Time to review your SPX risk profile.

Time for round two with Y2, or will it be once is enough?


Nb. Our comment from the 03/31/22


It has been well over a week since we last commented on the SPX, so apologies for that, but there really hasn’t been very much to write home about anyway.

The big thing we should have mentioned was that Y2 above the zone moved from 4580 to 4605 the day after we last published, so the 23rd.

So really, all the market had been doing was to slowly claw its way up through all the Y1 above the zone.

The day of the possible peace talks headway caused the first point of interest as the market blasted through 4605 on Tuesday.

As you can see, today Y2 is 4615, so the market is back below it after Wednesday’s capitulation.

As this index has been sensitive to Y2 in the past, it is entirely understandable to perhaps give it more weight than its due, forgetting that in fact it is still just a Y ratio and therefore still classed as minimal.

But, as the old saying goes “in the land of the blind, the one-eyed man is king”. And so it can be in markets, as when there is no dynamic delta and then when there is even some minimal amounts, this can have an effect.

And here is where it gets interesting, as from 4615 and above the ratios have actually strengthened, whereas between 4615 and the zone they have weakened before strengthening again below the zone.

The most obvious implication of this is that the zone will most probably move up.

The not so obvious, is that despite the market having already been higher, 4615 might prove harder to cross this time round.

Of course, all this comes with the usual proviso that what with the geopolitical situation being what it is, any sudden announcements could make whatever level of dynamic delta irrelevant.

But, in the absence of any new news, it seems the SPX is reverting to its previous degree of sensitivity, so the bulls might just want to rein it in a bit as the current zone is a long way south.


Range:            4405  to  4615           

Activity:          Moderate

Type:              Neutral


Nb. Our comment for 03/31/22


The zone here in the SPX has indeed moved up, so no surprise there. As is the fact that it probably hasn’t finished yet.

The move to 4495-4505 was actually yesterday, which coincides neatly with the move up in the FTSE, although if there is a relevance to this concurrence, we have yet to discern it.

Of far more importance is how the moves up have occurred. For the SPX it is more of a case of by default, as there was such a huge minimal Y1 ratio bandwidth it really doesn’t take much activity for this to happen.

This is, of course, as apposed to the situation where the ratios are constantly building below the zone while at the same time being in retreat above, and so in this instance the move up is by design.

Which brings us neatly round to the fact that although the Y1 ratio bandwidth has narrowed to 335 (370) this is hardly significant and, anyway, the overall Y ratio bandwidth is now 610 (565), so actually wider, and that’s the case even if you account for the reduction in the Y1 one.

Of far more importance was when we last published (31/03/22) this index was in a tussle with Y2, then at 4615. In the meantime, it dropped back to 4507.57 before recovering, while Y2 has moved out to 4630.

Will 4605 and 4615 still have an impact as steps-up, quite possibly, but please don’t lose sight of the fact that all Y ratio is described as minimal.

In fact, back in the day, the sole purpose for even recording them was as an early indication of momentum and momentum changes. Never did we ever consider back then that one day these markets would react like this to them.

At the end of the day R1 above the zone is just 50-points away, whereas R1 below the zone is 435-points away, so at the very least adjust your risk profile accordingly.


Range:            4505  to  4630           

Activity:          Poor

Type:              On balance bullish

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April 5th, 2022 by