Nb. Our comment from the 10/19/21
Although we are now in the November expiry, we just can’t not mention the end of October’s, as in our last comment the market had just closed at 4361.19 and our zone was stubbornly still at 4445-4455, and come the expiry the settlement price was 4463.66, which is definitely a bit hit in our books.
Nevertheless, this is still very pertinent for this expiry, as markets still being slaves to misdiagnosing the derivative influence, means that there is more than likely a bit of latent momentum remaining.
Which is essentially what we subscribe yesterday’s move to.
However today, there are more than likely to encounter Y2 at 4505 above the zone, and it is this reaction which will tell us what we need to know.
Namely being whether the recent rally was indeed all down to the expiry, or that the bulls are back in town, committed and in control.
Obviously, you know what we think, but best to spell it out.
Don’t forget this is still an intermediary expiry, and it is a five-week one, which may go some way to explaining why it is developing so slowly.
For the record the Y1 ratio bandwidth is 210-points and the overall Y ratio bandwidth 410-points, so actually wider (worse?) than last trip.
It has been a long time since this market faced dynamic delta of the variety that means futures selling, in fact it never got past just testing its zones upper boundary in the first week of the last expiry, so how the market reacts if/when it tests Y2 will define the rest of this week and very probably the next we suspect.
Whatever the outcome, it is definitely a good way to start a new expiry as at the very least it gets people engaged.
Range: 4445 to 4505
Activity: Average
Type: On balance only just bearish
Nb. Our comment for 10/26/21
Exactly as we said at this time last week, how the market would react to Y2, then at 4505, would tell us all we need to know.
Last Tuesday the market opened at 4497.34, and then hardly blinked at Y2 as it went past. Well perhaps it held them up for 15 or 20 minutes, but that was all.
Y2 then quickly retreated to where it was at the very start of this expiry, namely 4530, but the market was already way past this point and had new all-time-highs in its sights. As you can see it has now slipped even further.
This expiry is always a strange one, as the US markets do love to hit new all-time highs just before Thanksgiving, and that is still a month away.
Can the market maintain this level of aggressiveness for that long? Unlikely, and anyway, this trip expires on the 19th November, so there is that battle it has to face as well.
However, we have no doubt the zone will move up, and already there is the distinct possibility it will move to 4495-4505, but if it follows the recent game plans then this will always be a catch-up exercise.
Overall, the Y1 ratio bandwidth is actually slightly wider, and although the overall Y ratio bandwidth has come in to “just” 365-points it is still far wider than previously.
Admittedly, at least the Y ratios are moving up below and receding above, both bullish, but if the distance between them doesn’t change any zone move is more by default than design.
Therefore, we are back to the old mantra, that it is like an automatic car in neutral, designed to creep forward, but that even though it is just contending with the minimal Y2 ratio, and very possibly even attack R1, this is not a risk-free market, as that is an 8% bandwidth it is sitting at the top of. Great trading though.
Range: 4445 to 4610
Activity: Moderate
Type: Neutral
