Archive for June, 2016

Sunday, June 26th, 2016

Hear ye hear ye hear ye!!! Social Security payments will increase TWO DOLLARS per $1000 next year. But wait, before you spend the extra money, the cost for Medicare part B will increase $27.20 from last year’s cost of $121.80 to $149.00. Seniors stand to lose on the 2017 adjustment and will have less money in their pockets each month for food and medicines…..Something really is wrong with the government’s calculation of “cost–of-living” if the adjustment doesn’t even absorb the cost of the Medicare increase. Seriously, something is off here. Either we have a “cost-of-living” increase that covers the increased cost of Medicare part B or, Medicare part B should be adjusted lower. The result of all this is less money in the pockets of seniors who, because they are seniors, are unemployable. Why unemployable? Because the rampant and obvious discrimination against seniors is unchecked and sadly, seen as acceptable here in the USA. Statements referring to age as “experience” and equating industry experience to “senor roles” are all too common methods of discrimination built into, and deemed acceptable, by our system.

And, on to the next topic de jure, ladies and gentleman, we have…. BREXIT! A particular conversation we had a few months ago with a French colleague, oh I don’t know, let’s call him Joque, comes to mind on the eve of this vote. Joque, a young educated man in his mid-thirties who grew up in Paris, came to New York on a work visa a few years ago. Today, having left his family and friends, New York is his home. We asked Joque for his take on the noticeably growing population of French living and working in New York. Joque’s reaction was an interesting one. He told us of conditions described as “scary” in France: a massive influx of non-integrating immigrants and gloomy economic prospects for the young and educated. Mind you, Joque is not particularly politically minded nor does he harbor particularly strong opinions/views in one direction or the other. Sadly, we failed to put two and two together. We passed this off as the same old France that likes to protest and riot in the street each decade.

What we were in fact hearing were the seeds of populism that have been planted not only in France, but across much of the world. Fears tied to immigration, the changing/watering down of individual nation’s unique cultures, disappearing jobs and gloomy retirement outlooks have fueled nationalist movements in many EU member states and, here at home, have manifest themselves through the candidacy of Donald Trump. This Phenomenon is not simply Western; it is Global; take notice of the nationalist tides that have swept over Russia, China and, although perhaps a bit more muted, even Japan. Looking to the rise of globalization and nationalist movements during the late 19th and early 20th century and the global economic stagnation that seemed to effect even the most cut of economies of the world during the 1970s, we can see these phenomenon are like tides of the ocean, ebbing and flowing the world over. Why did we fail to recognize this populism in Joque’s words? Why do countless polls and studies underweight the risk of nationalism/populism? Perhaps, in part, it is because many of us performing the studies are not quite as effected by the woes mentioned above and subsequently are not a part of these conversations.

Although we by no means mean to relate the current state of the world to historic extremes, we would like to offer a word of caution. The Russian Bolshevik party was seen as an “extremist” party in Russia, after the Russian revolution (they did not immediately come to power but rather were one of many elected parties in the Duma). The Nazi party was seen as an “extremist” party in Germany during the 20s and very early 30s by the German population. We typically imagine these groups as having had broad support across populations in order to simplify our historic understanding of what happened; this is not the case. Alas, we will get off our soap box and digress into our weekly market commentary.

The S&P 500 September futures contract retreated 87.50 handles (points) in the Friday session, piercing and closing below our horizontal support line of 2022 closing the day at 2018.25. Both the RSI and the stochastic indicator are issuing a sell-signal with plenty of room on the downside. Our own indicator is issuing a buy-signal. The volume in the Friday session was very heavy. We will need to see if there is follow through in the Monday session. Sell the rumor buy the news anyone? Amazingly, the market’s downdraft stopped right at the 38.4% retracement number. The 50% retracement number is 1961, just in case you were wondering. If you stand back and assess the damage from the Brexit vote, it could have been a lot worse. The range for the day, including the overnight session was 120.50 handles (points). Needless to say, the volume was heavy. The day’s high was seen at 10:00am and after that the market retreated, but in an organized fashion never revisiting the overnight lows. Clearly the day session low was into the close as positions were adjusted to hedge for the weekend and any hysteria that might occur on Sunday evening. Just to bring back some sanity, the weekly range was about 120.50 points and in January we had a 133.50 range. It is likely that we will see some follow through to the downside before all is said and done on this retreat. The most frequently traded price was 2028. The Market Profile chart shows us a long wick and long tail on this normal curved chart.

Clearly, the day’s worst performer was the NASDAQ 100 which fell 200.50 handles (points) on the day. The range for the day was a stunning 259.50. Just to comfort you the range in January was 351. Both the RSI and the stochastic indicator are issuing a sell-signal with plenty of room to the downside and our own indicator is issuing a buy-signal. The volume was very high for the trading session. The NASDAQ 100 came very close to the 50% retracement number of 4223.375. The 15 minute chart shows the high at 10:00 and a slow and steady retreat into the close of the Friday session. The most frequently traded price was 4297.50.

The Russell 2000 September futures contract retreated 51.70 handles (points) in the Friday session touching the horizontal support line at 1082.10. We drew Fibonacci retracement numbers and discovered that the 62% retracement number taken from the February low is 1033. Both the stochastic indicator and the RSI are pointing lower with plenty of room to the downside. Our own indicator is pointing higher. The downside liability is to 1033 with support at 1059.50, the Fibonacci 50% line and 1052.10, a horizontal support line. It is interesting to note that the weekly range of 97.3 matches the weekly range seen in January which was 97 handles (points). Although the downside move might have felt worse than it was, it was not out of the ordinary regarding historic moves. What’s more, the Russell 2000 held better than the other indices that we follow. Friday, of all day’s the Russell 2000 rebalanced. The most frequently traded price was 1116.50 but the price with the highest volume was 1121.75 where 13.9% of the volume was traded. The initial plunge in this market was in the overnight session at about midnight. The high for the day session was at 10:00. From there, the market retreated but never went back to the spike low of the overnight session.

The US Dollar Index rallied 2.148 handles (points) in the Friday session as money ran to out of the markets looking for a safe place to hide. All the indicators that we follow herein are issuing a buy-signal. The US Dollar Index broke to the upside and then quickly retreated back inside its trading range. The next level of resistance is 97.09, 97.70, 98.609, 99.70 and then 100.36. The overnight high was seen at about 11:30pm when the DXE traded up to 96.70. During the day-session the market traded between a high of 96.05 and a low of 95.110. The most frequently traded price was 95.775 and 95.550. 9.7% of the day’s volume was seen at 95.85. The trading range seen in the US Dollar Index is clearly seen in the weekly and the monthly charts. Remember for this current crisis, the US Dollar Index is a safe place for money to hide, that said, with possible anticipated instability because of the coming elections in the US, that safety haven might be lost and the funds would likely flow into gold.

Crude oil retreated in the Friday session as the US Dollar appreciated. The intermarket relationship held strong as anticipated. Crude oil remains in a trading range of 45.83 to 51.67 and until it either breaks to the upside or plunges to the downside, it will be stuck here. The weekly chart clearly shows several trading ranges. Even the Bollinger Bands are going flat. There is concern that Europe and England will or could move into recession which will impact crude oil. The most frequently traded price was 47.75.

You have to love gold for the hysteria trade….up 55.2 handles (points) in the Friday session. Every time-frame reviewed is positive. Gold is the ultimate safety trade even safer than the US Dollar especially given the upcoming Presidential Election. Oh, by the way, no matter what these candidates say they will do, they essentially can only try to do. People tend to forget that congress must agree and then there is the judiciary which can still stop illegal actions even by a President. Gold is an emotional trade. It is also a hedge against inflation which some see coming. The most frequently traded price was 1320.

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