Nb. Our comment from the 03/28/22
We did say the zone could move anywhere within that ridiculously wide Y ratio bandwidth, and it has.
We should, but we don’t calculate this daily, so we don’t know exactly when this happened but, guessing by the lack of impetus in the market from Wednesday onwards, we suspect it was then.
As, don’t forget, when it was at 7550-7650 it would have acted like a magnet but, once it moved down to being below the market, it would be like the poles reversing.
However, at least now we are looking at a far more conventional ratio alignment, even though the Y1 ratio bandwidth is 300 and the overall Y ratio bandwidth 450-points, at least it is now interrupted by the zone in the middle.
And now, just like the SPX, London now finds itself in bullish territory. Which must come as bit of relief after March, but we suspect it probably took the final couple of days last week for the market to actually realise this as it didn’t really have to do anything to achieve it.
The problem the FTSE now faces is that R1 is just 70-points ahead of it. Although, if it can cope with that, and it is only just above the R1 threshold, then there is another 150-points before the far more serious R3 kicks in.
And before you get too carried away, it is a sobering thought that from aforementioned R1 at 7550, the top boundary of the zone is 200-points due south.
Furthermore, as there are still three weeks to go in this expiry there is plenty of time for a lot to happen in.
First things first though, and a test of R1 and a look at how this market reacts to this amount of dynamic delta will tell us an awful lot about what to expect thereafter. What would be worse is for it to drift aimlessly around its current level, although we think that this is unlikely especially considering where the SPX is in relation to their ratios.
Range: 7350 to 7550
Type: On balance bullish
Nb. Our comment on 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 its 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