Nb. Our comment from the 04/26/22
Well, it is not very old this expiry, but boy, has there been a lot going on already.
We have been warning about the extremely wide Y ratio bandwidths, and now you have just experienced why.
But, firstly, obviously the zone hasn’t moved. And we think the reason for this has been because 4395-4405 has taken over as the new potential home for the zone, rather than our suspected 4445-4455.
Nevertheless, we think a move is still imminent. However, a lot may well depend on what happens now after yesterday’s extraordinary moves.
Now, R1 hasn’t moved throughout this expiry, and even before it became the front month, so we have had it at 4195 since the 13th April. So, no excuses for not knowing it was there.
However, we may give you a bit of licence as the intraday low was 4200.82, but not much, as after plunging all the way down from its zone on Friday (intraday high 4512.94), which is a drop of over 300-points in two days making the vega spike, so we are hardly surprised the market reacted a bit early.
And, the astute, would have also noted that the close on Monday was 4296.12, just a fingertip north of Y2.
Which brings us back round to the “what happens now” bit. Was yesterday’s 100-point rally just a knee-jerk reaction to encountering the dynamic delta inspired futures buying? Or have the bulls wrested back control?
Always difficult to tell we have found. The best scenario is that the market goes back down to R1. If the bears are in charge, it will test it again, and it’s still formidable, then its either put up or shut up. If the bears are lacklustre, or wavering, and the bulls are circling, then it shouldn’t need a second test.
Finally, don’t forget our strike three rule, as this may yet be pertinent.
Range: 4195 to 4495
Activity: Moderate
Type: On balance bearish
Nb. Our comment for 05/04/22
Apologies for the late update, probably made all the worse as the markets have been so expectedly volatile.
When we last published (26/05/22 and please see above) it was all about R1 at 4195, and as the market closed that day at 4175.20, it was definitely the bears in control.
However, the next day, Wednesday, saw the bulls try to wrest back control with a very decent rally. But, R1 was unchanged, despite the zone falling to where it is today, so the close at 4183.96 did look slightly ominous, despite it being so close.
A very decent gap up at the open gave the market a good start, and with the intraday low of 4183.96 coupled with an unchanged R1 showed it was still being a nuisance.
Friday saw the bears really take it to the ratios, although as we said above, it seems our strike three was rather pertinent.
On Monday and Tuesday this week R1 slipped to 4170 and 4145 respectively.
For those purists the intraday high on Monday was 4169.81, whereas the intraday low on Tuesday was 4147.08.
So, it was still being very much involved, it is just a shame we don’t publish daily anymore, as then you could see the dynamic delta in real time.
Looking forward, and a lot depends now on how the ratios evolve daily of course, but there are still some guidelines we can possibly help you with.
Firstly, the zone is likely to move to 4295-4305.
Depending on sensitivity, the rollover and expiry is next week.
The overall respective Y ratio bandwidths remain unchanged at 310 and 510-points, so really don’t expect any reduction in volatility.
Otherwise, unless you are a bear that is, fingers crossed that the dynamic delta created by R1 continues to do its job.
Range: 4145 to 4395
Activity: Poor
Type: Neutral
