Option Queen Letter

President Obama doing what he does best, campaigning! We remember when he first rose to the office of President; he could not lead the nation and only knew how to campaign. Well, he is back in his comfort zone. A campaign slogan “are you better off today than you were a year ago” might well be used at this juncture however, the sad answer is no. You would likely come to the conclusion that whichever party had won, we would likely still be in this uncomfortable situation. We will never see a fair economy until our elected clowns representing us in D.C. are forced to live by their own rules. We will not see health care problems addressed until Senators and Representative have to deal with ever increasing insurance premiums and co-pays that we have to deal with. There will be no change to the social security/Medicare/Medicaid problems until our elected Senators and Representative have to live by our standards and don’t enjoy the benefits of government pensions and health care. Now is the time to revolt. Don’t just sit there and take it, vote them out of office and replace them with responsible people who will live by the laws that the congress creates for the people of the United States. We the People are darn angry and the result is that we have to fight for our rights, yes here in America.

Meanwhile the stock market’s retreats have been shallow which tells us that the market is not ready to go down. Yes, we believe that there will be a deeper retreat but we have to wait until the market decides that time is correct for that retreat. Most investors don’t understand that the market will tell them, they cannot tell the market because, the market doesn’t care. As a technical analyst we have learned to read the market clues and can, on occasion, project a possible outcome and if we are found to be wrong, we will change our minds in an instant.

Monday: Passover begins at sundown, your income taxes are due by midnight and Dallas Federal Reserve President Fisher and Atlanta Federal Reserve President Lockhart speak.
Tuesday: March housing starts are released at 8:30
Wednesday: March existing home sales are released at 10:00.
Thursday: March leading indicators are released at 10:00 and April Philadelphia Federal Reserve Survey is release at 10:00.

The US Dollar Index rallied, well sort of rallied in the Friday session. We see a very clear descending triangle on the chart. The good news is that triangles generally are not very reliable patterns. The stochastic indicator has just seen the short line cross above the longer line albeit at grossly oversold levels. Our own indicator has given us a buy-signal as has the RSI. The Thomas DeMark Expert indicator is sort of pointing lower just below the neutral zone. The 5-day moving average is at 75.090. The top of the Bollinger band is at 76.782 and the lower edge is seen at 74.78. We are below the Ichimoku Clouds for all time-frames. The down trend channel lines are 76.238 and 74.377. The chart looks awful. The only redeeming feature of this chart is that we seem to be losing some of the downside thrust. If you review percentage change charts, you clearly will see that this index seems to be slowing down on these retreats. We have a double bottom on the point and figure chart at 74.90. The market profile chart points to similar numbers (74.825) seen in the point and figure chart, just slightly lower. Below those numbers, there seems to be very little in the way of price support for this index. Be very careful!

The S&P 500 June futures contract rallied in the Friday session gaining 8.50 on the day. The stochastic indicator, our own indicator and the RSI are all pointing to higher levels. The 5-period moving average is at 1313.10. The top of the Bollinger band is at 1339.49 and the lower edge is seen at 1288.77. We are inside the Ichimoku Clouds for the daily time-frame but remain very comfortably above the clouds for the weekly and the monthly time-frames. Here is the problem this chart illustrates, if we do not close above 1336.50 and then 1343.00 we will likely retreat to 1298.25 and then1289.25, 1279, 1274.75, 1261, and then 1241.25. Below the 1241.25 level, the bears will be inspired and we likely will retreat to much lower levels. The indicators for the daily time frame are positive but the indicators for the weekly time frame have just turned negative. The risk trade is back so, if you are part of it, please be careful.

The NASDAQ 100 futures contract looks okay. This contract rallied in the Friday session and was able to print a higher high for the day. This market seems to be consolidating as seen you the chart and the contraction of the Bollinger bands. The stochastic indicator, the RSI and our won indicator all continue to issue a buy-signal. We are below the Ichimoku Clouds for the daily time-frame but remain above the clouds for the weekly and the monthly time-frames. The 5-day moving average is at 2304.00. The top of the Bollinger band is at 2359.41 and the lower edge is seen at 2259.20. We need to see this index stay above 2285. Again we see a descending triangle on the chart. This chart is consolidating, again we urge caution.

The best looking chart of the three that we review here is definitely the chart of the Russell 2000 futures contract. All the indicators that we follow herein are issuing a buy-signal. The rally seen in both the Thursday and Friday sessions was very impressive. We are above the Ichimoku Clouds for all time-frames. The 5-day moving average is at 826.30. The top of the Bollinger band is at 858.35 and the lower edge is seen at 801.53. It clearly looks as though this index is the winner. Remember above 858.10 there is nothing but air as resistance.

Crude oil rallied in the Friday session adding to the gains seen in both the Wednesday and Thursday sessions. All the indicators that we follow are issuing a continued buy-signal. We are above the Ichimoku Clouds for all time-frames. The 5-day moving average is 108.21. The top of the Bollinger band is at 112.09 and the lower edge is seen at 101.96. The uptrend line is at 107.12. On the daily chart, the Bollinger bands are beginning to narrow indicating that the market could consolidate here for a while.

Gold continues to glitter as it made a new high in the Friday session. We are above the Ichimoku Clouds for all time-frames. This chart clearly shows a very organized up trending market that rallies, rests and then rallies anew. The 5-day moving average is at 1467.28. The top of the Bollinger band is at 1485.23 and the lower edge is seen at 1404.93. We continue to like both crude oil and gold. Naturally, we like to buy the dips and will not chase this market.

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