Nb. Our comment from the 01/05/22
A lot has happened since we last posted, both in the ratios and in the market.
Although a Santa rally, or what we like to call the year end performance bonus rally, was not the hardest call to make.
Way back on the 23rd December this market hit Y2, then at 4730 (please see above) with the intraday high of 4740.74 and a close at 4725.79.
This set the tone, as such a deep incursion into Y2 was quite the hint, and the very next trading day saw Y2 capitulate, and over the next few days we saw it slide from 4755 down to 4805.
The three intraday highs last week of 4807.02, 4804.06 and 4808.93 tell their own story, and so, when it came to yesterday’s 4818.62 it was already on strike 3.
Also, we would be very surprised if Y2 remains at 4805 much past today.
Talking of today, only now has the zone moved, standing at 4695-4705, meaning it has taken just over two-weeks to get back to where it was in the Dec expiry.
And, we very much doubt it is going to stop here either.
All in all, quite a few changes, but none of which that can take us away from the fact that this year looks like picking up from where most of last year ended.
Basically, knock, knock knocking on the retreating ratio door. The big question is which door, Y2 or R1?
In the meantime, the Y1 ratio bandwidth has gone from 235 to 285-points, while the overall Y ratio bandwidth has gone from 435 to 460-points.
This is not symptomatic of hugely committed bull market, but rather more like one stuck in automatic, while all the time there is the potential for a blink of the eye 10% correction.
Range: 4705 to 4805
Activity: Very poor
Nb. Our comment for 01/11/22
Looks like the door was Y2.
Which was slammed shut very unequivocally. So much so, being above 4800 seems a distant memory now.
What did surprise us however, was the fact that 4805 has held onto being Y2, although it did slip on the 6th to 4810 it recovered the very next day and has since quietly strengthened.
This is not that pertinent at the moment as the last five trading days have been all about the zone.
The -92.96-point fall on the 5th took this market right into the safety of the middle of its zone, 4700.58. The next day the market meandered 20-points either side of its zone, before eventually finishing back in it for the second day.
This made Friday quite the important day, as above the zone the bulls are in charge, whereas below it and it is the bears. In the end it closed below it, but not after an intraday high of 4707.95, giving that upper boundary one more test for good measure.
And with Monday also closing below the zone we would normally say that the decision has been made, making the first line of support the corresponding Y2 below the zone, currently standing at 4570.
Our only misgiving is that the intraday low on Monday was 4582.24, which considering was a fall of 94.79-points inflating the vega, is close enough under these conditions to count as a hit. So, basically, has it done it already?
Either way it is certainly going to make for an entertaining end to the Jan expiry we think, and it could just turn out to be a very original finale as well, as it has been a very long time since this index has been south of its zone when the sharp end of the expiry comes about.
For the record the Y1 ratio bandwidth has returned to the 235-points we were used to seeing for the first few weeks of this expiry.
Range: 4570 to 4695