Will the SPX need the resolute R1 at 3745 yet again?

Are we going to see the SPX test R1 at 3745 for the second strike three of this expiry?


Nb. Our comment from the 06/22/22


We can’t not start without mentioning the end of the June expiry, which most certainly proved very expensive for someone.

But despite it getting out of control from a derivative perspective, it did adhere to some ratio levels, so at least the dynamic delta was having an effect right until the end.

Our final trading range was either 3645 to 3745 or 3745 to 3895. The fact that the market failed to close above 3745 when we last published on the 14th was a warning. It still could have made the zone by the Friday, but getting back to 4000 by the next day, rollover Wednesday, was obviously not going to happen. The bottom of that trading range was 3645, and the intraday lows on the Thursday and Friday were 3639.77 and 3636.87 respectively.

Evidently, “derivatives didn’t reassert their authority”.

Anyway, and more importantly, this, the July expiry, and what is the ratio picture telling us for this trip.

And if anything, the enormous Y ratio bandwidths have actually got worse.

Now the Y1 one stands at 260-points, but the overall one is the widest ever, coming in at the humongous 815-points wide.

Perhaps a saving grace, for the bulls at least, is at least this time the market is actually at the bottom of this huge bandwidth.

As we have seen, the dynamic delta denoted by the ratio levels has continued to work, it is really now just a question of who is in charge?

The highly strung emotions of the equity mob, or the money on the table of the derivative players?

Sadly, we can’t answer this question, all we can do is say that historically, once the over-excitement of a triple is over, money normally rises to the top.


Range:            3745  to  3995           

Activity:          Poor

Type:              Bullish



Nb. Our comment for 07/05/22


Well, it took a while with the market interacting with R1 at 3745 before “the money normally rises to the top” came about.

The fact that the first two days of this expiry, despite intraday lows deep inside the R1 bandwidth, always closed above 3745 gave a glimmer of hope.

The Thursday 23rd therefore could have gone either way, it being strike three at 3745, but a strong opening followed by the intraday low of 3743.52 just set the scene for the Friday.

We would like to have seen this market get back up to its zone, like the FTSE100, before capitulating, but we can’t have everything we suppose.

And last week, the last two days returned us back to literally where we were on the first two days of this expiry. The intraday lows being 3738.67 and 3752.10, yet again testing R1 at 3745.

It might not be Thursday 23rd again, but it might as well be, as it is looking increasingly likely that today we will see a further test of R1. This is some resolute defence going on here, as once again this is strike three.

Naturally R1 has weakened after such a prolonged assault, and the picture is further complicated by the second US holiday falling within this expiry, and so we would not expect 3745 to remain R1 by tomorrow, and probably not even by the end of today.

For a more robust R1, and at a commensurate level to the first week, you have to be looking at 3720, or at a pinch 3730.

In essence, should the market go there yet again, it goes in full knowledge of what to expect, and is therefore not frightened by that, or it pulls up short, pretty much for the same reason.

Don’t forget, last week having hit R1 this market rallied 47 and the 73-points respectively, so the bulls are far from dead, but at they same time, hardly galvanised either. Apologies its not more definite, but today or tomorrow should go a long way to sorting out who wants to be in charge for the remainder of this expiry we suspect.


Range:            3745  to  3995           

Activity:          Poor

Type:              Neutral

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July 5th, 2022 by