Archive for November, 2017

Sunday, November 19th, 2017

Option Queen Letter
By the Option Royals
Jeanette Young, CFP®, CFTe, CMT, M.S. and Jordan Young, CMT
November 18, 2017

. The heck with taxes and with NAFTA…….eat turkey and be happy as we enter the Christmas shopping season.
Remember, most retailers make most of their income during this season. Brick and mortar shops will continue to have difficulty competing with the on-line free delivery platforms; thus, retailers will have to do something special to entice buyers out of their homes, into their cars, and onto the hunt for a parking space so that they can shop. The customer experience has gained a new level of importance in this world as buyers demand something that cannot be purchased on-line to warrant their efforts….this is often hard to accomplish…. might we suggest food and wine? Will this happen, who knows. We continue to believe that e-commerce masks many of the problems in brick and mortar retail. Antiquated check-out processes, disorganized sales floors and a customer logistics process that no longer works in the era of instant gratification seeking consumers equal a painful shopping experience. There are many reasons to want to touch and feel certain products; however, many retailers need to get organized and come up with a hook to draw customers into the stores.

As to the tax legislation making its way through congress… Get rid of the old tax system, it doesn’t work…. Start all over with a value added tax (VAT) and add to that a graduated tax for all those earning in excess of 250,000 dollars a year or more for a single earner. That amount should be graduated higher as the income goes higher. In this way, we will catch all of income earners, generally paid in cash, who are not paying their fair share of taxes. Many jobs in society are paid off the books; these individuals, collecting their income in cash, skirt tax payments. Is this fair to the working stiff whose taxes are deducted from income earned? No, and the general populous is getting really angry about the system that allows this inequity to continue. As to corporate taxes, so long as they pay their share of the tax burden, we are okay with a tax reduction. We also feel that tax on income derived from dividends should be fully taxed on those earning over 250,000 dollars a year. In this way, people like Buffett will no longer pay less tax than his secretary does. So here is the plan, all those earning less than $250,000 pay no income tax. Everybody pays a VAT tax and those earning over $250,000 must take dividends and profits as ordinary income. Corporations, who knows. There should be a hefty tax levied on corporations keeping money abroad and there should be a tax holiday on repatriating cash funds held abroad.

The S&P 500 lost 9.25 handles (points) in the Friday session. This index is trading between two horizontal lines one at 2562.64 and the other at 2585.00. The Bollinger Bands are somewhat contracted and to blow to either direction at this time. The stochastic indicator and the RSI both continue to issue a sell-signal, but our own indicator is issuing a buy-signal. The market Profile chart shows an absolutely normal bell shaped curve which falls in between the bimodal curve seen the previous day. We basically put in trades and filled volume from the previous day. The most frequently traded price was 2581.20 and the highest volume was seen at 2580 where 18.9% of the volume was seen. The Bollinger Bands are contracting on the point and figure chart which looks like, at the moment, it is building a congestion zone. The market opened the day session a bit softer, tried to sell-off and then tried to rally. Basically the market went sideways until about 12:20 when the volume totally dropped off. The market was unable to maintain its level and began drifting downward and by 3:50 the volume returned with a downward thrust printing the low for the day and closing the day just slightly about that level. There is nothing to read into from that action except to say that apparently, nobody wanted to be long or short over the weekend so, they exited their positions.

The NASDAQ 100 lost 31.25 handles (points) in the Friday session but managed to say above the short-term uptrend line while failing to poke through the horizontal resistance line. The Bollinger Bands are beginning to contract. Both the stochastic indicator and the RSI continue to issue a sell-signal. Our own indicator is issuing a buy-signal. The most frequently traded price was 6342-6344.10. The heaviest volume was seen at 6331.50 where 13.4% of the day’s volume traded. The Market Profile chart shows us that the overnight trade was much more optimistic than the day trade although the highest volume was seen during the day-session. The point and figure chart looks like the twin towers with two attempts at a breakout to new highs. The resistance point is at 6350. The intraday chart for the NASDAQ 100 shows a slow sellers drift all day long from the opening to the closing of the session. The market closed very close to the low for the day.

The US Dollar Index lost 0.244 handles (points) in the Friday session. This market seems to be drifting in a narrow range between overhead resistance at 95.174 and horizontal support at 92.905. The Bollinger Bands seem to have stopped contracting which warns us that volatility might be returning to this market. We have a downtrend line at 94.065 and down trending channel lines at 94.38 and 93.216. Unless or until the most recent high is removed, 95.07, we seriously doubt that the US Dollar bears will view the rally as anything more than a blip in the dollar. Serious concern will erupt should the US Dollar challenge and remover the 95.174 area but until then, complacency should rule the day. Both the stochastic indicator and the RSI continue to issue a sell-signal and our own indicator is issuing a buy-signal. The most frequently traded price was 93.55. The Market Profile chart illustrates the congestion and complacency currently in this market. The intraday TradeFlow chart clearly indicates a slow volume directionless market. The weekly chart shows the weakness in this market. Are we forming a “W”…..could be. We will have to watch this one.

Crude Oil gained 1.54 handles (points) in the Friday session closing above the short-term downtrend line with volume. The door is now opened to the recent high of 57.92, that is, if this rally can continue. Is this a “one day wonder?” The longer up trending channel lines show support at 53.18 and resistance at 57.712. The Bollinger Bands seem to be narrowing. Both the stochastic indicator and the RSI continue to issue a buy-signal. Our own indicator is drifting lower. The volume did spike in the session. The Market Profile chart printed a tri-model chart. The most frequently traded price was 56.15. This market hit its high at 2:20 with heavy volume. The rest of the day, shows the market drifting higher on low volume.

Gold gained 16.2 handles (points) in the Friday session. The Bollinger Bands are beginning to expand telling us that volatility is returning to this market. We did see it breakout to the upside above the short-term downtrend line with good volume. We continue to see this market trade between the support level of 1260.50 and the resistance level of 1303.8. All the indicators that we follow are positive. Market Profile shows a bimodal curve with the higher bulge during the day session. The most frequently traded price for all session was 1282.50; however, the most frequently traded price during the day-session was 1294. The TradeFlow chart shows us that the market traded higher from the beginning of the day-session with good volume. The high was printed at 1:20 with good volume. From there, the market drifted down a tad.

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