August 14th, 2017

Option Queen Letter
By the Option Royals
Jeanette Young, CFP®, CMT, CFTe, M.S. and Jordan Young, CMT
August 13, 2017

We read a lot of negative articles regarding the Trump Verbiage and twitter storms. Let us remind you that we are dealing with a “nut” in North Korea who always, as far as we can remember used inflammatory verbiage and aggressive actions. Why can’t our President express himself in terms that this idiot will understand? This reminds us of a movie called The Mouse that Roared. It was about a tiny country that wagged war against the United States, not to fight but to get financial help for the country which, clearly would lose against any conflict with the USA. This was a fabulous book and a very funny film. While we don’t believe that this is what North Korea is up to, we believe that there are similarities regarding the size of the aggressor and our size.

The US stock market paused this past week giving up little ground, but retreating nonetheless. We needed a little consolidation and could use a bit more. Friday surprised us with a rally. Perhaps it was based on shorts covering their positions in front of a trade less weekend, we don’t know. The one-day retreat did get us oversold.

The S&P 500 gained 3.25 handles (points) in the Friday session. The high of the day, 2446.50 was just one handle shy of the resistance line at 2447.50. The Bollinger Bands are again expanding after a pinched contraction seen on August 9th. The stochastic indicator is curling to the upside but is not issuing buy-signal as yet. Should the market rally for another day, that signal will be seen. The RSI is pointing higher after having hit an oversold level. Our own indicator continues to point to lower levels. The rout seen in the Thursday session took us out of our trading range and if it fails to return closing above 2447.50 by tomorrow or Tuesday, than we will moving back to the old trading range of 2447.50 to 2402.25. The most frequently traded price in the day session was 2442. The highest volume for all sessions was seen at 2439 where 12.8% of the day’s volume was traded. The heaviest volume for the day was seen before the New York open and right after that open. For the rest of the day, we see-sawed back and for between the high and the low of the session. We closed the session pretty much where we started from. It really looked as though people were inclined to keep the wallet on the hip for the weekend. We guess that if nothing happens over the weekend that the market will try to rally as those who missed the rally try to catch up with the gains of the market. The weekly chart still shows a market in an uptrend although, the candlestick seen on the chart is decidedly bearish. The monthly chart shows the S&P sitting on the five period exponential moving average. Although this is a monthly chart, we need to watch that level.

The NASDAQ 100 rallied a strong 47.50 handles (points) in the Friday session closing the day near the top of the range. The NASDAQ managed to regain about half of what it lost in the Thursday session. Both the stochastic indicator and the RSI are issuing a buy-signal. Our own indicator continues to issue a solid sell-signal. The Bollinger Bands are tight or contracted telling us that the next move will be volatile. The next level of support on the downside is 5761. The most frequently traded price was 5826.60. The heaviest volume was seen at 58.32 where 8.7% of the day’s volume traded. The Market Profile chart shows a bimodal curve. That curve shows a bulge in the New York day session and a lower bulge in the overnight session. The intra-day high was seen at about 2:10 and the day’s low at 10:00. We closed the session pretty close to the highs. The heavier volume was seen in the early part of the session with the afternoon session showing lighter volume. The weekly chart shows that this market continues in an uptrend. There was a worrisome breech of the 5 period exponential moving average, but it appears that this index closed only slightly below that line. The danger is if the index remains here, there will be a very clear sell-signal. All the indicators for the weekly time-frame are issuing a sell-signal.

The US Dollar Index retreated 0.329 handles (points) in the Friday session. We are sitting atop the support line at 91.55. There are a pair of channel lines drawn on the chart, one is to the upside and another to the downside. The upside channel lines are93.932 and 91.55. We touched the support line at 91.55 in the session but managed to bounce off the line. The wider down-trending channel lines are 93.60 and 92.79. We have a very clear sell-signal issued by both the stochastic indicator and the RSI. Our own indicator is unclear. The Bollinger Bands are contracting. The most frequently traded price in all sessions was 93.30. The high for the day session was seen at the opening of trading and the low, at 1:30pm. After that, the market rallied for the rest of the afternoon slowly regaining some of the lost ground from earlier in the session. Both the weekly and the monthly chart show that we are at a very important support level which, if broken, will open the door to 88 and lower.

Gold continue its rally and gained 6.5 handles (points) in the Friday session. All of the indicators that we follow herein continue to point higher albeit at overbought levels. The most frequently traded price was 1292. The first resistance point is just a few points away at 1295. All the indicators that we follow herein continue to issue a buy-signal. The most frequently traded price was 1293. The slop of the short-term uptrend line is too steep for gold to continue at this pace. Gold either takes out 1288 and 1302, or it will retreat. The weekly and monthly charts are encouraging for the gold bugs. We are a bit more skeptical and would like to see some of the above mentioned levels removed.

Crude oil is trading around the 48.80 level. It has been going sideways for more than a week with occasional spirts to both the up and down sides. The indicators that we follow herein are all still positive but they seem to be losing momentum. The uptrend line is at 47.38. The product remains in a trading range. The most frequently traded price in the Friday session was 48.25. The weekly chart has both good and bad points. The uptrend line is 47.32 and the downtrend line is 10.20. Until we either breakout to the upside or breakdown there is no action to be taken in this product.

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Past performance is not necessarily indicative of future results.
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