Nb. Our comment from the 01/04/22
Happy New Year to you all and may 2022 bring you all health, wealth and happiness.
Just to recap the first two days of this expiry were all about the zone, and 7250 did prove critical (please see above).
But thereafter it definitely got its Santa rally hat on and R1 was the next stop, then at 7350.
When we last published it had only just become R1 by a fingernail from the Y2 it had been on the 16th Dec, two trading days prior, so coming under assault from the rampant market we suspect it beat a very hasty retreat.
This means that by the end of last week we firmly believe R1 was at 7400, where it is today.
This then makes perfect sense of the price action last week, especially all the concentrated activity around 7403 on the Thursday and Friday.
Looking forward, as you can see in the above table, 7400 is still R1, but only just, and we wouldn’t expect it to remain so for much more than a day.
7450 is another matter entirely, and is in fact just a smidgen below the R2 threshold.
Which is actually the same situation for 7500, apart from this threshold being R3.
So, it is great it made a new all-time-high, and there is even scope for it to go back there again, but the dynamic delta futures selling brought about by R1 at 7450 and backed up by R2 at 7500 will certainly take the steam, and perhaps enthusiasm out of this market should it test these levels we believe.
On the other hand, and don’t forget we still have three weeks to go in this expiry, the zone is now 200-points south, with virtually no ratio in-between.
Range: 7250 to 7400
Nb. Our comment on 01/10/22
As suspected R1 at 7400 didn’t last the night, leaving 7450 to take up that mantle.
And last week R2 was at 7500, and between these two levels they pretty much controlled what was happening in the FTSE.
The Tuesday and Wednesday showed just how desperate this market was to catch up with the rampant US markets, and on both days the market made deep incursions into R2 (above 7500) and even closed just north of it, but it was very plain to see that they really didn’t know how to cope with the persistent futures selling brought about by the R2 amount of dynamic delta.
Thursday was all about 7450, and the actual real world intraday high that day was 7498, not the aberration official 7516 caused by their weird policy. Whilst on this subject the real time close of the FTSE on Tuesday was actually 7497.42, it was the auction that took it to 7505.15, which is a cheat in our book.
Anyway, to more pressing matters, and this week the zone has moved up. Not expected, but also not surprising, and as there are still two weeks to go not that important last week anyway.
The real battle has been with R2, which is now gone, although we are sure 7500 will have legacy impact.
The important level is now 7550, which goes straight to R3 from R1, so will be all the more impactful for that. But, if this market couldn’t really cope with R2, and these levels are exponential, we just can’t see it handling this even greater number.
So, in our view, there is now very limited upside, and if the UK wants to follow the US and run for cover in its zone, then at least that has now moved closer. Nevertheless, the upper boundary is still 150-points south, so not insignificant.
This means 7450 and 7550 are the critical levels this week.
Range: 7450 to 7550
Type: On balance only just bullish