Jeanette Schwarz Young, CFP®, CMT, M.S.
Jordan Young, CMT
83 Highwood Terrace
Weehawken, New Jersey 07086
March 29, 2015
The Option Queen Letter
By the Option Royal
We are going to repeat a statement we made many months ago; the FOMC is not going to raise interest rates anytime soon. Why? Because it would snuff out any economic expansion in the pipeline, strengthen the US Dollar, stall the unimpressive job market's growth and negatively impact corporate earnings. These are only a very few reasons why the Federal Reserve will take a wait and see attitude. The mess created by the Fed's tinkering with the business cycle's booms and busts will not end well. Sooner or later, the piper will have to be paid. There is no way we can tell you when only that this will occur. This is why we have and continue to advise keeping stops tight and paying attention to your investments.
The fallout from falling oil prices, as we also pointed out months ago, goes far beyond the oil workers. Will it be apparent in the jobs data? The data will probably not reflect the true cuts because many of these workers are private contractors or working as private contractors. Businesses do this so that they do not have to pay benefits for their laborers. The other impact on job cuts and well closures are the effects on the businesses that survive to supply food and needs of these workers. The heavy machinery used for well drilling will not be ordered, or even serviced. The effect is like seeping water from a roof leak: you see the damage but haven't figured out where the actual leak is. The next step in the oil saga is that eventually, these shut-downs of wells will result in increased imports. With a strong US Dollar, you can buy more but because we are producing less oil, the supply factors will shift to the exporters and, in the end, oil will go up in price. Bottom line is that this will lead to higher prices for oil. So, a strong US Dollar helps business exporting to the USA (cheap products), hurts US exporters because our products are no longer competitive, and will put pressure on multi-national corporations which just might begin laying-off workers. Yahoo……what a mess!
On the other hand as the US Dollar strengthens, and European banks offer negative interest rates, money flows into the US stock market and debt market as the safest place to invest.
The S&P 500 rallied in the Friday session ending the four day decline with a final up day on the last day of the week. The horizontal line of support of 2033.25 was tested and rejected in the Thursday session. Friday's session was an inside day with good volume. Perhaps it was an effort to close out shorts in front of the weekend or perhaps an attempt to dress or undress portfolios for the end of the month, we certainly are not sure. The 5-period exponential moving average is 2063.07. The top of the Bollinger Band is 2121.15 and the lower edge is seen at 2033.07. All the indicators that we follow herein are beginning to curl upwards but none have issued a buy-signal. The downward trending channel lines are 2077.80 and 2024.82. The most frequently traded price for the Friday session 2050.00 with a volume of 21.2% of the day's volume. We remain above the Ichimoku Clouds for all time-frames. The daily 1% by 3-box point and figure chart remains positive.
The NASDAQ 100 recovered from the four-day sell-off adding 13 handles (points) in the Friday session. The 5-period exponential moving average is 4352.34. The top of the Bollinger Band is 4506.17 and the lower edge is seen at 4276.49. The horizontal line of support is 4270. The downward trending channel lines are 4424.03 and 4278.46. We are above the Ichimoku Clouds for all time-frames. The most frequently traded price for the Friday session was 4312.50. The highest volume was seen at 4308.75 which saw 19.7% of the day's volume. The horizontal support line is 4270.00. The most frequently traded price in the Friday session was 4312.50. 19.7% of the day's volume was seen at 4308.75. The NASDAQ 100 could be either building a top or……a flag, not sure yet.
The Russell 2000 added 7.70 handles (points) in the Friday trading session on light volume. The 5-period exponential moving average is 1239.23. The top of the Bollinger Band is 1265.92 and the lower edge is seen at 1207.94. The horizontal support line is 1220.10 which held in the Thursday session. Although both the stochastic indicator and our own indicator continue on sells, they are beginning to curl to the upside and could, within a day or so, issue a buy-signal. The RSI has turned to the upside. We are above the Ichimoku Clouds for all time-frames. The most frequently traded prices in the Friday session were 1228.00-1230. 14.6% of the volume was seen at 1232. By the way, the longer term uptrend line remains in place so do not rush to short this index until you have evidence of a break of that line.
Crude oil retreated in the Friday session printing a lower high and a lower low. When crude oil was rallying, it failed to remove the 54.47 horizontal resistance line which was not bullish. The stochastic indicator is issuing a sell-signal as is the RSI but our own indicator continues to point to higher levels. We are below the Ichimoku Clouds for all time-frames. The upward trending channel lines are 51.82 and 46.60. The 5-period exponential moving average is 4849.37. The top of the Bollinger Band is 53.12 and the lower edge is seen at 42.49. The volume dropped off in the Friday session. The most frequently traded price was 50.25. People are looking for a bottom in crude but we would like a little bit more evidence before we are convinced. There remains the outlier on the downside which would take us to 32.7 and then the 25 area. We do not see the 25 area at the moment but would bend to the 32.70 area as a support zone should crude take an awful fall.
Gold retreated in the Friday session after a spectacular seven-day run to the upside. The 5-period exponential moving average is 1193.91. The top of the Bollinger Band is 1217.26 and the lower edge is seen at 1138.66. We remain below the Ichimoku Clouds for all time-frames. All the indicators that we follow herein are pointing to the downside. Gold appears to be stuck between 1141.40 and 1223.30 and until or unless it breaks one of these levels, will likely continue within that range. The most frequently traded price in the Friday session was 1200, which accounted for 36.3% of the day's volume. Until or unless gold breaks above 1223, it will remain range-bound.
The US Dollar Index retreated slightly in the Friday session leaving a doji-like candlestick on the chart. The RSI is flat at 49.49, which is near neutral and the stochastic indicator is also flattish. Our own indicator has just issued a buy-signal. The 5-period exponential moving average is 97.625. The top of the Bollinger Band is 100.696 and the lower edge is seen at 95.093. The downtrend line is 98.515. The US Dollar looks as though it is trying to put in a rounded bottom at this level. The most frequently traded price, 97.580, in the Friday session was also the high volume area accounting for 11.6% of the day's trade. This market looks as though it might try to rally back to 99.264. Although there are too many US Dollar bulls it will take a while for the trade to even out, remember, the trend is your friend, do not fight it.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment