Nb. Our comment from the 06/01/20
Well London is still in a mess, but it has been tidied up a bit at least.
Sadly though, it failed to hold on to its move above 6150, which was bit of an epic battle, so not a good result really.
After the first test on Tuesday 26th, the first day back after the Bank Holiday, the market basically camped out on 6150 all day on the Wednesday, before closing at 6144.25.
Then on Thursday there was no holding it back as it burst out of the R3 ratio bandwidth it was in (5950 to 6150) and into the R2 one above it.
The fact it has fallen back in means it has it all to do again, although this time, there will be no surprise what is waiting for it at 6150.
In the meantime, the zone has fallen to 6450-6550, which is a lot closer than it was, but this still puts it quite some way away.
The problem is not so much with this, but rather the US markets are at the other end of the ratio scale, so will very probably be no help at all, and might actually work against.
Which was very much the case when the US gave up all its gains when London was closed on Thursday, the SPX having hit our old R2 level and which was now what we call a “step-up”, resulting in a very weak market on Friday and the FTSE relinquishing 6150.
The good news is that there is still three weeks to go, so plenty of time, but for the foreseeable, all we can see for London, is it being stuck in one bandwidth or another.
Range: 5950 to 6150
Nb. Our comment on 06/08/20
It is worth reminding that on Friday 15th May, after the May series had expired, the FTSE went as low as 5741.54, which back then, in the June series, was a solid test of the level DR ratio at 5750, which is a big level.
(Nb. The May expiry zone was 5650-5750)
So, it is interesting that this level has now slipped to 5650, but this could just be academic now.
For the simple reason, and even we are a bit stunned by this, this index is inside its zone.
That is a truly massive 700-point, or 12.2%, jump, and all in just three weeks.
Generally, the FTSE doesn’t tend to move like this, so it really is a remarkable feat.
Today is going to be a massive day for this index, as there are still two weeks to go in this expiry, so what happens now will essentially decide the next fortnight.
It might be too much to hope for this market to quietly while away the time happy and safe in its zone.
After the Street’s performance Friday, we suspect the zone upper boundary will be the battleground, rather like last Monday, when it was all about 6150, and getting back above that. But, with the volatility inherent in these markets, it just takes one bit of bad news, and it could easily be the bottom boundary being the battleground.
Either way, R1 shouldn’t really scare the market that much, but it is given extra strength as it is also the upper boundary, but at the other end, where it has only just broken through, that might prove tougher to hold.
However, we feel the real problem may well be the SPX, as it is now deep into their R2 ratio, and if that level of dynamic delta futures selling upsets the apple cart over there, it may well have negative repercussions over here.
Range: 6450 to 6550
Type: On balance bullish