Nb. Our comment from 11/07/22
As we said, a lot of ground to cover.
Made even more by the fact that R1 reverted back to where it was the week before. Well, not exactly, as back then it was at 7350, whereas today it is 7300.
We say “today” but, we have no way of knowing now when it did actually change, although we are certain that it hasn’t just moved.
So, that huge Y ratio bandwidth had re-established itself sometime last week.
That means the big move we saw on Friday took the market up to test R2 at 7350 with the intraday high of 7376.23.
It also means, that having closed above 7300, it is now inside the R1 bandwidth.
Which is very aggressive for the FTSE, and only today will we be able to tell how comfortable it really is having to cope with this amount of dynamic delta.
Since it broke free of its zone traversing the Y ratio bandwidth was always likely. In fact, it would have been more of a surprise had it not done so.
We have to give the market a bit of leeway, especially the FTSE, as on Friday it was the turn of another of the heavily weighted sectors. In fact, it was two of them together, namely the miners and banks.
However, Monday should bring some reality back to the market. By reality what we actually mean is futures selling courtesy of the dynamic delta created by R1 and, should it venture higher, R2 as well.
Now, the bulls may well be happy enough to absorb all these futures, we simply just don’t know. However, there has been nothing we have seen that makes us believe there is any great bullish sentiment. Especially as all the big moves so far this expiry has been down to specific stocks, firstly Shell and now HSBC and Rio’s, which is why we are sceptical and for the moment at least, put our faith in the dynamic delta.
Range: 6950 to 7050
Nb. Our comment on 11/07/22
What we should have mentioned in our comment last week, was the distinct possibility of the zone moving up to where it is today.
Therefore. we must not fail to mention this time, that there is so little ratio immediately above the current zone, that it was a close call as to whether we actually made the zone 7150 all the way up to 7350 rather than the 100-points it is in the table above.
What is more, is that 7300-7400 is also making a play.
And, we must point out, that the ratios are calculated entirely on activity. So, no business means no change. Therefore, big changes mean a lot of activity.
Interestingly, on the week, the FTSE has actually lost ground. Remarkable when one considers the SPX has actually put on 220-points (5.83%) and the DAX is up 765-points (5.68%).
Don’t know about the DAX anymore as we no longer calculate the ratios for it but, in respect of the SPX, they have just travelled from Y2 at 3695 all the way to their corresponding Y2 at 4005 (not all of it in last week mind).
Basically, both the FTSE and the SPX have travelled across their respective Y ratio bandwidths, it’s just that in the case of the FTSE they covered theirs sooner and spent the last week banging their head on the R ratios.
Concentrating on the FTSE, the zone is going to be key this week. Not just because of its rather liquid state, but because we are now into the rollover and expiry already.
And, next up is the mighty Dec expiry, the biggest of the big.
Obviously, it all depends on your risk appetite, but with the market at 7318 and R1 at 7350, in the final week, and the zone currently southwards, we are far more bearish than bullish. And, don’t forget, there is effectively no ratio at all between 7150 and 7350.
Range: 7150 to 7350
Type: On balance only just bearish