Y1 ratio bandwidth test for the SPX already

A ratio battle now looms for control of the SPX for the rest of the Aug expiry.


Nb. Our comment from the 07/19/22


We have to start the comment on the August expiry with one final one on the July, where the final resting spot for the zone was in fact 3800. Therefore, the settlement price of 3839.81 was about as close as they needed to be. In fact, we did say it was not so much about where the July expiry ended, but rather about keeping a lid on the potential volatility, which certainly seemed to be the case for us. Job done then.

Moving on to August, and as the SPX closed last Friday at 3863.16, it was happily in the new Y1 ratio bandwidth already.

Although, a point to note is that the intraday low on Friday was 3817.18, and yesterday, 3818.63, both right on Y2.

However, the really interesting aspect between the two expiries is that the zone did not make any significant attempt to join with the July level, staying stubbornly at 4000.

So, if Y2 can hold, then the August expiry might actually turn out as one for the bulls.

Also, R1 at 3695, as it stands, is a very solid level, so the downside has some far more significant support not that far away.

On the other side, we have already mentioned the zone being at 4000, then Y2 comes very quickly after that but, it is a very long way above this before you get to the R1 resistance ratio.

Another little pointer, our Delta Ratio, is currently standing at 49.3%, where a reading below 50% is considered bullish.

It is a 5-week expiry, so even longer than normal to go, and the first week of these extended expiries can be somewhat slow to develop, so caution perfectly understandably but, as the ratios are now aligned, there is definitely more upside potential than downside.


Range:            3820  to  3995           

Activity:          Average

Type:              On balance bearish





Nb. Our comment for 07/26/22


Well, so far it has definitely been the case that this “expiry might actually turn out as one for the bulls”.

On Monday 18th, the first day of this expiry, the intraday low was 3818.63, another test of Y2 at 3820. Since then, and after we highlighted the stubbornness of the August zone, the market closed on Thursday 21st at 3998.95, right in it. Not bad that, 4.6% in as many days, and why we feel slightly vindicated about our comments.

The question is, what happens next?

It was all done rather hastily, and let’s face it, there is still 4-weeks to go in this expiry.

The intraday high on Friday was 4012.44, and we mention this as there is some doubt as whether or not this was a test of Y2. The reason is, that Y2 after the 19th had moved down to 4015 but, on the Friday, actually slipped back out to 4020, before moving back for today.

If it was a test, then that is the market having performed a complete Y1 bandwidth test.

The fact that it is now almost 100-points below this, suggests that it was in fact a test.

Generally, this means the market languishing for a while in this bandwidth.

However, if one compares where the ratios were on the 19th to where they are today, then it is obvious that they are strengthening on both sides of the zone.

If this continues at the same pace, then the zone will have to move, and downwards.

The prognosis is that everything now rests on how the ratios now evolve. If they continue to strengthen as they are above the zone, this will eventually force it down. Or will the ratios below the zone get enough support to keep it up.

Whichever side wins this new battle, we suspect will then dominate the rest of this expiry. But, don’t lose sight of the fact that the Y1 ratio bandwidth is now only 170-points, whereas the overall Y ratio bandwidth is still a massive 460-points. So, although these are a lot narrower than they have been, they are still plenty wide enough to satisfy most traders.


Range:            3845  to  3995           

Activity:          Poor

Type:              On balance only just bearish

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July 26th, 2022 by