Nb. Our comment from the 09/05/2022
We do sincerely hope that you did take notice of our ratio levels, as you should then have had an outstanding week.
In fact, everything we talked about actually played out in London on the very day the market reopened, Tuesday 30th August.
From the open it went on to test R3 at 7450 but, by the end of the day it had also tested the upper boundary of its zone, 7350.
Which did hold, the intraday low being 7351.12, but that did create a bandwidth test. Meaning a breakout was imminent.
As the market closed that day at 7361.63 the odds were in favour of that breakout being down into its zone.
Wednesday saw the zones bottom boundary tested, 7250, which also made that day a zone bandwidth test.
The next level of support was R3 at 7150, and if you knew that then you pretty much had Thursday and Friday covered. Thursday’s intraday low was 7131.69 whereas Fridays was 7148.50.
The trouble is that the FTSE has now crammed into two weeks what we would expect to take the entire expiry. Well, three weeks actually, the final week being needed to get it back to its zone.
We have seen this setup before, and in those instances the market stayed in its zone for the entire third week (excitedly going nowhere) before the final week breakout.
Therefore, we would like to see the same, but we doubt this will happen as there are too many geopolitical things going on.
So, all we can say, is take note of the ratio levels and then watch very carefully what the market does when it’s around them, as either up or down, it has now been there already.
Range: 7250 to 7350
Activity: Very poor
Type: On balance bearish
Nb. Our comment on 09/12/22
Seems like our doubts were unfounded, as just like this setup previously, the market did stay in its zone the entire week.
And it was exciting as well…
We won’t bore you with all the intraday highs and lows last week but suffice it to say the zone was, and still is 7250 to 7350, and just look at the closing price each day.
The big question is whether or not we will see “the final week breakout”? Interestingly, the real time close on Friday was 7367.21, and it was the closing auction that took it down to being effectively on the upper boundary at 7350.
In the weird world of hedge ratios, being above the upper boundary by just 1.07-points, even on such a large numbered index, can be significant.
As can be the fact that the ratio just above the zone has dropped from R2 to R1.
However, it gets even more complicated than this, because there is a lot happening within that new R1 ratio bandwidth.
Where we say activity is “very poor” below, this is one of those rare occasions that this can be slightly misleading, as this time it has come about because there is as much money coming off the table as there is going onto it.
As it is also a triple, and the rollover and expiry are this week, not only is the historical setup hinting at a breakout but also the zone could easily move.
This is one of those occasions where we have to calculate the ratios daily to have any chance of picking up on any possible migration.
As we don’t, all we are going to say is that the possibilities are 7350-7450 and 7450-7550…or it could stay the same.
Apologies, but for this one you are on your own, although if we get the chance to post an update we will endeavour to do so, good luck.
Range: 7350 to 7550
Activity: Very poor
Type: On balance definitely not bullish