Nb. Our comment from the 03/07/22
Well, we did say we could easily see a test of 7050 as, not only would that be in keeping with a triple, but under the present circumstances probably even more so.
The fact that this meant a tumble of just over 400-points, or 5.36%, meant that there was a huge amount of momentum inherent in the market, and obviously too much for the ratio at 7050 to cope with.
Although, having just said that, after the initial fall on Friday for most of the rest of the trading day the action did revolve around 7050, only capitulating in the final half hour.
And that is how the dynamic delta works, as the ratios just tell you where it is and how much of it to expect. What the ratios can’t tell you is the appetite of the market. So, at 7050 we know there will be a “DR” number of futures buying courtesy of the dynamic delta, what we don’t know is if this will be met by as many willing sellers.
However, generally we do get a feel for the market’s sensitivity, or an indication of how it will react to the levels of ratio, but under the current climate we can safely say that these are not normal times.
That said, the next ratio level coming up in the FTSE is B1 at 6950.
And as our levels are exponential, then this is a very significant number of futures buying generated by the dynamic delta. What we don’t know is whether this will be more than the market is willing to sell.
Under normal conditions we would have no hesitation in saying that this would be more than sufficient to turn the market but, with a war raging, who knows.
Finally, in the midst of all this excitement, it would be easy to miss the fact that the zone has slipped down to 7350-7450. This might not be so important in the next few days but, if any hint of normality returns, then it could become significant when we get closer to the rollover and expiry.
Range: 6950 to 7050
Nb. Our comment on 03/14/22
What an absolutely epic battle with B1 the FTSE had.
And we must point out that on both Monday and Tuesday the actual open was 6890 and 6870 respectively, both being significantly below B1 at 6950, not the official 6987 and 6959.
Although on the Monday the market jumped 100-points straight up in just a few minutes such was the reaction to the dynamic delta unleased at the open.
Despite the deep incursion into B1, almost entirely down to huge gap downs at the open, the close on Monday was 6959.48 and on Tuesday 6964.11. Job done really.
Considering the gravity of the situation coupled with the obvious panic out there it was truly fascinating to watch how the market reacted to the dynamic delta and, naturally, we can’t not mention the SPX and their encounter with R2 at 4165.
Looking ahead, it is significant that the zone has fallen yet again and, it’s not beyond the possible that it might even return to where it started this expiry, at 7150-7250.
Although we have listed below the activity level as “moderate”, as this is a triple, where the numbers are just far far greater than an intermediary, this is actually very good. So, should this continue then there will no doubt be more changes.
It seems a very long time ago indeed when this index challenged R1 at 7550 north of its zone, the expiry high being on the very first day (21st Feb) at 7571.07 and again on the following Wednesday with the intraday high of 7549.98.
Therefore, considering how far this market has come back, and the nomadic nature of the zone, we think it will do well to hold the rollover and expiry in the Y ratio bandwidth. Although, we of course would like to see it end in its zone, but we have to be practical to a degree.
As 7250 is the current bottom boundary of its zone, which if it does return to its starting point, this would make 7250 the upper boundary, so in both scenarios we see this as a critical level this week.
Range: 7150 to 7250