Option Queen Letter
By the Option Royals
Jeanette Young, CFP®, CMT, M.S. and Jordan Young, CMT
January 15, 2017
OMG…….this is going too far, the Ringling Bros. and Barnum & Bailey circus is closing down. Here is to all you elephant lovers who took these iconic, well treated, animals away from the circus causing a drop in attendance which finally led to the circus closing down… gone, poof, never coming to town again! That’s not even the wrost part; 475 innocent people will lose their jobs, not even counting the support industries that helped the circus survive. It is sad that future generations of ogling children will never see the famous three ring Ringling Bros, and Barnum & Bailey circus live performance ever again!
The animal rights group, PETA, said that it “heralds the end of what has been the saddest show on earth for wild animals, and asks all other animal circuses to follow suit, as this is a sign of changing times.”
Well maybe we don’t want to change times…..have you seen the results of “changing times” in BREXIT or in the TRUMP election? Maybe this very loud litigious group should rethink what they are doing.
Perhaps there was a lot wrong with the Baby Boomers, or the Gen Xers but we didn’t cause the circus to shut down. Enough with the PCers. Let people say what that think, rather than covering up real observances with a smile and pleasant comments. “The truth will set you Free” remember that saying….well, be truthful. If Aunt Sadie looks strange in her new hat, tell her before she goes out and just looks bad all day. Our society needs a spark of truth. You can speak the truth without hurting someone. It is so much easier to hear the truth than to live the lie and find out it was a lie.
Welcome to an Alfred E. Newman market…..for those who don’t remember him, he was the face of Mad Magazine.
It is not the policies that are totally Mad, but rather the interpretation of what is going on that seems to be nuts. As to our tweeting future President, remember he is a world renowned MARKETER. His antics are intended to keep us engaged and alert. Take everything with a grain of salt; if he rants about a stars comments, well maybe they are overpaid and undereducated but have lots of money and power….whatever!
The market is doing its best to try to figure out what the best stock to own is and where to hide in case of a stumble along the way. The goals haven’t changed and those goals are to make money. Once money is made you can rant as much as you like.
On January 20th we will inaugurate our next President. He is not an apprentice but “the real deal,” President of the United States of America.
The S&P 500 gained 7.25 handles (points) in the Friday session. Don’t get too excited about that because this index has been in a trading range since December 9th of 2016. The high of the range was 2278.25 and the low was 2228. Regarding the low, it was a one-time sell-off with a very speedy rebound back to the comfort zone of 2267 or so. The Bollinger Bands are narrow but are neither expanding nor contracting. The volume is nothing to write home about. The indicators are mixed with the stochastic indicator at over bought levels with a continued buy-signal and the RSI at 60.98, also seemingly in a rut. Our own indicator has just issued a sell-signal. The most frequently traded price in the day session was 2270.50 but the highest volume of 10.5% was seen at 2270. The TradeFlow chart clearly shows a bulge of volume at 3:50-4:00 when traders were flattening positions prior to the 4:15 close of the futures. The 25 by 3-box point and figure chart shows the congestion clearly. The bottom line; after reviewing the intraday, daily and weekly charts is that something is going to give. If the breakout to the upside isn’t on high volume and a spike to the upside, then, we believe that a retest of the low, first with a test of 2248.50 will be seen leading to a test of the 2228 low will be seen, then the door to 2211 will be opened where good support will be found. Our advice is stay nimble and be ready to move with the market. Also remember once the shorts have covered on the upside, the market will fall back and test the breakout zone. On the downside, once the levels are breeched, sellers and trend-followers will appear and could take the market a bit lower than projected. If we were to bet, we would go with the downward side following the Inauguration celebrations. In other words, we have another bullish run for the next week followed by a possible sell-off during the week of January 23rd.
The NASDAQ 100 rallied 25.75 handles (points) in the Friday session setting a new high for the index. This index closed the session near the highs of the day, which, is bullish. The only missing ingredient for this action was volume which, was not robust. Bothe the stochastic indicator and the RSI are overbought but continue to point to higher levels. Our own indicator has just issued a sell-signal. The point and figure 50 by 3-box chart clearly shows a breakout to the upside. The Bollinger Bands are expanding. The TradeFlow 10 minute intraday chart shows a volume bulge after the 4:15 close. The lion’s share of the volume14.8% was seen at 5055.00. The most frequently traded price for the day session was seen at 5057.50. The bottom line here is that the NASDAQ 100 will likely try to expand the high seen near noon during the Friday session. Should that fail, we will see the market retest the 4990 level. We believe the upside is a more likely story given the Inauguration this coming week. That said, we would expect to see a retreat during the January 23rd week which will give us an opportunity to reassess the markets.
The Russell 2000 rallied 15.10 handles (points) in the Friday session. The high for this index was seen on December 12th 2016. Since that time two attempts to remove that high were seen, both of which failed. We have been going sideways since December 7th 2016. The low was 1343.50 and the high was 1396/80. Both the stochastic indicator and the RSI continue to issue a buy-signal. Our own indicator is issuing a sell-signal. Volume has been light. The most frequently traded price was 1374.00 which is the mid-point on the Market Profile chart for the day-session. The Bollinger Bands are very narrow and are still contracting. This shows that volatility will return to the market, unfortunately, it does not tell us when. It is like the sentiment indicators which are extremely bullish, tell us that the market has gone over the edge and likely will retreat. The problem with both is that we know the move is coming but we don’t know when.
The US Dollar Index retreated 0.1997 in the Friday session approaching the horizontal support line of 100.75. All the indicators that we follow herein continue to point lower. The Bollinger Bands are again beginning to expand. The downward sloping channel lines are 102.73 and 100.56. The most frequently traded prices in the day-session were 101.475 and 101.45. The Market Profile chart shows that this was an inside day. The all sessions most frequently price was 101.2. The horizontal support numbers for the US Dollar are 100.75, 9949, 99.09 and 95.90. Keep the wallet on the hip until we see where this index is going to go. We believe that should the support hold, we will likely move back to the upside.
Crude oil lose 0.49 handles (points) in the Friday session. The Bollinger Bands are gently contracting. We witness the high of the day kiss the downward sloping channel line. The channel lines are 53.14 and 49.84. Both the stochastic indicator and the RSI re issuing a sell-signal. Our own indicator is issuing a continued buy-signal. The volume fell off in the Friday session. We see support at 50.71, 49.61, 48.60 and 44.82. Should the market breakout to the upside and close above 55.24, 59.68 will likely be the next resistance area leading to 61.25 and 61.39. It should be noted that the retreat was on heavy volume on the weekly chart.
Gold lost 2.5 handles (points) in the Friday electronic session. We see expanding Bollinger Bands and a rounding bottom. Although the market retreated in this session it continues to trade above the uptrend line. The volume was average for the session. The stochastic indicator is issuing a sell-signal at an overbought level, the RSI continues to point higher at almost overbought (74.12) and our own indicator is now issuing a sell-signal which isn’t to be taken seriously insomuch as it flips between buy and sell-signals. Gold began its sell-off at 8:30 and continued until about 9:50 when it printed 1187.50. Some heavy volume trades occurred right after that but then the volume faded away by 10:10 and we watched the market drift higher until about 2:40, all on light volume. From there the market again drifted lower. Although we would like to join the “gold bug,” we will opt to wait and see what happens going forward. Should the economy really begin expansion, we would be buyer of platinum.
Trading futures, options on futures and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.
Past performance is not necessarily indicative of future results.
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