Nb. Our comment from the 09/16/20
As today is the rollover, therefore the expiry is this Friday, please don’t get hung-up on the fact the zone has reverted to 3345-3355.
There is a time lag in the movement of the zone, which is essentially why we have Y1 and Y2 ratio levels, which we constantly refer to as minimal.
The overriding point therefore of these minimal levels is to indicate, as early as possible, the rate of change, and therefore the potential next move.
The trouble is, that in a triple, the direction may be obvious, but it just may take a bit of time for that amount of activity to actually facilitate the move.
So, for this expiry, the move was signalled way back when, but when it did eventually move, the SPX had turned around and was mid process of losing 247.14-points.
So, no wonder it thought twice, and reverted, but, again in the meantime, 3395-3405, looks like the target.
And anyway, the old bottom boundary, 3345, did its job, as one could easily see its influence on the market at the tail end of last week, and we for one, are not overly surprised that the market bounced from this region.
The other point to make, is in our last FTSE note, we pointed out that this index losing 247 while the FTSE rose 233, realigned the markets and their ratios, putting both about 2% below their respective zones heading into the final week, so it was fascinating how each has gone about achieving a similar aim from a similar starting line.
Needless to say, and rather in keeping, the SPX raced ahead, achieving it essentially in one day, whereas the FTSE, is still struggling, and being very pedantic.
Now it will be all about trying to take the steam out of the market, as we often liken this amount of Y ratio to an ice-rink (very little impetus goes a very long way), so to end in its zone is similar to a beginner trying to land a curling stone in the bullseye.
Nevertheless, it will be revealing how this market reacts to Y2, as it should reveal how committed the bulls actually, and, don’t forget, R1 is not that far above.
Range: 3355 to 3405
Activity: Poor
Type: On balance bearish
Nb. Our comment for 09/18/20
Well it is humble pie time for us, and really, we should know better than to assume something is going to happen before it actually does.
We are, of course, referring to the fact we just assumed the zone was going to revert back to 3395-3405.
Evidently, it hasn’t.
In our defence, all the signs we there, and if it wasn’t literally the last few hours of the expiry, we believe we would have been correct.
What is impressive though, is the strength in the ratios, both above and below the zone, in these final hours, and, sorry, there is no way anyone can foresee that amount of activity suddenly manifesting itself.
For the record, the settlement price for the Sept SPX was 3353.60.
We haven’t produced a table for the October expiry, but while we are here, this is a good opportunity to let you know how it stands at the moment.
This is a snapshot of how it is, before it becomes the front month, so please bear this in mind, as it means it is not quite fully developed.
Furthermore, we are retuning to an intermediary expiry, from a triple, so, if history is anything to go by, everything scales down very significantly, and, therefore, sensitivity should increase.
The zone is the same as September’s.
Ironically, 3395-3405 as the potential new zone is quite probable.
But R1 below the zone, does not kick-in until 3070, whereas above it, until 3580.
Obviously, we expect these to change significantly by next week, but as it stands, we are back to a 510-point Y ratio bandwidth.
So, if you are hoping for a quiet market, then, on this evidence, we suspect you will be disappointed.
Range: 3355 to 3405
Activity: Good
Type: On balance bearish
