Option Queen Letter By the Option Royals

Jeanette Young, CFP®, CMT, M.S. and Jordan Young, CMT

4305 Pointe Gate Drive Livingston, New Jersey 07039

www.OptnQueen.com optnqueen@aol.com

December 14, 2015, 2015

The November ‘Jobs Report” goosed the financials creating one of the best rallies we have seen

in a very long while. Was it because the “Jobs Report” was just so good or because the data

supports an interest rate increase perhaps at the next FOMC meeting? We are not sure which it

was but the results were notable.

Last week the financial futures rolled to the March expiry and this Friday, the December contract

will expire. This activity generally puts some upside pressure on the averages as shorts cover and

roll their positions forward.

As to Donald Trump, we have been silent on the topic of the GAFE King. Love him or hate him,

the man is a marketing genius. We have never seen a candidate with 24/7 press coverage. For

months on end Trump has managed to get and keep his name in front of the press on a daily

basis. As to what he says; while some is totally outrageous and we do not agree with it, we

believe that this country is looking for leadership and he is saying as well as showing that he is

indeed a leader. In today’s politically correct matrix in which modern candidates operate Trumps

message resonates decisive leadership. What the public fails to realize is that some of the

outrageous thing he says he would do would likely never get done after all, this is a democracy

and not a dictator ship.

To the elected officials in the USA, the American people are sick and tired of PC do nothing

behavior. The American people are looking for leaders that are not afraid of taking a stand and

really representing the people. What this country does not need, are more do nothing politicians

with allegiances to special interest groups. Representatives that vote in pay raises for themselves

in the middle of the night and qualify as the most over paid, when considering work done,

employees in the world. Talk about do nothing geeze!

As to the markets; Rocky Road is a great ice-cream but not great in the market place.

The S&P 500 dropped like a stone in the Friday session and teased the 1998.50 support line. The

danger here is, that should that neckline of an “M” formation fail, on a closing basis, then the

door will be open to 1861. This formation is truly ominous for the market. We warn that a

breach of one day will be a tease, but a two-breach is a good signal. In other words, we need to

close below the neckline for two days. Generally when you take the one day signal you suffer

from a snap-back rally that is why we like to see two-days for confirmation. Both the stochastic

indicator and the RSI continue to point lower. Our own indicator is now giving us a buy-signal.

Remember divergences should be used as an alert signaling a need for more focus. Divergences

tells us something is wrong. The chart also tells us that the market will test the 1998.50 level just

to see if it holds. We have the combination of an FOMC meeting this week and a quadruple

witch expiration. Clearly once the FOMC meeting is past, the market will feel a sense of relief

and could rally on any news that shows the direction of the FOMC. The daily 1% by 3-box point

and figure chart is beginning to turn negative closing below the internal downtrend line. The 60

minute 0.2% by 3-box chart clearly shows the damage the recent decline has made to this chart.

Tread lightly and proceed with caution.

The NASDAQ 100 retreated in the Friday session but is not in as bad a position as is the S&P

500. The neckline of the double top is 4455. Although it appears that this index will probably

test this level, that activity is less probable in this index than in the S&P 500 breaking its

neckline. Should the market retreat and remove that level, it would open the door to another 100

handles to the downside. All the indicators that we follow are lower and although none has

given the hint of a buy-signal as yet, they look as though they might do so in a few days. The 60

minute 0.2% point and figure chart looks awful. The daily 1% by 3-box point and figure chart

looks better than the 60 minute chart. That said, the prices need to stabilize or we can expect to

see much lower levels. The Market Profile chart clearly illustrates how downward lopsided the

trade was in the Friday session. Proceed with caution!

The Russell 2000 retreated in the Friday session. Both the stochastic indicator and the RSI are

issuing a buy-signal. Our own indicator continues to point lower. The Bollinger Bands are again

expanding showing the increased volatility in this index. The downtrend channel is very steep

and not sustainable. We can expect to see a bounce in this index. The quality of the bounce will

be most important to us. The 11 by 3-box point and figure chart clearly illustrates the downdraft

seen in this index. The market tends to buy this index as we move into January. The small

capitalization stocks sold for tax loss are repurchased causing this index to rebound.

The US Dollar index retreated in the Friday session. We see mixed signals from the indicators.

They seem to want to go higher but are not issuing a buy-signal as yet. The US Dollar index

seems to be suffering from a reversal of direction. We are stair stepping lower. We need to

close above 98.155 and 98.88 for a reversal from down to up. Surprisingly, commodities

continue their steep decline even in the face of a retreating US Dollar. This behavior is not

unusual when the markets suffer wild swings. Perhaps the US Dollar went too far too fast and

now is regrouping. Actually we don’t believe that we believe that once the FOMC increases

rates, it is likely that the US Dollar will retreat a bit further. There are far too many US Dollar

bulls and the trade is lopsided. When everybody believes that something is going to happen, it

likely will not happen. The most frequently traded price and the highest volume was seen at

97.60-97.625. The daily 0.5 by 3-box point and figure chart has an upside target of 114.2243,

that is an old target. The 60 minute 0.2% by 3-box chart has a downside target of 92.895.

Crude oil has no friend and continues to implode. It is important to note, that the spread between

Brent and WTI has narrowed considerably. Yes, the product will bounce….eventually. Right

now it looks more like a falling knife than a measurable trade. After the emotion is removed

from the trade we see support at 32.48. It is quite likely that should crude oil trade down to that

level, that it will remove that old low just to print a new one. The downward trending channel

lines are 40.216 and 34.562. We closed below the lower Bollinger Band indicating that it is

likely that we will see a bounce in this product. The RSI is curling upward although both the

stochastic indicator and our own indicator are issue a buy-signal. The most frequently traded

price in the Friday session was 36.54. The daily 0.9 by 3-box point and figure chart has a

downside target of 34.75. The chart continues to look awful. The 60 minute 0.5% by 3-box

point and figure chart has a downside target of 32.5. Again as with the daily chart, there is

nothing positive to report on this chart.

Gold closed higher in the Friday session leaving a bullish engulfing candle on the chart. The

indicators are mixed. The RSI is pointing lower from neutral levels, our own indicator is issuing

a buy-signal and the stochastic indicator looks as though it is ready to issue a sell-signal. The

Bollinger Bands are becoming very narrow. This is generally an indication of a violent move

coming in the near future. For us to become bullish on gold it needs to close above 1088.80.

The daily 1% by 3-box point and figure chart has a downside target of 930.64. The 60 minute

0.25% by 3-box point and figure chart has a downside target of 1039.32 and an upside target of

1160.01. The most frequently traded price in the Friday session was 1076. There were more

downside prints than there were upside prints yet the bulls won the game closing up on the day.

Caution is warranted in this trade.

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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