Option Queen Letter By the Option Royals

Jeanette Young, CFP®, CMT, M.S. and Jordan Young, CMT

4305 Pointe Gate Drive Livingston, New Jersey 07039

www.OptnQueen.com optnqueen@aol.com November 11, 2015

Here in the northeast, the weather has been fantastic. We have been enjoying our Indian summer

and, as the major indices continue to rally in the fourth-quarter, so too have the markets. We did;

however, see a minor retreat on the very positive “Jobs Report” in the Friday session. The

reports highlights the expansion of low paying job. Will it translate into consumer spending for

the all-important Christmas Season? We certainly don’t know. We do know that the US Dollar

surged in the Friday session and that folks will continue to make our exports less competitive.

Why did the US Dollar surge? It is simple, because the positive “Jobs Report” signaled to the

FOMC that the economy is enjoying an expansion and thus a rate hike can be justified. Will

they do it in December? Who knows, but we tend to doubt it. It is more likely that if they hike,

it will be in January. What does a rate hike do to the currency? It makes it stronger. Money

floods into the US looking for the more appealing interest rates and demand increases for the US

Dollars needed to purchase those fixed-income instruments. Remember a time not too terribly

long ago, when Switzerland was faced with a very strong currency. What did it do? The Swiss

pegged their currency to the Euro thus (doing a Houdini currency adjustment) keeping their

currency in check, preventing further appreciation. The Swiss did not need do anything more:

the currency retreated... well somewhat... Sadly for the FOMC, this isn't a model that is

adaptable to the US and thus we will continue to lose exports and have greater difficulty in the

global markets. Manufacturing in the US will continue to retreat and we will attempt to continue

the expansion of our service industries. The bottom line is, this is good for our competition and

bad for our companies.

Will the currency wars resume with each country bashing their own currency in an effort to

maintain their price advantages? Food for thought... Speaking of food, this sort of behavior

reminds us of the food fight scene in “Animal House.” The incident started off fairly low key.

Bluto, using a puff pastry in his mouth, mimics an exploding zit. The scene grows quickly into a

hilarious real food fight... ah those college days we truly miss them. How does this relate to

counties pressuring their currency lower to stimulate sales and production? One country sees

what the other is doing and before you know it, there is currency devaluation all over the lot... a

currency food-fight in progress… (we believe this is the technical term), resulting in instability

in currencies and, the return of gold. The US multinationals will feel the continued pain of a

strong currency. This translates into difficulty remaining competitive regarding exports. Our US

Dollar simply makes our products too expensive, opening the door to poor sales and a flood of

cheap imports just in time for the Christmas Season.

On another note, are we approaching the end to stock buy-backs? Well, probably yes, as interest

rates ratchet higher money becomes more expensive and thus it becomes costly for companies to

borrow in the market and buy-back their shares. Another fudge factor bites the dust! Oh and

you wonder why income earned made a nice advance? Try remembering that the minimum

wage was recently jacked up….tada!

In a recent article in “Barron’s” Ben Levisohn expanded on the subject of earnings…. noting

just what we have been saying for years. You can massage them anyway you want them to turn

out. We continue to believe in technical analysis, you see why? Supply and demand trumps all!

The Friday “Jobs Report” at first blush was very positive. The market initially took this as a shot

across its bow and retreated. By the end of the session the S&P 500 regained all of the loss

added a couple of points then closed the session with a shallow decline of 0.50. We see a

possible bull flag on the chart along with two doji-like candlestick from the Thursday and Friday

trading sessions. The “W” pattern is almost completed and is close enough for us not to wait for

the last few points. Market Profile shows us that the most frequently traded price was 2093. The

high volume area was at 2086. Both the stochastic indicator and our own indicator are issuing a

sell-signal the RSI remains flat very near to overbought levels. The daily 1% by 3-box point

and figure chart remains positive. The 60 minute 0.2% by 3-box point and figure chart is also

positive at the moment. We are in the seasonally favorable time of the year and continue to

expect to see the markets push a bit higher. Remember if the FOMC does raise interest rates,

they are broadcasting to the public that they believe that the economy is expanding enough to be

able to absorb the rate increase without hampering the expansion…..we shall see. We have our

doubts about that one.

The chart of the NASDAQ 100 looks much like that of the S&P 500 only that this index actually

achieved the upside number projected by the “W” formant. We continue in an uptrend and show

that the slight retreat from the recent high was very modest. Actually the Friday change was up

for the day. Both the stochastic indicator and the RSI continue to issue-a buy signal albeit at

extremely overbought levels. Our own indicator has issued a sell-signal. The 1% by 3-box daily

point and figure chart continues to look strong. The 60 minute 0.2% by 3-box chart has a high

target of 4941.86 and a downside target of 4617.30. This chart looks less positive than does the

daily chart. The high volume area was seen at 4696 and the most frequently traded price at

4698. Most of the day’s action was seen to the downside.

The Russell 2000 finally awoke from its slumber and bolted to the upside adding 11.50 handles,

points to the index in the Friday session and closing very close to the highs of the day. The high

volume area, 1185.25was seen in the early brakes of the session. The most frequently traded

price was 1186. Both the stochastic indicator and the RSI continue to point high although they

are both very overbought. Our own indicator is issuing a sell-signal. It is thought that many of

the stocks in this index do not depend on exports as much as the large capitalization stocks do

and therefore, a strong US Dollar will not be a detrimental to their earnings as it will to other

large multinationals. Remember in a good rally these stocks will outperform to the upside but

also never forget, that they outperform to the downside in a retreat.

As the US Dollar rallies, crude oil retreats unless there is unusual demand for the product which,

is not the case today. The price of crude oil retreated 68 cents in the Friday session capping off a

rather lousy week for the crude oil bulls. Four of the past five trading sessions have been to the

downside. We have not broken out of the trading range we established at the end of August.

The last three days were ugly. The top of the range is 50.92 and the bottom of the range is 42.58.

The downward trending channel lines are 48.01 and 41.47. All the indicators that we follow

herein continue to point to the downside with plenty of room to go. The only good we can see in

the daily chart is that the Bollinger Bands seems to be beginning to contract. The 1% daily 3-

box point and figure chart seems to be contracting. We have both an upside and downside old

target but nothing new to report. The 60 minute 0.7% by 3-box point and figure chart shows

consolidation also. Keep your wallet on your hip until the market tells us where it is going to go

from here.

If you thought crude oil was an ugly chart, just take a gander at gold…..yuck! We not only had

the US Dollar blowing to the upside but we had chatter out of India’s leadership speculating on

releasing some of the treasury’s hoard of gold. This market looks awful. The door is now open

to 1072.30. Yes, this is an oversold market and yes, we have buy-signals coming from the

stochastic indicator and our own indicator but the RSI continues to point lower at oversold

levels. The 60 minute 0.25% point and figure chart looks terrible. The daily 0.9% by 3-box

point and figure chart is less awful but certainly nowhere near fair or good. The good news here

is that platinum did not decline as much as gold did and actually the prices are becoming close so

maybe there is some expansion in the economy. Time will tell.

The US Dollar index broke to the upside in the Friday session taking on 1.23 handles on the day.

The Market Profile chart of the US Dollar looks like the positive image of the negative gold

chart. The high volume area for the US Dollar was 99.225. The most frequently traded price was

99.27. The chart shows an aggressive breakout to the upside. Both the RSI and the stochastic

indicator are overbought and pointing higher. Our own indicator is rolling over but no signal is

seen at this time. Our next target on the upside is 100.38. The 60 minute 0.25% by 3-box point

and figure chart has an upside target of 105.8132. The daily 0.5% by 3-box point and figure chart

looks extremely positive. The rally has been a little aggressive on the upside, expect to see some

backing and filling in the coming week.

Risk

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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