Nb. Our comment from the 12/01/21
For all its apparent weirdness, rather bizarrely, it is actually acting as we would expect.
By which we mean it is whizzing around in its Y ratio bandwidth, meaning volatility is up and whipsaws abound…brilliant.
Of course, the big difference is that the zone here has jumped up to 4695-4705, which it did the day after our last comment, so on the 24th Nov and which we did mention on twitter (@hedgeratio).
It is a symbolic move really, as the Y1 ratio bandwidth remains at 310-points and the overall Y ratio bandwidth is still an absolutely staggering 460-points.
In fact, this would be staggering in an intermediary expiry, so in a triple there really are no words for it.
Nevertheless, as long as it stays there it will remain the target and, even more so, towards the expiry.
Although we allude to this above, another fascinating aspect of this expiry is the fact that despite the zone moving none of the other ratios below it have budged an inch, that is apart from R2 which only begrudgingly moved today. Rather odd to say the least.
Another odd aspect is the fact that 4495-4505, the previous zone, didn’t really look like it wanted to relinquish its crown, or at least this was the case until today, when the ratio here has eventually started to fill in. Which should help the bulls nerves a bit at least.
Sadly, we are no closer to discerning the sensitivity of this expiry yet but, now at least, people may have a greater appreciation of what we mean when we say “Y2 and R1 ratio levels below the zone are still a very long way away indeed”.
Range: 4395 to 4695
Nb. Our comment for 12/07/21
And today supplies the first real surprise of this expiry, as the zone returns to 4495-4505.
When we last commented we did say that this level seemed very reluctant to relinquish its crown but, over the intervening period, 4700 had been consolidating its presence.
This is why, the sudden reversal today comes as such a surprise.
We do normally point out that the triples are a bit like turning a supertanker, in that it takes time and that sometimes all the effort required is not that obvious.
But, as it is the rollover next week, where the zone is, or where it will be, now takes on a huge importance.
In the meantime, and totally in character with the inherent weirdness ever present in this expiry, the market continues to behave as if the zone is still at 4695-4705.
As we quite often say, we just crunch the numbers and the only subjective view of that is our interpretation of the resultant answers.
Who is to say it won’t revert straight back?
But, for today at least, there has been a steep fall in the ratios below 4700.
And again, in keeping with the weirdest expiry ever, who’s to say that the zone could not in fact stretch from 4495 all the way up to 4705.
In a way we now look back with fondness when this market just kept on knocking on the retreating R1 ratio door, as at least then we knew where we were, as even now we still don’t really have an idea of this market’s sensitivity this trip.
On a more positive note, with essentially 200-points of absolutely minimal ratio there could be some decent moves. By which we don’t meant the one to one and a half percent point moves of late, but some more meaty three to four percent moves. Just don’t forget whipsaw is just as much as likely under these conditions. Good luck.
Range: 4505 to 4705
Type: On balance only just bullish