The low for the S&P June future’s contract on April 14, 2014 was1803.50 and the high, seen on April 24, 2014 was 1882.50. That trading range will remain for the coming weeks unless either the upper or the lower levels are broken decisively.
This week we will have a two-day FOMC meeting with no scheduled conference after that meeting. Chairman Yellen has been very clear and open regarding her intentions therefore we expect no changes and more of the same verbiage. This week is the end of the month and quarter which generally causes portfolio adjustments (dressings or undressings). Also this Friday we will have the monthly Job’s Report for April’s so get ready for some instant volatility! Of course, don’t forget the 140th running of the Kentucky Derby, strap on your hats and collect a mint julep.
Global chaos is not really impacting the USA markets. We were due for a correction and indeed we got it. Should the aggression and threats of Russia abate over the weekend, expect to see a relief rally after a brief dip in the Monday session. Investors and portfolio managers are demonstrating manic behavior with the patience of a flea, jumping from one side to the other. Risk on risk off, much like a ping pong ball sailing over the net in a game. For day-traders this has been a fertile field to trade, for all others, it is causing vertigo. Note that the small capitalization index has had more volatility than the steadier S&P and Dow. For those of us who trade and use options, this increase in volatility has been heaven. Remember the VIX only measures the volatility via price changes in the options (two months out) for S&P 500 and not the other indices or stocks. On Friday the change in the VIX was +0.74% while the change in the VXN (which measures the volatility of the NASDAQ 100 options) was +1.42% or double the change in the former.
The S&P 500 declined 0.68% in the Friday session retreating 12.75 points/handles. We have signs of exhaustion. All the indicators that we follow herein continue to issue sell-signals. The 5-period exponential moving average is 1865.90. The top of the Bollinger Band is 1896.48 and the lower edge is seen at 1817.71. We are above the Ichimoku Clouds for all time-frames. Believe it or not, the weekly chart shows that the S&P 500 remains in an uptrend, which began in October of 2013. Until or unless this market closes, on a weekly basis, below 1815.55, the trend remains up. We take a much shorter view of the market and for now, we believe that we are in a trading range. The daily 1% by 3-box point and figure chart has a downside target of 1673.96. There are a few internal uptrend lines and absolutely no downtrend lines for this chart. The 60 minute 0.1% by 3-box chart does have a pair of internal downtrend lines and a downside target of 1832.15. This index is the best performing index in the group that we follow. Clearly money is seeking safety at the moment.
The NASDAQ 100 lost 53.75 points/handles in the Friday session. The 5-period exponential moving average is 3557.84. The top of the Bollinger Band is 3669.12 and the lower edge is seen at 3435.59. We closed below the Ichimoku Clouds for the daily time-frame but remain above the clouds for both the weekly and the monthly time-frames. All the indicators that we follow herein continue to issue a sell-signal. This chart looks ugly. The 60 minute 0.25% by 3-box chart has a downside target of 3428.34. The chart gives us a fair amount of insecurity regarding a continuation of a rally. The daily 1% by 3-box chart has a downside target of 2922.41. This chart continues to be concerning for those of a bullish nature. Just for fun, we stacked some NASDAQ names on a single page to see how those names preformed. Clearly, AAPL was the best looking chart and the only positive chart. AAPL also gave a boost to the S&P 500 which tells you that the chart would have looked far worse without AAPL’s contribution. AAPL also helped prop up the NASDAQ. Friday’s decline in this index was the second day of a decline and much of the nervousness can be attributed to people wanting to be flat and out of the market in the face of the weekend. Likely the market will find relief in the Monday session. That said if the new “cold war” continues, we will see more action to the downside.
The Russell 2000 lost about 1.79% of its value in the Friday trading session. This index lost more than the other indices that we follow herein. Remember also that this index does not have AAPL in it. The chart looks as though we are in a downward trending channel will possible support at 1111, 1101 and 1090.50. We are below the Ichimoku Clouds for the daily time-frame. We are above the clouds for all other time-frames. The weekly chart shows that this index has broken its uptrend line. The downward trending channel lines are 1151.49 and 1081.88. All the indicators that we follow continue to issue a sell-signal. The 5-period exponential moving average is 1134.69. The top of the Bollinger Band is 1189.37 and the lower edge is seen at 1098.15. We do have horizontal lines of support but at much lower levels. Although we believe that this index will bounce, we advise caution.
Crude Oil continued its retreat in the Friday session retreating for four of the week’s sessions. All of the indicators that we follow herein continue to issue a sell-signal. We are in the Ichimoku Clouds for both the daily and weekly time-frames but remain above the clouds for the monthly time-frame. The 5-period exponential moving average is 101.84. The top of the Bollinger Band is 105.21 and the lower edge is seen at 99.08. The daily 1% by 3-box chart continues to have an upside target of 137.75. There is a downtrend line which we closed below which does give us concern. The 60 minute 0.2% by 3-box chart has a downside target of 95.34 which, at this time, seems quite possible, however; when looking at the 0.1% by 3-box 60 minute chart a more likely 99.26 is the target. Until the chart tells us differently, we remain cautions and bearish crude oil.
Gold rallied 0.75% in the Friday session. We are kissing the upper downward pointing channel line at 1303.62. The lower channel line is 1222.02. There is a horizontal line of support at 1269.70. The 5-period exponential moving average is 1293.92. All the indicators that we follow herein continue to point higher. The Bollinger Bands have contracted telling us that we may be in for some volatility when it expands anew. The upper Bollinger Band is 1323.57 and the lower edge is seen at 1272.47. The daily 1% by 3-box point and figure chart has a target of 1812.66. We do have both internal uptrend and downtrend lines. The 60 minute 0.5% by 3-box chart has a downside target of 1104.88. Gold seems to be in a trading range of 1276 to1331. Until or unless this market breaks out of that range, we expect to see trading back and forth between the recent highs and lows. Should gold close above 1331.15 for two days, we would expect to see it rally to 1392.08.
The US Dollar Index retreated in the Friday session. The downward pointing channel lines are 79.94 and 79.38. The uptrend line is 79.73. The upper Bollinger Band is 80.64 and the lower edge is seen at 79.38. The 5-period exponential moving average is 79.81. All of the indicators that we follow herein continue to point to lower levels with plenty of room to the downside. The US Dollar Index continues to coil. The weekly chart tells us that we must stay above 79.29 or risk a quick trip to 79.01. Should that level fail to hold up the market, we have levels of support at 78.61 and 78.11. The 30 minute 0.05 by 3-box has a downside target of 79.25. The 1% by 3-box chart has a downside target of 75.74 and a strong downtrend line.
The Option Queen Letter
Jeanette Schwarz Young, CFP®, CMT, M.S.
Jordan Young, CMT
83 Highwood Terrace
Weehawken, New Jersey 07086