Nb. Our comment from the 02/23/22
The February settlement price was 4383.70, so a little way below the zone (which finished at 4445-4455) but easily within the Y1 ratio, so as good as it was going to get.
Of course, US markets were closed on Monday, so this is only the second day of the first triple witching expiry of 2022, an expiry that was always destined to start life below its zone.
Which should have come as no surprise, as this market has been in bear territory for some time, on top of which the zone had started falling, having threatened to for so long.
So, with everything else going on, the overriding question was where, or if, this market would get some support.
As one can see in the tables above Y2 was 4390, last Friday as well as Tuesday, but has fallen today to 4345. Considering the market closed on Friday at 4348.87 this was a moot point anyway.
The real level to watch would have been R1, which has remained the same since last Friday. So, yesterday’s intraday low of 4267.11 gives us a very good insight as to what level of sensitivity exits in this expiry. And, although it did overshoot by twenty odd points, this is not disappointing because firstly, yesterday was the first day so the market naturally takes a bit of time to adjust, and secondly, it was always going to react to the geopolitical news and be playing catch-up with Europe.
The telling point was the close, back above R1.
Then, the fact R1 has remained at this level today is also reassuring.
It is by no means out of the fire yet, but as an early indication that it will respond to the dynamic delta is a good sign, as irrational fear (or greed) is never good.
Now, we just have to see how the ratio levels evolve, and as they are already dropping below the zone this is a bearish sign but, early days.
Range: 4295 to 4495
Nb. Our comment for 03/02/22
The very reason we include our previous comment (above) is for easy reference and continuity. Therefore, following directly on from the test of R1 then at 4295 on the 22nd Feb we saw the market the very next day blast straight past that to R2, then at 4220, with the intraday low of 4221.51.
There is no denying that these were very nervous times so, for the ratios to have any affect at all, was very remarkable.
The day of the invasion the intraday low was 4114.65, just (again) twenty odd points above R3, but with the spike in the vega and the alacrity of the fall a bit of pre-emption was always very likely.
On the 25th Feb the zone moved down to 4395-4405, which is roughly where the market gravitated to but, very noticeably, it never tested the bottom boundary at 4395.
Yesterday, the 1st March, we saw the intraday low of 4279.54, when Y2 was at 4295.
And as we said last time “that it will respond to the dynamic delta is a good sign, as irrational fear (or greed) is never good” but as a triple expiry coupled with the fact there was so much Y ratio around it was always going to be extremely volatile even without the added issues of the invasion, so the fact that the ratios are even an influence can only be a good sign.
However, that’s pretty much where the good signs end, as the zone will almost definitely move down to 4295-4305, making the third downwards move in this expiry already.
Well, perhaps there maybe one more good sign, as if the zone does move down AND the market stays above 4305 then, by default, this market will find itself in bullish territory, and it has been a while since we have last seen that.
For the record the Y1 ratio bandwidth has shrunk from 260 to 210-points, and the overall Y ratio bandwidth from 435 to 360, so still ridiculously wide, meaning that even under normal conditions we would expect a trading range of at least 5% this expiry and yet, here we are, seven days in and the market literally hasn’t moved, albeit in a very exciting way.
Range: 4295 to 4395
Type: On balance decently bullish