about its zone.

The fact that the intraday high was 7268.88 just hides the fact that this index had many hours in a running battle with 7250, the top boundary of its zone.

And as one can see in the table above, above the zone it is only Y1, so to hold the market back at all meant it was punching above its weight.

Worth noting is the fact, that as things stand, Y2 does not even start until 7450, so there is ample room for this market to go ahead into, if it so desires.

However, and especially for those who have read our comment on the SPX yesterday, the difference in the FTSE is that the corresponding Y2 and R1 ratio levels below the zone are 400 and 500-points away respectively.

That is a long way, particularly for this index.

This is also a 5-week expiry, so the first week can be deemed a bit superfluous, and if this is the case then we haven’t seen this expiry true colours yet.

All we can say, is that London has plenty of scope as things stand, to make a significant move, but in either direction.

The fact it has elected to go above its zone and into bullish territory certainly gives further moves in the same direction the upper hand, but don’t lose sight of the risks.

Range: 7250 to 7450

Activity: Strong

Type: Neutral

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

Posted in Uncategorized Tagged with: derivatives, FTSE, ftse100, Futures, indices, investing, Markets, Options, shares, stock market, stocks, trading

Jul

19

2022

July 19th, 2022 by Richard

Could the SPX Aug expiry turn out to be one for the bulls?

Nb. Our comment from the 07/15/22 (Not published)

Nb. Our comment for 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

The faction account of the Big Bang, The Great Storm and the market crash of 1987, available in eBook and paperback here, a must read if you don’t believe in history repeating itself.

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

Jul

12

2022

July 12th, 2022 by Richard

Volatility to worsen as the R1 safety net drops in the SPX

Nb. Our comment from the 07/05/22

Well, it took a while with the market interacting with R1 at 3745 before “the money normally rises to the top” came about.

The fact that the first two days of this expiry, despite intraday lows deep inside the R1 bandwidth, always closed above 3745 gave a glimmer of hope.

The Thursday 23^rd therefore could have gone either way, it being strike three at 3745, but a strong opening followed by the intraday low of 3743.52 just set the scene for the Friday.

We would like to have seen this market get back up to its zone, like the FTSE100, before capitulating, but we can’t have everything we suppose.

And last week, the last two days returned us back to literally where we were on the first two days of this expiry. The intraday lows being 3738.67 and 3752.10, yet again testing R1 at 3745.

It might not be Thursday 23^rd again, but it might as well be, as it is looking increasingly likely that today we will see a further test of R1. This is some resolute defence going on here, as once again this is strike three.

Naturally R1 has weakened after such a prolonged assault, and the picture is further complicated by the second US holiday falling within this expiry, and so we would not expect 3745 to remain R1 by tomorrow, and probably not even by the end of today.

For a more robust R1, and at a commensurate level to the first week, you have to be looking at 3720, or at a pinch 3730.

In essence, should the market go there yet again, it goes in full knowledge of what to expect, and is therefore not frightened by that, or it pulls up short, pretty much for the same reason.

Don’t forget, last week having hit R1 this market rallied 47 and the 73-points respectively, so the bulls are far from dead, but at the same time, hardly galvanised either. Apologies it’s not more definite, but today or tomorrow should go a long way to sorting out who wants to be in charge for the remainder of this expiry we suspect.

Range: 3745 to 3995

Activity: Poor

Type: Neutral

Nb. Our comment for 07/12/22

Well, that was some test, or should we say examination, of R1 at 3745 last Tuesday 5^th. The market basically spent the entire morning flatlining on R1, before eventually the bulls gained control. In fact, it was so impressive, that even after a multitude of tests, the intraday low was still only 3742.06.

The trouble is that the bulls, although happy to capitalise on the support generated by the R1 dynamic delta, they still can’t quite muster enough enthusiasm to really push ahead, and get this market back up to its zone.

And that is the problem, but with an added twist for the derivative players, as this expiry ends this week, so they are literally running out of time.

Up until today, the pertinent ratios hadn’t changed from when we last published.

So, R1 has remained at 3745, with Y2 at 3895.

Of course, as you can readily see in the above table, this has changed significantly today.

Basically, derivatives have blinked first.

In fact, so much so, that there are four candidates to being the potential new zone, each having lost almost 50% of their ratio value.

Therefore, as it stands, the Y1 ratio bandwidth below the zone now stretches from 3795 all the way up to 3995.

And, the “resolute” R1 has dropped to 3695.

Essentially, no one is going to get badly hurt, even if this index expires in the Y2 ratio bandwidth but, with so little ratio around it could get extremely volatile.

And not only is this terribly difficult to control, but with a falling R1, the safety net has also been lowered.

We think this particular expiry now will not be so much about where it finishes, but rather keeping it calm and rational.

Range: 3695 to 3995

Activity: Moderate

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.

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

Jul

11

2022

July 11th, 2022 by Richard

Still a lot to play for as the FTSE enters its final week of the July expiry.

Nb. Our comment from the 07/04/2022

“Big call” indeed, as the FTSE had to dig itself out of the R3 ratio hole it had dug itself into first.

By which we mean the open on the very day we last published, the 22^nd June, when the market opened below 7150 and really looked in a very sorry state.

Sadly, we just don’t know when 7150 changed from R3 to R2, but whenever it was, this was always the crucial level.

Still is, as having gone all the way back up to its zone’s bottom boundary, at 7350, here we are back at R2 again.

That failure, on the 28^th and 29^th, when the intraday highs were 7362.37 and 7345.45 respectively, was very damaging for the bulls. Therefore, the fact that the market closes on Thursday and Friday last week were all about 7150 again, should have come as no surprise.

The fact that the Y1 ratio bandwidth below the zone is 200-points wide, also accounts for the big moves, essentially from 7350 to 7150.

So, although it may have appeared exciting at the time, in essence this market has gone absolutely nowhere in two weeks.

Definitely more troubling for the bulls, as not breaking back up into its zone at 7350 shows a worrying lack of commitment from them. Whereas the bears, have been happy to make deep intraday inroads into the R2 ratio bandwidth. However, both are now on strike three from last week alone.

As we are now just at the half way stage of this expiry, there is ample time left. So, although the market hasn’t really moved in the last two weeks, it does now know where the pertinent levels are. Therefore, game on, we think.

Range: 7050 to 7150 or 7150 to 7350

Activity: Moderate

Type: On balance only just bullish

Nb. Our comment on 07/11/22

On the day of our last comment (4/7/22) we thought R2 had done the trick again, with the market finishing up 64-points that day.

Sadly, the very next day, Tuesday 5^th, changed the picture entirely, with the huge fall of 207.18-points, which also took the market into the R3 ratio bandwidth.

Obviously, this was one of those instances when equities ruled over derivatives, and the futures buying generated by the dynamic delta had little or no effect.

It does happen, more commonly in those indices with a hundred or less constituents, especially where there are just one or two sectors that account for a disproportionate weighting within the overall index.

For the FTSE on the 5^th this was the case with the oil stocks, which all suffered on the back of Brent giving up 10%.

There is absolutely nothing we can do about this, and it is just one of those peculiarities that affect the FTSE.

However, for the brave, it can represent a good opportunity, as generally those equity moments are fleeting, whereas the dynamic delta is there for the length of the expiry.

Naturally, a move like this will shake things up, so the move down in the zone is not altogether surprising. In fact, with such a large Y1 ratio bandwidth below the zone when it was at 7400, it was always a distinct possibility, especially towards the expiry.

7150 is still a key level, although how resilient it will remain after so many tests and breaches, we just don’t know.

The big test for derivatives will be keeping this market inside its new zone for the rollover and expiry, which after the big miss in the June expiry would probably be most welcome. And not that perhaps one might realize, but this index is still up almost 200-points this expiry, so there is a lot to play for still.

Range: 7150 to 7250

Activity: Average

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.

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

Jul

05

2022

July 5th, 2022 by Richard

Are we going to see the SPX test R1 at 3745 for the second strike three of this expiry?

Nb. Our comment from the 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 14^th 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

Nb. Our comment for 07/05/22