Option Queen Letter

Just to be positive, here is some good news–because the US currency has declined so steeply, manufacturing is returning to our shores. Recently, BMW announced that it will beef up its US production of their cars which, this is a switch, will be shipped to Germany and other destinations. Why? Simple, it is cheaper to produce the cars here and ship them where they are needed. The weak US Dollar strategy, a silent one, is reaping some rewards returning some, painfully little, manufacturing to our shores.


Many pundits believe that the economy may hit a soft spot and will avert a recession. They point to the fact that the “Jobs Market” has remained fairly flat. At this time we must remind you that for years these same writers-gurus-analysts-economists were complaining about a “Jobless Recover,” today of course, they are pointing to the “Jobs Market” as proof that we are not in a slow-down. The fact of the matter is that there has been a slow-down. Will the Grinch steal Christmas, certainly not! Even the most cash strapped family will come up with extra jingle to buy or make something for the kids and probably the rest of the family. This could be the year of handicrafts, when we return to using our skills and time in an effort to create something special for the Christmas Holiday. Just remember, things you make yourself always have greater meaning than thing you buy, you will not only create an heirloom but you save money at the same time. Have you noticed, many stores are slashing their prices already and…. it is still November! What will they do in December? Perhaps we should hold out and wait till Christmas Eve to shop!

In this global economy, it is possible for some of the globe to fall into recession without causing the entire globe to implode. This is the case with the US economy, which seems to be slowing down. While our slow down will effect the economies of Europe, it probably will not affect the Asian economies, which are still expanding. An American slow down will have a drag on the emerging markets. Will Canada feel some slow-down? Probably yes, but nothing near the slow-down that the US will feel and has felt. Remember, Canada is a resource rich country which exports around the world. They are not a debtor nation as we are. Speaking of which, we ought to start worrying about the various countries that peg their currencies to the US Dollar. Unless the US Dollar finds a bid soon, we will see major uncoupling erupt into a nasty currency battle with the US Dollar in a poor position.

Yes, we continue to see visitors to our shores enjoying the weak US Dollar and yes, we are enjoying the sales created from this imbalance. This is all working to rectify the trade imbalances that have been hanging over our heads for years. Now, if we could get our spending under control we would emerge much healthier as a country.

Why interest-rate cuts are not a “good thing.” Just think about it, if the FOMC needs to cut interest rates, our economy is in trouble. This FOMC is cutting rates in the face of real inflation felt by the consumer. This is not good news. It is somewhat gratifying to see that Chairman Bernanke realizes that the CPI and the PPI are not really good gauges for inflation, and that the ordinary citizen of this country is feeling the costs of heating their homes, feeding their families, paying their real-estate taxes, as well as fueling the family car. Inflation is here and, doing very well thank you. It isn’t only fuel costs that have caused this pinch; it is agriculturals and the declining US Dollar that has jacked up the cost of feeding “Elsie the Cow” causing her milk to cost us more. This naturally, is only one example. The spill-over effect of rising costs of agriculturals paired with energies has caused these increases in prices. We are exporting more agriculturals to a hungry globe creating shortages and tightness in the market. Naturally, this flows over into our costs and is having an inflationary affect. What we need to look for is an economy that is expanding and a Fed that needs to increase interest rates to keep the growth of the economy in check….that, would be a “good thing.”

Monday: Minneapolis Fed President Stern speaks in Singapore. Tuesday: October housing starts are released at 8:30, the new forecasts begin with the release of the FOMC minutes from October, and the Brazilian markets are closed. Wednesday: October leading indicators are released at 10:00, the Bank of England releases the minutes from its last meeting and the bond market closes early in advance of the Thanksgiving Holiday. Friday: Black Friday, the markets close at 1:00 EST (okay get ready to shop!!!!!).

The US Dollar Index looks dreadful. Friday, the index managed to close on the lows on the session. Worse than that, we have a sell signal from all but the Thomas DeMark Expert indicator, which continues to issue a buy-signal. Right now, it looks as though we will have a point of inflection next Tuesday, no, not this Tuesday, next Tuesday. The 5-period exponential moving average is at 75.841. The top of the Bollinger band is at 77.902 and the lower edge is seen at 74.898. On the weekly chart, you will notice that the US Dollar Index had a red candle as a result of this week’s trading, however; this candle is within the bounds of last week’s candle and it is an inside candle. For those long the US Dollar Index this could be a good sign. The indicators on the weekly chart are trying to go positive. When reviewing the point and figure chart we see that it is important for the US Dollar to remain above 75.060. Our next resistance level, from that chart will be at 76.50 and 76.80 above that level; 77.400.

The Euro continues to defend its level at the upper edge of the chart. The stochastic indicator, our own indicator and the RSI are all issuing a continued buy-signal near overbought levels. The Thomas DeMark Expert indicator is issuing a sell-signal. The 5-period exponential moving average is at 146.234. The top of the Bollinger band is at 147.982 and the lower edge is seen at 142.002. The uptrend line for the Monday session is at 146.456. The point and figure chart shows that if we can close above 146.76 we would open the door to the old highs of 147.320. It certainly would not be a surprise to see the Euro back and fill a bit to remove some of the overbought condition. Should the market retreat, we would expect to see 143.992, 142.225, 140.645 and 139.064 as good support levels. The weekly chart shows us that there is some stiff resistance at 147.320. The stochastic indicator, the RSI and our own indicator are all at overbought levels and are all issuing a subdued sell-signal. The Thomas DeMark Expert indicator is going sideways at neutral levels. The uptrend line is at 144.872 for the Friday session. The monthly chart shows signs of exhaustion. The indicators are all at overbought levels and all, but the Thomas DeMark Expert indicator, are issuing a sell-signal. The uptrend line on the monthly chart is at 138.734, which is for December 7th of this year.

The Canadian Dollar declined for most of last week, but ended the Friday session on an up-note. We saw the Loonie trade right down to the 50% Fibonacci number where, it found a bit. All the indicators that we follow herein are issuing a buy-signal from oversold levels. The 5-period exponential moving average is at 103.05. The top of the Bollinger band is at 108.74 and the lower edge is seen at 100.87. The weekly chart shows that the market gapped lower this week, as the Canadian Dollar retreated. The indicators, on the weekly chart, that we follow are uniformly issuing a sell-signal with plenty of room to the downside. We could see the market trade down to 99.37. The indicators on the monthly chart are also issuing a sell-signal. If we do some really simple Fibonacci levels on the monthly chart, we see that a return to 97.21 would be reasonable. We are sure that the officials in Canada were relived to see the retreat in the Canadian Dollar, this past week.

The chart of the Dollar/Pound shows a very large gap as a result of this past week’s trading. The market gapped lower in the Monday session leaving a large gap on the chart from 209.360 to 206.200. All the indicators that we follow are oversold and all are issuing a buy-signal. The 5-period exponential moving average is at 205.440. The top of the Bollinger band is at 210.691 and the lower edge is seen at 202.376. The weekly chart has a large red candle on it. The indicators are uniformly issuing a sell-signal. On the monthly chart, we see signs of exhaustion. The stochastic indicator, our own indicator and the RSI are all issuing a sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal approaching overbought levels. This chart shows us that it is important for this market to stay above 203.460 or, risk the return to 201.485, 200.525 and 198.870.

The S&P 500 rallied in Friday’s expiration session. The 200 day moving average for this futures contract is at 1491.18. We have been below this average for all but a second in the Wednesday session, when we managed to poke above the line. The Thomas DeMark Expert indicator is issuing a sell-signal. The RSI is going flat, our own indicator is issuing a sort of sell-signal and the stochastic indicator is trying to curl to the upside but has not issuing a buy-signal. The uptrend line for the Monday session is at 1452.12. The short term downtrend line is at 1480.09 for the Monday session. The longer term downtrend line is at 1529.56. The 5-period exponential moving average is at 1463.94. The top of the Bollinger band is at 1569.33 and the lower edge is seen at 1436.96. It is important for this market to stay above 1437.30 or open the door to the August lows. Although the market moved higher on the weekly chart, it left a doji-like-candle on the chart. The indicators continue to point lower albeit at a less urgent speed, but lower nonetheless. It looks as though we could easily retest the August lows. On the monthly charts, we remain on an uptrend however; all the indicators are pointing lower. We are entering a very positive time of the year for the indices. The week of Thanksgiving is usually an up week for the markets. The point and figure chart tells us that we must remain above 1448.00 or risk a trip to 1440.00 and then we had better defend 1438 or, down we go!

The NASDAQ 100 is a whole lot less scary than is the chart of the S&P 500. This chart actually has a positive look to it, and is above its 200 day moving average. All the indicators that we follow herein are uniformly issuing a buy-signal. Unless or until we remove 1983.00, we seem to be in good shape to recover to 2121 or so. The 5-period exponential moving average is at 2040.50. The top of the Bollinger band is at 2315.89 and the lower edge is seen at 1993.00. The weekly chart shows a doji-like candle. The indicators on the weekly chart are issuing a sell-signal but some are beginning to curl to the upside. We do have signs of exhaustion on the weekly chart. The monthly chart shows a failure to follow thru on the upside and signs of exhaustion. Further, we are expanding the downside printing lower lows. All the indicators for this time frame are issuing a sell-signal. We have an 11-count which tells us that we are overbought and possibly will retreat. The 200 day moving average on the daily chart for the NASDAQ 100 is at1954.97. Remember the 1983 area is very important for this index. If you are a bull you want the index to remain above that level, if you are a bear, you want to see that level removed. Important levels on the point and figure chart are at 2054.60, 2052 and 2050 below which it could get painful for the bulls, as we would likely stair-step our way lower.

The Russell 2000 had a difficult week printing a lower close in the Friday session. All the indicators are uniformly issuing a sell-signal for the Russell 2000. We printed a low for the week in the Friday session. The 5-period exponential moving average is at 776.06. The top of the Bollinger band is at 840.63 and the lower edge is seen at 757.16. The downtrend line for the Monday session is at 785.20. The longer downtrend line is at 806.08. We find the 200 day moving average at 815.73. It is important that this index stays above the Friday low of 760.00 or risk a return to 754-752 and finally to 744 and the August lows of 738.00. In case you have forgotten, the lows July was……671.50…yikes! The weekly chart tells us that the market is oversold…no kidding! The indicators all continue to issue a sell-signal on the weekly chart. We do have an 8-count but a clear liability to the August lows of 738.00. The monthly chart looks equally awful. The only savings seen in the monthly chart is that we continue above the uptrend line. The problem with that is that should we remove the Friday low of 760.00, on a monthly basis, we would close below the uptrend line. The indicators on the monthly chart are all uniformly issuing a sell-signal.

The Continuous Commodity index has defended the 447.68 lows. When you look at the daily chart you will be struck by the 454.04 level which has been important in the last four trading days. We seem to have opened at that level on each day. The downtrend level for the Monday session is at 449.86 for the Monday session. The stochastic indicator is curling to the upside, but has not issued a buy-signal. Our own indicator, the RSI and the Thomas DeMark Expert indicator have all issued a buy-signal. The 5-period exponential moving average is at 450.02. The top of the Bollinger band is at 459.68 and the lower edge is seen at 443.60. The weekly chart shows signs of exhaustion and has a red candle showing that this week was a down week for the index. The indicators are uniformly issuing a sell-signal on the weekly chart. The monthly chart is showing signs of exhaustion and has a scary 15-count. The indicators, for this time frame, are all overbought and all are issuing a sell-signal.

March cocoa traded in a narrow range for most of this past week. The stochastic indicator continues to issue a sell-signal. The RSI is going sideways as is the Thomas DeMark Expert indicator. Our own indicator is issuing a buy-signal. It is important for March cocoa to stay above 18.98. The uptrend line for March cocoa is at 18.44 for the Monday session. The downtrend line is at 19.50, until we remove either the uptrend line or the downtrend line we will remain in the range of 18.44 to 19.35. The 5-period exponential moving average is at 19.23. The top of the Bollinger band is at 20.11 and the lower edge is seen at 18.32. The uptrend line on the weekly chart is at 18.49. The downtrend line is at 19.60. The indicators on the weekly chart are diverging. We have a solid sell-signal issued by the stochastic indicator and our own indicator, the RSI is going sideways at neutral and the Thomas DeMark Expert indicator is issuing a buy-signal. The weekly chart looks as though we are forming a wedge from which we will break out.

March sugar violated the uptrend line yet is trading above the long term uptrend line of 9.80 for the Monday session. Last week was negative week for sugar. We need to see a close above 9.93 and then a further close above 9.99 to turn this chart positive again. Without that, we will revisit 9.59. The stochastic indicator, the RSI, and our own indicator are all uniformly issuing a sell-signal from oversold levels. The Thomas DeMark Expert indicator is oversold and tilting to the upside. The 5-period exponential moving average is at 9.90. The top of the Bollinger band is at 10.25 and the lower edge is seen at 9.80. The weekly chart looks like sugar is consolidating however, it needs to stay above 9.88 by Friday or it will violate an uptrend line on the weekly chart. We will have a point of inflection the week after next, midweek. The indicators are also mixed for the weekly time-frame with the same results as on the daily chart.

March coffee closed above the uptrend line in the Friday session and seems to be forming a rounded bottom. All the indicators that we follow herein are issuing a sell-signal. The uptrend line for the Monday session is at 128.31, we need to see a close above 130.10. The 5-period exponential moving average is at 127.69. The top of the Bollinger band is at 129.29 and the lower edge is seen at 123.17. The weekly chart is a more positive chart. The uptrend line on the weekly chart is at 122.89. The stochastic indicator, our own indicator and the RSI are all issuing a buy-signal, only the Thomas DeMark Expert indicator is opposition issuing a sell-signal. March coffee is less volatile that it had previously been. This period of low volatility will not last long so be prepared for a move.

January Frozen Concentrated Orange Juice had consolidative week ending on a somewhat sour note, as the market made a lower low for the week. That is the bad news the good news is that the indicators are making higher lows. The stochastic indicator and our own indicator are both oversold and continue to issue a sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. The 5-period exponential moving average is at 133.07. The top of the Bollinger band is at 147.22 and the lower edge is seen at 128.44. The downtrend line is at 136.41, for the Monday session. It is important for the bulls that this market stays above the 130.40 low of the Friday session. The next stop below the Friday low is at 125.15, 120.00 and then the lip of a gap at 119.00 and the gap to 116.00. The weekly chart shows that we are at the bottom part of a defined range. Should we break the Friday lows, on a closing basis, we would open the door to closing the gap down to 116.00. The indicators are all issuing a sell-signal on the weekly chart. This week is very important for FCOJ technically.

March cotton remains below the downtrend line of 67.37. The stochastic indicator, the RSI and our own indicator are all issuing a sell-signal. Our own indicator is curling to the upside and could, within a day or so, issue a buy-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. It is important for March cotton to stay above 65.60 or return to the lip of the gap at 62.50. The 5-period exponential moving average is at 67.15. The top of the Bollinger band is at 70.39 and the lower edge is seen at 66.64. The weekly chart shows the devastation of this past week’s activity with a huge red candle on the chart. The indicators are uniformly issuing a sell-signal on the weekly charts. This should be a very interesting week for March cotton.

January crude oil rallied in the Friday session. We see that crude oil is comfortably above its short-term uptrend line and its longer-term uptrend line. The short-term uptrend line is at 91.68 for the Monday session and the longer uptrend line is at 87.19 for the Monday session. The stochastic indicator is issuing a buy-signal. The 5-period moving average is at 93.682. The top of the Bollinger band is at 99.266 and the lower edge is seen at 86.469. The weekly chart looks toppy. The stochastic indicator, on the weekly chart, is issuing a sell-signal. The monthly stochastic indicator is also issuing a sell-signal. We believe that the market needs to back and fill somewhat here to relieve some of the overbought condition seen on the longer term charts. If January crude can trade above 96.60, we will see it at 97.60 and 98.600 with a goal above 100.00. There is no technical reason for that target, it is more a media blitz that might get us there. Once there, we could see a rally above that level with a quick retreat from the stopping point above 100.00.

Gold retreated for most of this past week. The stochastic indicator is oversold and curling up, but without issuing a buy-signal. We expect to see a buy-signal in two days. The 5-period moving average is at 799.14. The top of the Bollinger band is at 845.328 and the lower edge is seen at 748.792. The downtrend line for the Monday session is at 808.00 and the uptrend line is at 790.10. The 5-period moving average is at 799.14. The top of the Bollinger band is at 845.328 and the lower edge is seen at 748.792. The Friday session closed just below the uptrend line and below the 20 period moving average number of 797.06. The weekly chart shows how deep the retreat last week was. The stochastic indicator on the weekly chart is issuing a sell-signal. We could easily see gold trade to 745.10 without disturbing the bullish view. We continue to look for entrance points for gold.

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

,

No comments yet.

Leave a Reply