Nb. Our comment from the 04/04/22
This is a very skittish zone this expiry, as it makes yet another move.
This time it goes back up to 7450-7550, which means the level we highlighted last week as important, 7550, took on a joint significance. Last week it was just where R1 started but, what with the zone move, it also became the upper boundary of the new zone.
Again, we should calculate this daily, but as we don’t, we believe it is a fair assumption that last week’s obsession with 7550 was for two different distinct reasons.
At the start of the week, it was all about the dynamic delta caused by R1 but, by the end, it was all about the fact it was now the upper boundary. Which was quite unusual as a move in the zone should be quite rare in this index, and yet here we are at the midpoint, and this is move three already.
And it’s not as if these are small moves, this latest being a jump of 200-points.
Can we say these moves are over, sadly no. Although, it may prove to be significant that there is no more Y1 ratio around.
However, there is still 500-points of Y2 ratio out there, which is still a ridiculously huge amount, so the potential for big moves is ever present.
So, the good news is that if it can break out of its zone, then R1 now doesn’t start until 7650.
However, the bad news, again if it breaks out of its zone, is that R1 below the zone doesn’t now start until 7150.
And with two weeks still to go in this expiry, then there is plenty of time remaining, and who knows, we may even get another zone move.
Range: 7450 to 7550
Nb. Our comment on 04/11/22
At least the zone hasn’t moved again but, as last week panned out, the market never quite got away from it so it had every reason to stay put.
And it really was a week of concentrating on the intraday highs and the lows.
Firstly, the lows, and in order they were 7532.23, 7536.21, 7536.20, 7537.25 and 7551.81. So, every day the market was clinging to its zone, apart from the Friday when the low was just under two-points above the upper boundary.
Of course, surprise surprise, on Friday we saw the first test of R1 at 7650. In the morning it took 15 minutes of interaction before it fell back and waited for Wall Street.
Even then it was hardly convincing, and in real time the close was 7659.82, so it was the auction that took it back up to make its high of the day.
The fact that the significant ratios above the zone haven’t changed makes life a bit easier, as does seeing how hard the market found coping with the dynamic delta created by R1. And, don’t forget, this is test two, as the week before it also suffered at the hands of R1 when it was at 7550 (see comment above).
Therefore, make note that the next level is R3, which skips a level (R2) altogether, and as these are exponential, this will be like running into the proverbial brick wall, apart from the fact that the bricks in this instance will be futures selling.
On top of all this we are now into the rollover and expiry week. One that finishes on the Thursday, not the more usual Friday, it being a Bank Holiday. So, apart from a confusing rollover, which theoretically should now happen on the Tuesday, the gravitational pull of the zone should exert an influence.
But, for those traders out there, hopefully not before we get a sniff of R3 at 7700.
As an aside, we seriously hope we do, as in our opinion it would be a real travesty that the new all time high came about because of the closing auction, in other words, as a result of abnormal market conditions.
Range: 7650 to 7700
Type: On balance only just bearish