Archive for April, 2016

Sunday, April 24th, 2016

www.OptnQueen.com
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April 24, 2016

There are two ways for employers to handle a $15.00 minimum wage without actually paying it: 1. Make all employees part of management, removing the need to pay hourly wages and 2. automate work processes previously dominated by humans (use robots). To avoid paying benefits to employees, employers could potentially hire only part time workers. Will these reshuffling tactics be employed to skirt wage and benefit requirements? We are concerned that even with higher hourly wages, the average income earner will continue to have higher costs and less take home pay, and we aren’t even factoring in the stealth cost of living increases seen at the food store. All in all, the average wage earner is still behind the “eight ball.”

This earning’s quarter reflects the concern we expressed in October regarding the strength of the US Dollar and its effect on multinationals. As we pointed out then, this earning’s season has reflected a retreat in sales and an outlook that has been, at best, guarded for the future. That said, earnings are a current history; they do not reflect what is to come. We suggest that if you want a handle on the prospects for earnings growth of multinationals, that you seriously study that technical action of the US Dollar. Unfortunately the market has limited peripheral vision and does not see much beyond what is clearly in front of it. A strong US Dollar affects not only crude oil and commodities, but also trade regarding exports. Further, a strong US Dollar is deflationary and thus imports are cheaper as well. This not only affects our exports but also our imports. The US Dollar is at a juncture of support and thus, if it again starts to gain strength, it will impact future earnings as well as commodities.

The S&P 500 June futures gained in the Friday session adding 3.25 handles (points) for the day. The immediate resistance area is 2105 which, a high printed in the Wednesday session, should be easily removed. That said, our own indicator is issuing a sell signal; however, the RSI is issuing a buy from 62.10 level. The stochastic indicator is on a sell but curling to the upside and could issues a buy-signal as soon as the next session, likely in the Tuesday session if, and only if, the strength continues. We do have an FOMC meeting this week. With the BREXIT vote on June 23rd, and fairly soft numbers here in the USA, it is unlikely that the FOMC will change anything for now. The Bollinger Bands are stable, not expanding or contracting. Steady as she goes. The major resistance will be at 2126.75. Should the market remove that line, expect to see a quick move to the upside. The move may not be sustainable but should attract the trend-followers who will jump on board the trade. For now, we are stair-stepping our way higher. The most frequently traded prices were 2084-2086 both equally frequently traded with the heavier volume at 2086-2087. The daily 1% by 3-box point and figure chart shows a market above the trend line and a market in congestion. The 0.2% 60 minute chart has an old target of 2169.65 and remains above all trend lines. All time frames reviewed, intra-day, daily, weekly and monthly are positive. The daily, weekly and monthly show us that we are approaching resistance areas. The longer charts especially the monthly looks as though we are topping.

The NASDAQ 100 closed the Friday session with a loss of 31 handles (points) and has broken the uptrend line at 4470.60. The downward trending channel lines are 4530.75 and 4424.49. This is a sharp contrast to the S&P 500 and especially the Russell 2000 which gained in that same Friday session. Naturally all the indicators that we follow herein are pointing lower and with slightly increased volume. Both the stochastic indicator and the RSI are flashing a sell-signal on the weekly chart. Our own indicator is not giving a signal at this time. The most frequently traded price was 4492 however the highest volume was seen at 4442 and 4468 which both received the most volume in the Friday session. The daily 1% by 3-box point and figure chart remains above the uptrend line and is in an area of congestion. The 60 minute 0.2% by 3-box point and figure chart is below the downtrend line and has an old target of 4366.08. This market needs to stay above 4427 or that target will become a reality.

Clearly the market believes that we are in a new bull uptrend……the Russell 2000 rallied 14 handles (points) in the Friday session out pacing the S&P 500 and the NASDAQ 100 which actually lost in the same session. The market piles into small capitalization stock when it believes that there will be an upside surge. The same logic appears on retreats with the players believing that the downdraft will be greater in this index than in the large capitulation S&P 500 index. This also has the earmarks of a short covering rally with the trend followers dog piling into the trending object du jour. Both the stochastic indicator and the RSI are pointing higher but our own indicator is clearly pointing lower. That said, the ROC continues to point higher telling us that “there is gold in them thar hills”…….well that is what they think. Remember too that this index is miles away from the high seen in June of 2015. The weekly chart shows that all the indicators that we follow are pointing higher; however, the ROC is pointing lower, or losing some steam. The downtrend line on the monthly chart is at 1146.52 very close to our closing level. The Russell 2000 close almost at the high. Is this a true rally or just short-covering? We certainly don’t know as yet. We can say that short volume is dropping…..hum? The most frequently traded price was 1133.50. The highest volume was seen at 1144.00 where 7.8% of the day’s volume traded. When we look at the 20 minute tradeflow volume and price chart we see that the volume clearly picked up in the Friday session. The 12 by 3-box point and figure charts shows that this index has broken out to the upside.

US Dollar Index rallied 0.516 in the Friday session. There is some resistance at 95.21. Should this index close above that level, we expect to see the market trade above 96.42 to 96.66 and 96.90. The most frequently price in the Friday session was 94.80. The highest volume was seen at 94.85 where 9.5% of the day’s volume traded. All the indicators that we follow herein are pointing higher. So far this market has been range-bound but looks to be ready to revisit the upside. All the indicators continue to issue a buy-signal albeit some are at overbought levels. The daily 0.5% by 3-box point and figure chart is below the downtrend line. The 60 minute 0.2% by 3-box point and figure chart has an upside target of 97.26. This index looks like it has formed a “W” pattern. To complete this pattern we need a close above 95.21 and which would give us a target of 96.65. Generally speaking this chart is positive. Clearly the US Dollar Index will react to any action by the FOMC which, is meeting this week.

Crude oil broke out to the upside in the Wednesday session. This move was confirmed in the Thursday session as oil closed the week above the resistance line. Unfortunately, this was achieved on declining volume. Both the stochastic indicator and the RSI are clearly pointing higher. Our own indicator is still issuing a buy-signal but looks as though it will issue a sell-signal within a day or so. The market gapped higher in the Thursday session and failed to make a higher high in the Friday session. So where is the next resistance level? It is 50.89 which is an important level and a price at which drillers could justify, perhaps, adding rigs? The weekly chart shows the stochastic indicator and the RSI continuing to point higher. Our own indicator is issuing an iffy sell-signal. For the week, the volume decreased slightly from the previous two weeks. The monthly chart looks good with all indicators that we follow herein pointing higher. Unfortunately the volume has been declining for the past two months. The daily 1% by 3-box point and figure chart continues above the uptrend line and is generally positive. The 60 minute by 3-box point and figure chart is also positive but needs to trade higher to break out of this area.
The most frequently traded price in the Friday session was 43.50.

US Dollar Index rallied 0.516 in the Friday session. There is some resistance at 95.21. Should this index close above that level, we expect to see the market trade above 96.42 to 96.66 and 96.90. The most frequently price in the Friday session was 94.80. The highest volume was seen at 94.85 where 9.5% of the day’s volume traded. All the indicators that we follow herein are pointing higher. So far this market has been range-bound but looks to be ready to revisit the upside. All the indicators continue to issue a buy-signal albeit some are at overbought levels. The daily 0.5% by 3-box point and figure chart is below the downtrend line. The 60 minute 0.2% by 3-box point and figure chart has an upside target of 97.26. This index looks like it has formed a “W” pattern. To complete this pattern we need a close above 95.21 and which would give us a target of 96.65. Generally speaking this chart is positive. Clearly the US Dollar Index will react to any action by the FOMC which, is meeting this week.

Gold lost 17 handles (points) in the Friday session. All the indicators that we follow herein are pointing lower with plenty of room to the downside. Gold has been in a trading range since February and continues to look as though it will stay in that range. The bottom of the range is 1206.0 with an outlier horizontal line at 1193. The upside has resistance at 1261.70, 1279 and 1287.8. The weekly chart looks as though it is under pressure and range-bound. The monthly chart show the range clearly beginning in September of 2014. It is a very long base if you take it back to January of 2013. The most frequently traded price was 1247.50 in the Friday session. The 60 minute 0.3% by 3-box point and figure chart shows that gold is in a congested area of the chart, above the uptrend line and just below the internal downtrend line. The daily 0.9% by 3-box point and figure chart has an upside target of 1712.22. This chart is positive.

Risk
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Past performance is not necessarily indicative of future results.
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