Nb. Our comment from the 09/29/20
Hopefully this week will be as fascinating as last week.
As we saw the market dip down to meet Y2, before staging a great comeback, to end the week at 3298.46.
This meant it spent the weekend nicely in its zone. No coincidence for us.
The slightly troubling aspect, and we are fully aware that we constantly say the intermediary expiries are far more sensitive than the triples, but, even so, Y2?
Still, very early days, but it is something one should be very aware of, as in the land of nothing, even a few futures can have an impact.
Nb. Although activity is “poor”, it only just made that threshold.
Which is also what we say about Y1, as it is like the market is on ice, frictionless, and a just a little impetus can result in a big move.
Do not forget, this Y1 ratio bandwidth alone, goes from 3195 all the way up to 3405.
In normal times, a 210-point, or 6.3% range would be more than enough to keep everyone happy.
And, if it is a textbook expiry, then it moves to test one end, before reversing to test the other, before ending in the zone, which is a two-way trip, so if timed correctly can result in 12.6% in those 4-weeks, which is more than enough for equities, let alone derivatives.
Again, another “no coincidence for us” that last nights close was 3351.60, which is virtually the same as September’s settlement price (or its zone) and which may still harbour aspirations for this expiry.
If 3245-3255 does want to become the next zone, ordinarily we would expect the market to hover in its vicinity, if for nothing else but to establish its credentials, but, being in so much Y1 ratio, we can’t see that happening easily.
So, for us, over the next day or so, the battleground is going to be between its existing zone, 3295-3305, and Y2, at 3405.
Obviously, whichever one wins, will go a long way to deciding what will happen next.
Range: 3305 to 3405
Nb. Our comment for 10/07/20
Please be our guest and check what we said last time, as rather than having to repeat it, this is why we include it in this comment.
The zone has moved, and to 3345-3355.
Also, this may not be the end of it, but early days yet.
The surprise was it has taken so long, as it has literally just moved today, despite the market “hovering in its vicinity” for so long.
The other aspect was what we said about Y2, then at 3405.
Of course, 3405 featured prominently this week, this being the demarcation line of a significant step-up in ratio, as much as moving from one Y ratio to another can be.
Although, we have pointed out previously, that this expiry is proving to be extremely sensitive, as it was Y2 it bounced up from when the market hit 3195 earlier on this expiry.
As Y2 is currently 3455, then in the last day or so it has also been slowly climbing to this level from the aforementioned 3405, and yesterday, for example, was 3430, which considering the intraday high was 3431.56, says a lot.
Perhaps, something else worth a cursory glance, is that the intraday low was 3354.54, or the top of the new zone.
The fact that the market is following a retreating Y2 ratio, is good news, as is the upwardly mobile zone, but when it is hitting Y2 and a piece of bad news comes out, then what happened yesterday is only to be expected.
Don’t loose sight of the fact that the Y ratio bandwidth in its entirety is still a gobsmacking 385-points.
The real issue is that the ratio movement is painstakingly slow, and we are now entering the end-game of this expiry, so it may well just run out of time.
The fact that both puts and calls saw money coming off the table, with still a week and a half to go, just sums up the lack of involvement, and hence its sensitivity, at present.
Range: 3355 to 3455
Activity: Very poor
Type: On balance not bullish