The SPX is stuck in its R2 Ratio bandwidth

The SPX on the 20th Dec had the opportunity to rally...


Nb. Our comment for 12/20/22


It was bit of a tough end to the December expiry for the SPX but, we were more than happy to see the index finish on rollover Wednesday at 3995.32, just inside its zone.

Of course, the SPX was trying to go up to get inside its zone, whereas the FTSE was pulling in the exact opposite direction.

So, being in its zone for just the rollover is not ideal, but it is sometimes as good as you are going to get.

For the FTSE, this meant it was above its zone on the rollover, but managed the actual expiry in its zone.

And don’t forget this was the mighty Dec expiry, the biggest of the big, so with this in mind as well, we are more than happy to take that. And if we had known this at the start of the expiry, we would most definitely have taken it.

However, once the rollover was out of the way, there was precious little left for this index to fight for over the last two days of last week.

Which meant, the January expiry, started life (or being the front month) at 3852.

Prior to Friday 16th in the Jan expiry R2 was at 3845, only jumping that day. Well, it was more like a leap-frog, as the close on that Thursday was 3895.75, so by the time Dec actually expired it was already below it.

The point being, is that the Jan expiry was born in the R2 bandwidth.

Quite often a new expiry can be “born” into a level of ratio it is uncomfortable with and, we strongly suspect, that this is the case here.

If there was ever an opportunity for a Christmas rally to take place, then this is it.



Range:            3670  to  3895           

Activity:          Poor

Type:              On balance bullish




Nb. Our comment from the 12/13/22 (Nb. The December expiry)


And they were doing so well, getting the market back to 3990 and just below the zone as we entered the final week of the December expiry.

Also, don’t forget, this was when London was going the other way and trying to get back inside its zone, below 7450.

Still got a few days yet, so it certainly isn’t over this expiry. It just means they are going to have to work for it if they want a successful outcome.

Of course, this is a success for derivatives, so please bear that in mind.

As we are now on substack it is perhaps worth pointing out that when this research was valued by institutions, or pre-MiFID II, we used to cover the FTSE100, DAX, CAC, HSI, DJIA, NDX and the SPX. And our reports were daily but, more importantly, before the respective market opened.

Which makes this look a tad curve-fitting but, above the zone, although R3 now starts at 4180, we would have mentioned there is what we call a significant step-up at 4105.

Anyway, last week we did get our test of R1 at 3945 (please see comment below), but not the one we were hoping for, R2 at 3895.

Evidently this was enough, especially for a “meandering market”, but it seems the CPI figures have scuppered that.

Also, we do take pains to point out that the huge increase in overall activity in the final week of the biggest of the big expiries very often get misdiagnosed. This to us is such a case in point. It’s not as if the Fed tapering rate rises is new news after all.

What it does mean is that this expiry has a good bit of fight left in it, which is always exciting, if not tradable.

Finally, at least as yet, no pretenders to being the new zone, so 4000 is the bullseye.


Range:            3995  to  4005           

Activity:          Only just registered

Type:              On balance not bearish

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December 28th, 2022 by