Nb. Our comment from the 09/21/21
The important aspect is that anyone who has read our comments over the last few expiries should have been in no doubt whatsoever about this potential pullback.
The only shame is that we still don’t publish the ending expiry ratio table next to the forthcoming expiry ratio table in the rollover week, as then you would have also known about which levels to watch out for.
Interestingly the zone in October has been very solid where it is, despite September’s jump to 4500. We say “interestingly” as just like the FTSE, where this index closed last Friday was below it, and therefore in bear territory.
However, the really critical level yesterday, was Y2 at 4340, as had you known that it was there you would have picked up on the support it gave this index for at least half an hour, before capitulating. The fact the market then went a further 35-points below it, had us looking at R1 as the next level but, and this was probably more to do with the DJX, it recovered. Also, on the very first day of an expiry, especially when markets are challenging virgin territory, the actual ratio levels can be somewhat formative, and as you can see in the above table, last Thursday Y2 was actually 4295. For the record, yesterday’s intraday low was 4305.91.
Perhaps more significant for today, was yesterdays close, which was back above Y2.
Possibly most important of all, it has seemingly galvanised everyone as we have now had two consecutive days of “strong” activity here, on what was otherwise shaping up to be yet another expiry when the market was stuck in automatic.
The end result of this has been the Y1 ratio bandwidth only being 190-points, and the overall Y ratio bandwidth just 345-points. Of course, these are still stupidly wide, but both are considerably less wide than they have been, and furthermore, at least so far, have reversed the trend of them actually growing wider.
Also, it has certainly kick-started this intermediary expiry into life early on, which will hopefully continue.
Range: 4340 to 4445
Nb. Our comment for 09/28/21
We feel we should give the SPX some leniency, as over the years we have been calculating the ratios the width of the zone has stayed the same, whereas the market itself has increased significantly.
So, a 10-point zone is now only 0.23% of a window for the index to aim at.
Considering this, we think it has done exceedingly well, especially as this index is bit of a juggernaut, as last Thursday it closed at 4448.98, then on Friday 4455.48 and yesterday it missed the bottom boundary by just under 2-points, closing at 4443.11.
In the case against leniency, we have said in the past “a miss is as good as a mile”, and let’s face it, this index had every opportunity on Friday to make decent inroads above the zone and back into bullish territory.
It does make for a difficult call, as on the one hand it has already bounced off Y2 below the zone, and having regained its zone this normally means the momentum is back with the bulls.
But, the failure to hold their zone can’t be ignored either.
The fact that the last three trading days have been in or around its zone we also think is symptomatic of a market that can’t decide.
This is also borne out by very low levels of activity over the last three days.
Also, having just spent so many expiries where the market has been content to keep knocking on the retreating ratios door, this type of behaviour is both new and difficult to get an understanding of how deep it goes.
However, first and foremost, we wholeheartedly welcome back the normality of a market that tests support and resistance either side of its zone, as this is simply just a far healthier methodology, which in no way deducts from an underlying trend, but rather strengthens it.
With this in mind, we are not yet ready to call a sea-change in attitude, but rather welcome back a more normal and sane market while the jury is out.
Range: 4345 to 4445
Activity: Very poor