Nb. Our comment from the 06/02/21
What an absolutely epic battle the SPX has been having with Y2, then at 4205.
Virtually daily the incursions were getting deeper and deeper, and twice, they even tried a gap up at the opening, trying to leapfrog this level, before yet again closing below it.
But, at last, it has today conceded ground, and with our honest respect, as it put up a mighty battle for what is essentially a minimal ratio level.
We haven’t mentioned this in a while, but the entire reason for even having the Y ratios, is because they are so minimal that they are a very good and accurate first indication of any trend, or even an acceleration or relaxation of said.
However, because of Y2’s stubbornness, what we have witnessed is a build-up of the ratios below the zone.
Appreciated, we have said for a while now that we fully expect the zone to move, but with this release of pressure, we think it will start to move up very quickly now.
So much so, where before we were looking at 4120-4130, now we would not be surprised to see it settle around the 4200 level.
This indeed could be a game-changer, apart from the obvious fact that Y2 is now 4230, but more along the lines of the ratios overall above the zone being in retreat.
Obviously, it is making extremely heavy weather of it, after all we are talking about just Y2, but the point is that the way forward is now open.
However, having just said that, please also respect the fact that although the war with Y2 at 4205 has been won, the ratios are firming up below the zone, which itself is very likely to move up, considerably too, but there is still a vast amount of Y1 ratio below this market.
In fact, Y1 currently goes down to 3945, which is a sphincter-clenching 260-points away, so just don’t kid yourself that this is a risk-free market.
Range: 4005 to 4230
Type: On balance bearish
Nb. Our comment for 06/08/21
The SPX battle with Y2 has continued, although probably not quite as “epic” as it was while it was at 4205.
Nevertheless, last Friday the intraday high was 4233.45 and the close 4229.89 (Y2 4330), which should have given it the perfect platform to breach it come Monday.
However, on Monday Y2 slipped to 4235, where it is today, and the intraday high was just 4232.34, and the close you can see on the table above.
Basically, it keeps knocking on the door, but still hasn’t generated enough momentum to walk in.
And, exactly as we said in the last expiry, we are just talking the minimal Y2 ratio, so it really is not a great deal of futures they need to buy before moving on.
Worth noting in amongst all this fixation with Y2, is that the ratios below the zone have actually weakened, which is not good.
R1 neatly encapsulates what has been happening, as between our last note (2nd June) and this, it has been down to 3845, before recovering to where it is today.
At the moment, the only outcome of this seems to be delaying the upward move in the zone, and perhaps reining in the expectations a bit, but even so 4145-4155 now looks a shoe-in, and after that any of the other levels mentioned are still very possible.
We have mentioned the amazing width to the Y ratio bandwidths ad nauseum, but this very fact just makes these huge jumps in the zone possible, but where the ratios don’t fill in, or build below them, then they can just as easily be reversed.
We are not saying that this is going to happen, but with the overall Y ratio bandwidth now standing at 415-points, then your risk factoring should be including a potential reversal of at least 9.82%.
It is a most peculiar situation, as here we are lurking just below all-time highs, and yet the level of “bullishness” as depicted by the ratios is astonishingly low, and just to add another twist, across the pond, which is still yet to achieve a new high, the bulls are in an all-out fist fight with R3/DR levels of ratio, go figure.
Range: 4005 to 4235
Type: On balance bearish