Nb. Our comment from the 08/17/20
It really was the case of being wary around half past two, when the US opens, as their fight with R1 certainly did spill over here, taking the wind out of the UK’s sails more than once during last week.
However, we think the real issue here was the fact that the zone did not move up to 6250-6350, although less likely now, it is certainly not ruled out entirely.
Having fought so hard, on Tuesday 11th, to get into its zone, it needed another auction manipulation to achieve it in the end.
That Tuesday the real time close was 6146.55, but after the auction, it finished at 6154.34, just inside its zone.
Those that knew the significance of 6150, should not therefore, have been surprised on the Wednesday when it powered up the entire breadth of its zone.
The momentum was so great it actually burst out the other side, which was a mistake.
A mistake, that was not only rectified on the Thursday, but compounded on the Friday, again, not exactly helped by the SPX’s interaction with R1.
Of course, the big issue this week is the rollover and expiry, which hopefully will be more influential than the significant weakness in the ratios below the zone.
Therefore, we think this index would do very well to just achieve its zone, which we will endeavour to keep a close eye on should it start to migrate, for the rollover.
The other aspect to be aware of, is the next expiry is the third triple of the year, and as such is inherently much much larger than this expiry, which was always very poorly populated throughout, so its influence may loom large.
Range: 5950 to 6150
Nb. Our comment on 08/21/20
Well you can’t say it didn’t try.
The FTSE, on the rollover day, Wednesday 18th, tried so very hard to get back into its zone, it was almost painful to watch.
The first two attempts were early morning, about an hour in, then, having failed, at about 6147 (twice), it took well over an hour before it could try again.
This time it was knocked back on the actual line, 6150, again twice, before the third attempt, about an hour later, saw it achieve the intraday high of 6162.66.
To be honest, we thought that was that, but it was all downhill thereafter, the half past two curse, coming back to haunt.
Bit of a warning sign really, as failing to hold on after all that hard work, generally means its not by choice, derivative choice that is.
Again, we have to mention, that the ratios should be calculated daily, as between Monday and today, the activity levels have been the highest all expiry, and by some considerable margin too.
The end result of all this, is the biggest changes in the ratios we have seen for the last five weeks.
So much so, that the Y ratio distribution has flipped around the zone, with Y1 and Y2 now being below it.
So not only do we now see 150-points of Y1 ratio below the zone, we also see Y2 now stretching down to 5900.
Sadly, we will now never know whether the market capitulation at 6150 on Wednesday was because the ratios had flipped, or that it was the cause of them doing so.
The mighty Sept is next, oh joy, but as things stand, we think the FTSE has done remarkably well just to stay in its Y1 ratio bandwidth, despite it not ending in its zone.
Range: 5950 to 6150