The Options Queen, Jeanette Schwarz has just released her first book:
The Options Doctor: Option Strategies for Every Kind of Market (Wiley Trading)
Can you believe that this week is already the first week in May? How quickly time passes when the market is in rally mode! We have been watching money filter into the “appreciation” coffers and the appreciation of our assets, …unless you had your investments in real-estate, which is the labored underperformer. That statement comes with a footnote, however; real-estate in the New York area, has not declined at all. In fact, the office rental market is flourishing– in lower Manhattan!
We are watching fund managers chasing all asset classes which are favored and are advancing, rather like the lemmings in a “follow the leader” play, into the fisherman’s net. This comprises a global rally, although not limited to any single asset class, so long, that is, as you exclude the real-estate portion from the investments.
The US Dollar index has continued to slide, adding value to our US stock market and to the companies that populate our markets. Let us think about this a bit�..well, that is, from a European’s point of view. Our weak US Dollar has kept the values, attributable to our companies, from appreciating. As the values of these companies appreciate, via stock value; note, they really do not appreciate, when converted out of US Dollars and into other currencies, stronger than ours. As a note, there aren’t many currencies that are weaker than ours. Indeed, the companies with the best earnings, here in the USA, appear to have a global component to their model. Those companies with sales globally, have done best. Also companies that can take advantage of cheap global workers, have appreciated. Only those companies selling to US customers, using a US workforce, have had problems.
Why is the US Dollar having so much trouble finding a bid under the market? The long and short answers filter back to interest rates, here in the USA, when compared to global interest rates. While we here in the USA are at the perceived end of our interest rate cycle, most other countries are mid-way through their cycles. Thus, we have a drag on the US Dollar, because this interest rate differential, will encourage investment, off-shore. Then, there is our trade deficit, which while getting better, with the weak US Dollar, continues to be a problem. We also have the voiced intention of some global banker to move their reserve currencies into a more diverse portfolio, dropping that portion invested in US Dollars.
There may be some hope for the US Dollar index in the coming days. Why? Because, the media is into over-coverage of the dreadful, declining, US Dollar. Usually, when this occurs, the end of the move is near. Actually, we think that if we measured the amount of coverage given any one event, we could use that to find “tops and bottoms.” Not until blood is in the streets, do these media-mavens notice that real red flood is flowing. At that point, they jump on to the wagon, to avoid drowning in the mess and begin their hyper-coverage of the event.
Once the end of the month, Monday, is over and the 401K money is put to work, on Tuesday, we’ll be ready to see a decline in the market. Notice, we said decline, not, ” fall-out-of -bed,” retreat. Right now, most declines will be met with buying from the crowd; that crowd that missed the rally. These guys will be piling into the market, just when it is peaking and the smart money is running for the exits. Remember this week is “Golden Week” and the Asian markets will be absent, for the most part.
The US Dollar index matched the previous low, of this move, when it printed 81.10, in the Friday session. We saw that low, printed in the Wednesday session and retested, in the Friday session. The market does look as though it is trying to defend that bottom; it was successful in the Friday session. This week is “Golden Week,” which means that the Asian markets will not be participating in the markets. This could be the reprieve which the US Dollar index needs, to regain some footing. The US Dollar index closed above the very short-term uptrend line, in the Friday session. We have mixed readings from the indicators, with three of the four indicators issuing a sell-signal. Only the Thomas DeMark Expert indicator, is issuing a buy-signal; all the others, a sell-signal, at oversold levels. The 5-period exponential moving average is at 81.433. The top of the Bollinger band is at 83.156 and the lower edge is seen at 80.879. We note that we are currently in a vertical, moving for the US Dollar index. We know that, as a friend puts it; “vertical moves lead to horizontal moves.” The weekly chart looks dreadful. We see a continuation of the downtrend. The downtrend line, on the weekly chart, is at 82.217. On the weekly chart we do see some mixed readings. Three of the four indicators that we use, are oversold; two of which are issuing a buy-signal. The Thomas DeMark Expert indicator is the deviating indicator; and that one is going sideways, at neutral. The monthly chart points out that we are very close to the lows of December 2004. That low was 80.480. The indicators are uniformly oversold and pointing, lower.
The mighty Euro rose yet again in the Friday session, when it printed a high of 1.37080; a new annual high and a higher than the previous high, of December 2004. The indicators continue to point higher, issuing a continued buy-signal for the Euro. The uptrend line for the Monday session is at, 1.36690. The 5-period exponential moving average is at, 1.36462. The top of the Bollinger band is at, 1.37413 and the lower edge is seen at, 1.33324. We do have continued signs of exhaustion, in this market. The weekly chart shows this continuation, to the upside. The indicators are overbought on the weekly chart. Two of the four indicators are issuing a fresh, sell-signal. The Thomas DeMark Expert indicator is going sideways, at a neutral level. Only the RSI continues to point higher. Naturally, the monthly chart is positive.
The S&P 500 futures contract has left a hangman-candle on the chart, as a result of the Friday session. Both the stochastic indicator and our own indicator are issuing a sell-signal. The Thomas DeMark Expert indicator is issuing nothing, at neutral levels. The RSI is simply overbought, and not trending. The 5-period exponential moving average is at 1496.94. The top of the Bollinger band is at 1511.68, and the lower edge is seen at 1428.36. Although this market looks extremely vulnerable to a quick downdraft, we will have the positive effect of the last day of the month, portfolio adjustments on Monday, and the addition of 401K money being put to work on Tuesday, to support this market. After that, we should see a rather quick and nasty decline. The weekly chart shows signs of exhaustion. The stochastic indicator, on the weekly chart, is issuing a fresh, sell-signal. The Thomas DeMark Expert indicator is also overbought and issuing, a sell-signal. Our own indicator is not giving us that reading, and is at overbought levels. The RSI is at near-overbought levels, and going sideways. The monthly chart shows the magnitude of this past month’s rally. Three of the four indicators that we follow herein, are issuing a continued buy-signal; only the Thomas DeMark Expert indicator is issuing a solid, sell-signal.
The NASDAQ 100 shows definite signs of exhaustion. Given the end of the month activity, we will defer our negative opinion until Wednesday. The stochastic indicator and our own indicator are issuing a sell-signal, from overbought levels. We have not seen the RSI as overbought as it is today, in a very, very long time. The Thomas DeMark Expert indicator is going sideways. The 5-period exponential moving average is at 1890.91. The top of the Bollinger band is at 1906.39 and the lower edge is seen at, 1784.25. Yikes, we have a scary 15 count, on the weekly chart. The decline that follows this should be as deep, as the rally has been high. The Thomas DeMark Expert indicator is issuing a solid sell-signal. Our own indicator, the RSI, and the stochastic indicator are all overbought, and issuing a continued, buy-signal. The monthly chart’s indicators are overbought, with three of the four, pointing higher. The only indicator issuing a sell-signal, is the Thomas DeMark Expert indicator.
The Russell 2000 underperformed in the Friday session. The downtrend line for the Monday session is at 837.82. The uptrend line is at 831.19. Notice that these lines are very narrow. By the Wednesday session, we should see a point of inflection. This works well with the projection of further gains, into the Monday and Tuesday session, leading to a decline in the Wednesday session, which, at a very minimum, should return this index to the longer-term uptrend line at 826.03, for Wednesday. The stochastic indicator, our own indicator and the RSI are all pointing lower, issuing a sell-signal. The Thomas DeMark Expert indicator is overbought and still pointing, higher. The 5-period exponential moving average is at 834.39. The top of the Bollinger band is at 843.10 and the lower edge is seen at 805.74. The weekly chart is flashing a dangerous 13 count. The indicators on the weekly chart, are all uniformly overbought with one, the Thomas DeMark Expert indicator, issuing a sell-signal. While the weekly charts of the other indices are showing large green candles, the Russell 2000 has a doji-candle�.not good for the bulls! The monthly chart is even more overbought and has issued a 17 count! Three of the four indicators are overbought, and issuing a continued buy-signal; only the Thomas DeMark Expert indicator is issuing a sell-signal, from overbought levels.
As a reminder, Monday will be the last day of the month, which is an important time for funds, to adjust their holdings. We usually have some accompanying volatility on these days. We also have the expiration of May sugar, which will add to some quirky behavior.
July cocoa opened the electronic session at 18.26 and rallied, on light volume, to 18.42. By the time the New York pit session opened, the market had retreated to 18.20, by 08:10 in the morning and then continued the retreat to 18.10. That low, for the session, was above yesterday’s low, which helped inspire a rally, returning July cocoa to 18.39 by 09:21. The market became dull and range-bound. By 11:15, the market returned to 18.18. Three of the four indicators that we follow in this report are uniformly issuing a sell-signal, at oversold levels. Interestingly, there isn’t a bend or a curl to be found. The Thomas DeMark Expert indicator is issuing a buy-signal, from oversold levels. The 5-period exponential moving average is at 18.47. The 9 day moving average is at 18.93, the 18 day moving average is at 19.04 and the 40 day moving average is at 18.81. The top of the Bollinger band is at 19.95, and the lower edge is seen at 18.13. The closing range for July cocoa was from 18.18 to 18.26. The weekly chart shows the magnitude of the retreat seen in last week’s sessions, leaving a very large red-candle on the chart. The indicators on the weekly chart are uniformly issuing a sell-signal. Even the monthly chart looks bad but the monthly chart shows that July cocoa has not violated the uptrend.
The electronic session, for July sugar, opened at 9.31 rallied to 9.37 and retreated into the open, of the New York pit session. The pit session opened at 9.30. The market dipped to 9.29 and rallied, matching the previous rally, after which, July sugar began its customary decline, carrying the market back to 9.21. At 10:35 the 9.21 price gave way to the selling pressure, which, in turn, elected some resting sell-stops, which were resting below the 9.21 low of the session. The market declined to 9.11, matching the low seen in the Tuesday session of 9.11. July sugar found support at that level and returned to the comfort level of 9.21. The stochastic indicator, our own indicator and the RSI are issuing a fresh sell-signal, near oversold levels. The Thomas DeMark Expert indicator is not issuing anything and is going sideways, at neutral levels. It is important for July sugar to hold the 9.11 to 9.09 levels, or risk going lower, much lower. . The 5-period exponential moving average for July sugar is 9.27. The top of the Bollinger band is at 10.20 and the lower edge is seen at 9.06. The downtrend line for the Monday session is at 9.36. The closing range for July sugar was from 9.18 to 9.22. The weekly chart illustrates the weakness of the sugar market. This past week was especially depressing for July sugar when a lower low was seen. All but the Thomas DeMark Expert indicator, which is issuing a buy-signal, are pointing lower at oversold levels. We have an 8-count on the weekly chart of July sugar. The closing range for July sugar was from 9.18 to 9.22.
July coffee opened the electronic session at 106.75 and declined into the opening of the New York pit session. New York opened at 106.30. The decline continued to 105.85, on fund-selling. When the selling dried up, the buying began taking the market back, above the opening level and continued to 107.90. That high for the day, stopped the rally dead in its tracks. The market retreated from that level and returned to the opening levels. We have been range-bound, since that little flurry of activity, going nowhere fast. All the indicators that we follow are uniformly issuing a buy-signal. We continue to print lower lows, coming closer to the life of contract low, at 105.30. There must be sell-stops below that level, which would provide the washout trade needed to begin a robust rally. Today’s session was a high-wave candle, clearly showing that both the highs and lows were rejected. The 5-period exponential moving average is at 107.85. The 9 day moving average is at 109.79, the 18 day moving average is at 111.55 and the 40 day moving average is at 113.32. The top of the Bollinger band is at 116.38 and the lower edge is seen at 106.40. The closing range for July coffee was 107.20 to 106.85 in that order. The weekly chart shows a continuation of the downdraft seen in prior weeks. We need to see a weekly close a 112.71.
July Frozen Concentrated Orange Juice opened the electronic session at 152.75, retreated to the session low of 152.25 into the open of the New York pit session. The market rallied to 154.80 and then 155.25 and was unable to hold on to the gain and retreated mildly, in very quiet, dull trading. The stochastic indicator, the RSI and our own indicator are uniformly issuing a buy-signal. The Thomas DeMark Expert indicator is issuing a sell-signal. The uptrend line for the Monday session is at 153.29. The downtrend line for the Monday session is at 154.20. If we stay between those trend lines, we will have a point of inflection, late into the Monday session and definitely in the Tuesday session. As you know, a point of inflection causes a violent reaction, either up or down. If this market can close above 159.85, before making a new low, we will probably rally to 166.75, and that is a conservative target. The 5-period exponential moving average is at 155.75. The 9 day moving average is at 158.17, the 18 day moving average is at 168.87 and the 40 day moving average is at 182.61. The top of the Bollinger band is at 195.97 and the lower edge is seen at 142.03. The closing range for July Frozen Concentrated Orange Juice was 155.00 and 155.10. The weekly chart shows a doji-candle. All of the indicators on the weekly chart are issuing a buy-signal.
The electronic session for July cotton opened the session near the lows, at 49.95. The market rallied into the opening of the New York session, carrying cotton to 50.35, by 10:37 in the morning. The market then embarked into its customary retreat, returning to the opening level and then printing a new low for the day, when it traded down to 49.25. Naturally, the market found support at this level and carried the market back to 49.95 where it closed the session. The downtrend line for the Monday session is at 50.70. The RSI is going flat just below oversold levels. The stochastic indicator is diverging going positive. The Thomas DeMark Expert indicator is issuing a buy-signal from oversold levels. Our own indicator will issue a buy-signal in the Monday session. The 5-period exponential moving average is at 50.60. The top of the Bollinger band is at 55.76 and the lower edge is seen at 49.49. The weekly chart continues to look ugly with all the indicator issuing a unified sell-signal at oversold levels.
Crude oil continued to trade in a horizontal trading range with an upside expansion. All the indicators that we follow herein are issuing a buy-signal. While the indicators tell us that this market is overbought, little else is indicating that this rally will end. The chart really looks like this market is getting ready to make a move. The 5-period exponential moving average is at 65.49. The top of the Bollinger band is at 66.98 and the lower edge is seen at 61.58. Although the indicators are approaching overbought on the weekly chart, they uniformly are pointing higher. The chart looks good and shows us that crude oil is in a definite uptrend.
Natural gas futures contract is showing signs of exhaustion. Three of the indicators that we follow herein are issuing a continued buy-signal. Only the Thomas DeMark Expert indicator is not issuing that signal, but rather going sideways. The 5-period exponential moving average is at 7.662. The top of the Bollinger band is at 8.223 and the lower edge is seen at 6.273. The uptrend line for the Monday session is at 7.287.
The gold market rallied in the Friday session after printing a new low for the week. Three of the four indicators that we follow are issuing a buy-signal. Only the Thomas DeMark Expert indicator continues to issue a sell-signal at oversold levels. The downtrend line for the Monday session is at 686.20. The 5-period exponential moving average is at 884.40. It would be important for gold to close above this line. The top of the Bollinger band is at 699.90 and the lower edge is seen at 667.00. The weekly chart does not have the positive spin that the daily chart does. Rather, the weekly chart has a very large red candle indicating that last week was a bad week for the gold bugs. The indicators on the weekly chart are pointing lower. Before you get depressed, the monthly chart looks better than the weekly chart does and shows us that gold has been in an uptrend and has not violated that trend. The indicators on the monthly chart are all pointing higher.
Jeanette Schwarz Young, CFP, CMT
Box 1952 c/o New York Board of Trade
One North End Avenue
New York, New York 10282
www.optnqueen.com/
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