September 21, 2014 with charts
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Transcript of September 21, 2014 with charts
Jeanette Schwarz Young, CFP®, CMT, M.S.
Jordan Young, CMT
83 Highwood Terrace
Weehawken, New Jersey 07086
www.OptnQueen.com
September 21, 2014
The Option Queen Letter
Here we are in the third week of September and so far, the September blues have been avoided.
We have conquered the September roll of futures and quadruple options expiration with no
scares or battle wounds. The bulls are out in full force the bears in hibernation and so the saga
continues. Ah but will it last? Yes and no, there are too many expecting to see a 10 to 20%
correction just waiting for the opportunity to jump into the trade. Naturally, that is supportive of
a market resulting in shallow retreats. The problem as we see it is that it takes an awful lot of
effort to move this market higher that is warning us of a possible distribution top. With that in
mind, should the market begin to rally to the upside with conviction, that means not only
generals leading but the troops following, we will see the trend following algorithm traders dog
piling aboard and really could start off a rally.
The S&P 500 closed down in the Friday session after printing a new all-time high. This past
week this market rallied for all days but the Friday session. In the Friday session the sentiment
changed to the downside and much of the trading after the New York opening was to the
downside. It is interesting to note that the volume did improve on the upside for most of the
week. Was it selling in front of a weekend, option and futures flattening or something more
ominous? Was the volume increase attributable to the expiration of futures and options, was it
short covering or the beginning of another leg to the upside. These questions cannot be answer
at this time but will become clear and we progress into this coming week. The indicators are
mixed, the stochastic indicator has just issued a sell-signal, the RSI is pointing lower and our
own indicator continues to issue a buy-signal. The 5-period exponential moving average is
1996.50. The top of the Bollinger Band is 2004.88 and the lower edge is seen at 1976.94. The
Bollinger Bands look as though they are beginning to expand. The S&P 500 is above the
Ichimoku Clouds for all time-frames. The Market Profile chart shows us a bimodal pattern. The
1% by 3-box daily point and figure chart continues to look positive with the upside target of
2371.33 in place. The 60 minute 0.1% by 3-box point and figure chart is less promising with a
downside target of 1970.83. Key advice is that caution is warranted. Keep your stops tight,
don’t chase the trade, and if elected by your stop stay in cash until a better signal of something is
seen.
The NASDAQ 100 rallied for the middle three days of the week ending the week on a sour note
after printing a high for the year. The Bollinger Bands have become narrow and look as though
they could again signal an increase in volatility. The 5-period exponential moving average is
4077.95. The top of the Bollinger Band is 4102.70 and the lower edge is seen at 4039.67. The
volume increased in the Tuesday, Wednesday and a little in the Thursday session and dropped
off a bit in the Friday session. Our own indicator, the stochastic indicator and the RSI are curling
over to the downside. Neither our own indicator nor the stochastic indicator have issues a sell-
signal but look as though they will do so in a day or so. If this market retreats below 4004.25,
we believe that there could be some unpleasant downside for the bulls. We are above the
Ichimoku Clouds for all time-frames. The Market Profile chart demonstrates the confusion in
this market. The action was clearly a downside push in the Friday session. The 1% by 3-box
daily point and figure chart continues to look positive. The 60 minute 0.1% by 3-box chart has a
downside target of 4007.22, which number is very close to our line in the sand number of
4004.25. The tech heavy NASDAQ 100 index has been struggling a bit telling us that we need
to exert some caution.
The Russell 2000 gets the award for the worst performing index for the week. This index gave
up 18 points (handles) in the Friday session clearly winning the prize as the dog for the week.
The 5-period exponential moving average is 1147.04. The top of the Bollinger Band is 1179.26
and the lower edge is seen at 1139.53. The Bollinger Bands are beginning to expand telling us
that volatility is expanding. Our line in the sand for this index is at 1134.10, below which, we
would expect to see a flush to the downside. The stochastic indicator and the RSI both are
issuing continued sell-signals. This index is below the 50 and 100 day exponential moving
averages but still is above the 200 day moving average. The downward trending channel lines
are 1160.92 and 1129.69. The Russell 2000 is inside the Ichimoku Clouds for the daily time-
frame but remains above the clouds for both the weekly and the monthly time-frames. The
market Profile chart shows us that although the Russell 2000 started the Friday session on a
positive not it could not hold on to that and gave way to the downside.
Crude Oil continued its retreat in the Friday session. The only thing positive about crude oil is
that the volume is that the volume fell on each of the three down days this past week. All the
indicators that we follow herein continue to point to lower levels. The 5-period exponential
moving average is 92.14. The top of the Bollinger Band is 94.82 and the lower edge is 90.42.
The downtrend line is 93.60 and the lower channel line is 87.86. The uptrend line is 89.95. We
are below the Ichimoku Clouds for all time-frames. The 60 minute 0.2% by 3-box point and
figure chart has a downside target of 88.19 and nothing positive to be seen so far. The daily
0.9% by 3-box point and figure chart has a downside target of 81.39.
It truly is difficult to look worse than crude oil or the Russell 2000, but we think gold has
achieved that honor. Worse yet, all the indicators are pointing lower at oversold levels. At this
point we must remind you that both gold and crude oil are traded in US dollars. The US dollar
has been on a tear to the upside. We are sure some of the weakness in both gold and crude is
attributable to that fact. The next level of real support is at 1182…..yikes! The very steep down
trending channel lines are 1229.97 and 1202.72. The 5-period exponential moving average is
1226.54. The top of the Bollinger Band is 1303.91. The lower edge is found at 1210.44. The 60
minute 0.1% by 3-box point and figure chart has a down side target of 1208.88. There is nothing
positive about this chart and it seems that the target is achievable. The daily 1% by 3-box point
and figure chart has a downside target of 1113.19. Again with the 60 minute point and figure
chart we see nothing positive on the charts. It seems too late to short this and way too early to
nibble on the long side thus we will avoid for now.
The US Dollar Index left a bullish engulfing candlestick on the chart in the Friday session. This
index has been on a tear moving to the upside. The 5-period exponential moving average is
84.59. The top of the expanding Bollinger Band is 85.39 and the bottom edge is seen at 82.205.
The stochastic indicator and RSI continue to point higher at overbought levels with room to the
upside. The market closed at the high of the session showing real strength. The upside target on
the daily 0.5% by 3-box point and figure chart is 85.1062. The chart continues to look very
positive. The 30 minute 0.05 by 3-box chart has a target of 86.5….”pow zoom to the moon.” We
are above the Ichimoku Clouds for all time-frames. The weekly chart has pole like qualities.
We remember during the tech bubble many charts looked just like this chart. Hard to measure
poles ya know. I this market rallies above 85.66, it will likely visit the 87 level and could be on
track to go to the 90 region. That seems to be a bit aggressive but then so is this index.
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. 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.