Why is the SPX procrastinating?

The SPX being in the middle of such minimal ratio should be a lot more volatile.


Nb. Our comment from the 03/24/21


These expiries all seem to morph into one these days it seems.

The March expiry, a triple, looked more like an intermediary, and this, the intermediary April expiry, looks like just a slightly scaled down version of March.

The similarities are the zone, both being 3895-3905, and the still gargantuan Y ratio bandwidths.

At the end, in March, the Y1 ratio bandwidth was 235-points and Y2 was 360-points, while here in April they are 210-points and 385-points respectively.

Whether or not the sensitivity to Y2 returns remains to be seen, but we suspect it will, as it took until virtually the rollover week for March to even test R1.

Perhaps having a 10% Y ratio bandwidth is the new normal, who knows, but if it is, we can’t find one logical reason for it.

For reference, at this exact same point in 2019, the Y1 ratio bandwidth was 60-points, and Y2 100-points, and which at that time was considered wide.

The point is, that despite recent all-time-highs, the ratios below the zone are not filling in, which is a sign of bullish intent.

In over 20-years previous highs have come about because of the ratios below the zone have been rising, building pressure, while above the zone they have been retreating, creating space.

This is not happening this time, and abnormality is always a concern, but with $5trln worth of spending washing through the system it could just be a coincidence that the total market cap in the last 12 months has risen by just about that.

But with no ratio around, the volatility we have been seeing recently could just be a precursor.


Range:            3905  to  4005           

Activity:          Poor

Type:              On balance bearish


Nb. Our comment for 03/30/21


Considering how little ratio there is, we are a bit surprised by the lack of real volatility.

Of course, it is at the start of an expiry, so that by its very nature it is a bit timid, but nevertheless, we were only seeing 40 to 50-point moves (apart from Friday granted), which under these conditions 1% plus a bit is not much at all.

Despite there being nothing in its way, the market hasn’t even tested Y2 for example.

Therefore, we would be very surprised if this continued.

Perhaps one contributing factor has been a distinct lack of activity, and as the base-line is so low in an intermediary, then “moderate” is in fact pretty meagre.

Although, we have seen the Y2 ratio bandwidth shrink from 385 to 335-points, but as this still represents almost 10%, then we don’t see it as having any great influence.

And, in fact, the Y1 ratio bandwidth, has remained the same at 210-points.

Should this market actually take on Y2, then we will reappraise the situation, in the meantime, it is just an indication of how much the ratios have moved.

On a more positive note, at least they are moving, as with them strengthening below the zone it at least may eventually give some validation to this bull market.

And, as there is so little ratio, the zone moving to 3995-4005 by the rollover, is very likely.

But, as we still have almost a full three weeks to go, it would be a lot more fun if it went down to 3795 before it made a nice run back up in time for the 14th April.

We have already seen this index test its zone, and in fact, it did even close 6-points below its lower boundary last Wednesday, so it has already fulfilled that aspect, but the lack of any great stampede forward to test Y2 at 4005 doesn’t exactly cover the bulls with any great degree of conviction, or at least not to us anyway.

At the end of the day, this market is in minimal ratio from the top boundary of its zone, 3905, all the way up to Y2 at 4005, so daily, or over 2/3 days, moves of 100-points is what we should be experiencing.


Range:            3905  to  4005           

Activity:          Moderate

Type:              On balance bearish


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March 30th, 2021 by