MBCC Trading Highlights 22nd November'22 - What is the technical set up of the market and why is it being controlled by derivatives?

As you can see in the chart above, the market remains stuck in a very narrow range right on the cusp of a strong downward trending resistance level around 4000. For the market to be able to break higher it needs to hold the 3955 level, but if loses that then it can fall down to 3920, and 3850 and lower as we mentioned yesterday. But if we take out 3980-4000, we can ultimately get to 4125, which is the big resistance of the downward range going all the way back from the highs of this year.

So that is the technical set up, of course as we say, technicals do NOT tell you where the market will go, just where it can if nudged in the right direction. But the right direction comes from bottoms up fundamentals and macro, the flow just pushes and pulls it. For now we also mentioned another technical factor, the gamma set up of the market into December expiration is such that there is a lot of open interest around 3900-4000, we analyse exactly what strikes are at risk here and what that means for actual futures hedging and flows. Quarterly expiries are very important for market direction, and something often overlooked by the average investor.

But we are not a “if this or that” shop, where do we think the market goes and what is really driving it? Sign up to read the full note with our live views.

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