Will the SPX aggression transfer to July expiry?




Nb. Our comment from 06/19/19 (not published)








Nb. Our comment on 06/25/19


It will be interesting to see if the July expiry will carry the same aggression as June’s did.

On which subject, we did get R2 ratio all the way up to the corresponding R2 ratio, with the intraday high of 2958.06 on Thursday, so that made it a perfectly balanced expiry.

Sadly, the only aspect missing was the finish in its zone.

Looking forward, into July, then a quick comparison between the two tables above will tell you that the ratio below the zone has come in considerably, whereas above it, this has been far more tentative.

This is backed up by, not only the high level of activity, but also by its type.

So, the only real question that remains is how aggressive the bulls will be able to be now it’s a new trip.

Historically, if the triple can only get up to R2, then an intermediate expiry should struggle with even R1.

Rather oddly, and against most other market commentators, we see these markets as behaving perfectly rationally.

In fact, were the index not to travel the length of their Y ratio bandwidth, then we would find this weird, no matter how wide it is.

In fact, in a triple, it is very rare that you even get a 20-point Y ratio bandwidth, let lone the 150-points we saw in June.

However, in intermediates, then such wide bandwidths are far more common.

Furthermore, coming up against the naturally occurring dynamic delta occasioned by hitting R2 and reversing, is, again, perfectly rational.

Pushing through, to DR or even the B ratios, is when the market is irrational, as it would be ignoring all that futures activity in the opposite direction.

To put all this into plain English, then for this expiry, we would fully expect a trading range of 2970 all the way down to 2795.

Hopefully, then back up to finish in the zone by the 17th July.

The great unknown, is whether it will take R1, R2 or perhaps even higher.

But, at the end of the day, you at least know where those levels are currently.


Range:            2905  to  2955 / 2970           

Activity:          Strong       

Type:              On balance bearish

June 25th, 2019 by