Nb. Our comment on 19/02/24

Well, the last week of the Feb expiry was certainly exciting, as these weeks often are.

The Monday started out quite boring and, apart from a test of the bottom boundary (7555.47), maintained this indifference to the close of play.

Then it came to life on the Tuesday, with derivatives fighting a rearguard action to keep the market even in its zone’s proximity.

Rollover Wednesday saw this fight intensify, but in the end the market did regain its zone on this significant day.

Thursday was like Monday, but Friday saw battle resume and, although the official open was 7597.53 (the previous day’s close), the real open was around 7641. Right on the upper boundary. So, to hold the market for a settlement price of 7660.15, was a hard-fought victory really. Especially, as after that, the market leapt up 114-points.

Good expiry though for derivatives, and you if you knew where the ratio levels were, but the first triple of the year, March, is an entirely different beast.

While in the intermediary expiry Feb, the market found R1 too much to handle at 7700. Or, more precisely, the dynamic delta futures selling equivalent to R1, too much to handle, but everything ramps up in a triple such as March.

Of course, any ratio inspired futures selling, is going to have an impact, its just now, only the higher ratios are the ones that can become pivotal for markets.

As we know, precisely, where the ratio levels are, the only question that remains is how sensitive this market is going to be?

After Friday’s rise, this means the mighty March expiry is already going to start in R1 ratio, a good baptism by fire if you like.

This bandwidth goes up to 7750, so not that far away at all. More significantly, it also skips a level, as it is R3. A very solid R3 as well, so the market should notice it for sure. Quite often, it sometimes does take a while to build up enough of a head of steam for the market to tackle this number of futures selling, so not only is it a high ratio level but its also catching the market early, so best watch out.

Range:            7650  to  7750      

Activity:          Very poor

Type:              Bullish

www.hedgeratioanalysis.com

Nb. Our comment from 12/02/24 (The February expiry)

Indeed, it was “another exciting week going nowhere”.

Actually, it did go somewhere, which was back up to R1. What we are referring to, is the fact that on the week the overall change was a fall of 42.96-points but, and far more importantly, it finished back inside its zone.

And it followed the ratio playbook to the letter again last week.

Monday was a sighting shot, with the intraday high being a test of the upper boundary at 7650.

Which did then prove “porous” as after Monday 7650 hardly caused a ripple in the market’s movement, in either direction. Tuesday and Wednesday, with intraday highs of 7693.60 and 7694.90 respectively, were definitely tests of R1 at 7700.

Interestingly, Tuesday was the only day last week that the FTSE actually closed outside its zone. This just goes to prove how serious they were in trying to continue with the rally, and therefore how serious the test of R1 was on Wednesday.

The last two days of last week were all about the market reestablishing boundaries. The intraday high on Thursday was 7653.40 and the intraday low on Friday was 7557.35. Basically, a two-day zone bandwidth test.

This makes next week rather interesting, especially in light of the changes in the ratio table.

Below the zone it looks quite dramatic but, all that has really changed, is we have lost Y2 which has become R1. The other R ratios remain the same.

Above the zone, they have also strengthened, but not by enough to effect any changes.

The first few days, at least until rollover Wednesday, should be all about the zone but, and as we say every time, the final week of an expiry always gets a bit excitable.

What is different this time, is next up is the mighty March expiry, the first triple of 2024. Suffice it to say, but the zone mirrors February’s however R1 starts at 7650 above it and not until 7450 below it however, as everything ramps up by a factor of three at the least, it can sometimes extend its influence forward into this current expiry due solely to the weight of its numbers alone.

Range:            7550  to  7650      

Activity:          Very poor

Type:              On balance bearish

www.hedgeratioanalysis.com