Option Queen Letter By the Option Royals

Jeanette Young, CFP®, CFTe, CMT, M.S.

4305 Pointe Gate Drive

Livingston, New Jersey 07039

www.OptnQueen.com

optnqueen@aol.com

April 17, 2016

NEWS FLASH: we have negative interest rates in many investment accounts today. True they

are not called negative interest rates but rather inactivity fees. These are, fees assessed on

accounts with cash deposits that have not had trades for a given period of time. An inactivity fee

= negative interest rates. You would think that money sitting in a money market account, adding

to a brokerage firm’s book, would pay interest, right? No, you are charged a fee if you are not

actively investing or trading. It’s all about how you name the asset. So parking fees are

assessed; not all firms have them but many do.

Sadly, the NYMEX and COMEX trading floors, the last commodity trading floors open in New

York City, will close by the end of 2016. The NYBOT, before it was acquired by ICE, moved to

the One North End Avenue location in 2003 after the NYBOT trading floor, at Four World Trade

Center, was destroyed by the 9/11 attack. NYMEX had moved to this space years earlier to

accommodate a need for more room. NYBOT’s move to One North End Avenue rejoined the

commodities traded on NYMEX and NYBOT to a massive, common floor. NYBOT occupied

the left side of the seventh floor at North End Avenue adjacent the COMEX on the right. Our

pits were different from the COMEX in that we relied on a halo of screens circling the outer

edges of the ring for trade information, while the COMEX depended on electronic wall boards.

Downstairs, energy and platinum were traded on the third floor with escalators linking the

different products. . To us trading animal pit traders, food was an important part of our day,

naturally. Various dining options were available on the seventh and third floors with formal

dining on the tenth floor, fitted with a terrace overlooking the New Jersey skyline. Today, what

is left of the trading pits is confined to a portion of the building’s third floor. Food, while still

available, is not quite what it was. Traders have been relegated to local restaurants and, of

course, food trucks.

There was a time when increased volume in a particular pit on the trading floor would draw in

traders from surrounding rings as they vied to “get a piece of the action” in what can at best be

described as total mayhem. Ah those were the days: ugly jackets, course traders, paper stroon

floors and a bee-hive of activity. While today this is all gone, it is not forgotten: getting

spurred…….laughing, and enjoying the craziness of trading, both bad days and good days alike.

Remembering, even if there was a devastating day, the sun would come up tomorrow…..next

trade!

On a more sensitive note, it was reported that the Saudi’s have threatened to sell $750 Billion of

US assets if the US does not bend to its wishes regarding a pending bill in congress……This is a

serious case of too big to fail which doesn’t involve the US banks. We, here in the USA, should

take note that we have given other governments this sort of power by selling them our debt.

What if China didn’t like one of the proposed changes being made by congress? Okay now

what? Do we allow a foreign government to dictate to our congress and bend to their wishes?

Whether or not the bill is ridiculous (and by the way it isn’t), no foreign power should be so

audacious so as to dictate to us what we can and cannot do. Does our constitution give foreign

governments power over the bills pending in our congress? While we believe diplomatic

solutions should certainly be utilized to resolve the matter at hand, under no circumstances

should we allow foreign powers to make such bold threats in response to domestic matters..

Now what?

The S&P 500 lost 1.75 handles (points) in the Friday session closing just below the horizontal

resistance line. Although for the week, the index added some upside points, the volume fell

gradually as the week progressed. The market is close enough to the old high, achieved in May

of 2015, for it to realize a new high with just a few rally days. As a trader, one views the high

and wonders if the momentum will take the price higher just to see where the stops are above

that old high. As a floor trader we knew as we approached a high that the market would probe

to see what was above that level. All the indicators that we follow are curling over to the

downside but only the RSI is issuing a sell-signal. The Bollinger Band are beginning to expand.

Should there be follow-through on that expansion, increased volatility would result. It has been

a bit too quiet lately…..The most frequently traded price was 2074 and the highest volume was

2076. The 60 minute 0.2% by 3-box point and figure chart looks extremely positive and has an

upside target of 2101.39. The daily 1% by 3-box point and figure chart is also bullish although

the market clearly is in an area of price concentration. Until or unless this market breaks out of

the range and clearly makes a run for the May 2015 high, it will stay trapped in a trading range.

The situation at the moment is really not tradable until the market either fails to break out or

breaks out.

The NASDAQ 100 lost 7.50 handles (points) in the Friday session and remains below the

horizontal resistance line. We did see the market poke through the resistance line in the

Thursday session but close slightly below that line on reduced volume. The stochastic indicator

is about to issue a sell signal and the RSI has already done so. Our own indicator is rolling over

but no signal has been issued. The Bollinger Bands are steady at this time. The most frequently

traded price and the highest volume price was 4540 for the Friday session. The 60 minute 0.2%

by 3-box point and figure chart is bullish but not wildly bullish. The daily 1% by 3-box point

and figure chart has an upside target of 4951.93 and does look bullish. As with the S&P 500

until or unless this index breaks out of the trading range or confirms staying inside the trading

range we would avoid it. That said, if there is a break-out or a retreat, we would act on that

depending on the volume and the thrust.

The Russell 2000 did break out of its range in the Wednesday session and has followed through

that breakout by staying above the horizontal resistance line at 1116.80. The market close up

2.50 handles (points) in the Friday session. All the indicators that we follow continue to point

higher. Our own indicator, although pointing higher is curling over to the downside. The

volume is also fading which is of some concern. For a true break-out we should see increased

volume. The most frequently traded price was 1124.50 but 15.2% of the day’s volume was

traded at 1127.50. The 12 by 3-box point and figure chart is clearly bullish but also need to me

higher to establish a better break-out.

The US Dollar Index lost 0.238 handles (points) in the Friday session, closed within the

established trading range and left an outside day candlestick on the chart. This could indicate

that this market is about to change directions from down to up. An outside day candlestick or

bar prints a lower low than the previous trading day and a higher high than the previous day.

Both the RSI and stochastic indicator have issued a buy-signal. Our own indicator continues to

point lower. The volume for the week has been low. The most frequently traded price was

94.95 but 13% of the volume was seen at 94.675. The 60 minute 0.2% by 3-box point and figure

chart has a downside target of 90.694 and a downtrend line above it. The daily 0.5% by 3-box

point and figure chart also has a downside target, 91.717. We believe that this market is in a

trading range and that it is near support and likely will bounce from this or slightly lower levels.

That said, should the support level fail to hold for two-days on a closing basis, we believe that

lower levels will be in the future. Many multi-nationals are hoping for the US Dollar to weaken

so that they might regain some competitive advantage, or at the least a level trading field, both

here at home and abroad.

Crude oil lost 1.10 handles (points) in the Friday session. Although this market poked above the

horizontal resistance line on three occasions, this past week, it was unable to close above that

level. The movement on Friday decisively pushed the market inside its trading range. All the

indicators that we follow are issuing a sell-signal. The most frequently traded price was 42.50.

The 1% by 3-box point and figure chart has an upside target of 43.87. The daily 1% by 3-box

point and figure chart has a target of 44.75. The spread, although narrower than its historic

norm, between Brent and WTI is getting a little wider, it is still narrower than normal. It is

interesting to note that platinum and WTI are trading together in the same direction, which at this

time, is down. The spread is constant.

Gold gained 9.2 handles (points) in the Friday session but remained inside its trading range. The

RSI is pointing higher and the stochastic indicator is curling to the upside but has not issued a

buy-signal while our own indicators clearly is pointing lower. This is divergence in indicators

which is a caution flag for traders. The Bollinger Bands appear to be contracting slightly. The

nicest thing we can say about this chart is that it shows a range-bound market that is dull. The

most frequently traded price was 1230. The daily Market Profile chart shows a market stuck in a

range. The daily 1% by 3-box point and figure chart has an upside target of 1707.61. The 60

minute 0.3% by 3-box point and figure chart has an upside target of 1270.65. The spread

between platinum and gold remains steady but exceedingly wide and historically upside-down.

We would consider trading the spread, unfortunately we do not know when this will reverse and

there will be lots of risk in that trade. We will continue to watch it closely.

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.

Past performance is not necessarily indicative of future results.

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