Nb. Our comment from the 02/23/21
To be fair you have to be going some to have an exciting a start to the mighty March expiry that London has.
So, despite it being slightly sedate here in the SPX, do not lose sight of the fact this is a 4-week triple (the US like to call them quadruple, but whatever) expiry, and as such everything tends to go up several notches.
Our one reservation is that there are oodles of Y ratio still around here, which is again amazing, but especially so for a triple, but which might just keep the sensitivity down towards the levels we have been seeing recently in this index.
The best way to explain this is simply look at the FTSE, which spent ages yesterday morning touching the top boundary of its zone, or the bottom of its R2 bandwidth, before recovering, and then today try ever so manfully to break up into DR at 6650, before getting such a bloody nose it immediately dropped 120-points.
The point being, is that this index is already messing with R2 and trying it on with DR, and so in 3-weeks times its sensitivity will have adjusted, simple as.
Whereas here, in the SPX, it has a Y1 ratio bandwidth that is 160-points wide, and a Y2 ratio bandwidth (obviously inclusive of Y1) that is 360-points wide.
Back in the day, well in the last decade really, it was a surprise to see any Y ratio at all in a triple.
And the fact we are now a year on from the fallout, means that adjustment excuse is wearing paper-thin right now.
The ratio table above shows that there is more ratio below than above, but importantly do take note of the respective distances away from the market each ratio level actually is, and of course, as yet we have no idea of the level of sensitivity.
But, with so much Y ratio just expect volatility, whipsaw and solid percent moves.
Range: 3805 to 3955
Type: On balance only just bullish
Nb. Our comment for 02/23/21
We have some good news and some bad news for you, well, actually, it’s the same news, just that it depends on your interpretation of it.
As we said last week, please see above, this is exactly what we were expecting.
Although, it has been particularly impressive the way the market has mixed up one-way down or up days, with whipsaw days.
The net result of this, is activity has fallen off a cliff.
But, believe it or not, this is actually all rather lame, especially so for a triple.
By which we mean that this index has found support twice at its zone, the first on Tues 23rd Feb with the intraday low coincided with the top boundary at 3805.59, and secondly last Friday, when it dipped briefly below its zone.
It has yet to test R1 at the other end of the Y ratio bandwidth above the zone.
And this is the reason why it is so “lame”, because it has only bounced around in the Y ratio bandwidth above the zone.
It is not the markets fault that this is so wide, and as dramatic as the 2% to 3% daily moves we have been getting are, this is nothing had the market utilised the full Y ratio bandwidth.
As food for thought, that would mean seeing it down to circa 3635, which would be fun, or not, again depending on your interpretation.
Talking of interpretation, this is where we get to the good/bad news bit, as precious little has changed, ratio wise, after the first week.
The overall the Y ratio bandwidth has shrunk by 40-points admittedly, but nevertheless still remains a jaw-dropping 320-points wide.
On the flip side, it would be very interesting to see this market get aggressive, as it really won’t realise that the only ratio ahead is just R1 and R2.
Bizarre not to see any B ratios, but then again, it’s bizarre to see Y ratio in a triple.
In a nutshell, more of the same, but probably getting worse as the expiry continues.
Range: 3805 to 3955
Activity: Very poor