June 26, 2016 edited.docx with charts

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

[email protected]

June 26, 2016

Hear ye hear ye hear ye!!! Social Security payments will increase TWO DOLLARS per $1000

next year. But wait, before you spend the extra money, the cost for Medicare part B will

increase $27.20 from last year’s cost of $121.80 to $149.00. Seniors stand to lose on the 2017

adjustment and will have less money in their pockets each month for food and

medicines…..Something really is wrong with the government’s calculation of “cost–of-living” if

the adjustment doesn’t even absorb the cost of the Medicare increase. Seriously, something is

off here. Either we have a “cost-of-living” increase that covers the increased cost of Medicare

part B or, Medicare part B should be adjusted lower. The result of all this is less money in the

pockets of seniors who, because they are seniors, are unemployable. Why unemployable?

Because the rampant and obvious discrimination against seniors is unchecked and sadly, seen as

acceptable here in the USA. Statements referring to age as "experience" and equating industry

experience to "senor roles" are all too common methods of discrimination built into, and deemed

acceptable, by our system.

And, on to the next topic de jure, ladies and gentleman, we have.... BREXIT! A particular

conversation we had a few months ago with a French colleague, oh I don't know, let’s call him

Joque, comes to mind on the eve of this vote. Joque, a young educated man in his mid-thirties

who grew up in Paris, came to New York on a work visa a few years ago. Today, having left his

family and friends, New York is his home. We asked Joque for his take on the noticeably

growing population of French living and working in New York. Joque's reaction was an

interesting one. He told us of conditions described as "scary" in France: a massive influx of non-

integrating immigrants and gloomy economic prospects for the young and educated. Mind you,

Joque is not particularly politically minded nor does he harbor particularly strong opinions/views

in one direction or the other. Sadly, we failed to put two and two together. We passed this off as

the same old France that likes to protest and riot in the street each decade.

What we were in fact hearing were the seeds of populism that have been planted not only in

France, but across much of the world. Fears tied to immigration, the changing/watering down of

individual nation's unique cultures, disappearing jobs and gloomy retirement outlooks have

fueled nationalist movements in many EU member states and, here at home, have manifest

themselves through the candidacy of Donald Trump. This Phenomenon is not simply Western; it

is Global; take notice of the nationalist tides that have swept over Russia, China and, although

perhaps a bit more muted, even Japan. Looking to the rise of globalization and nationalist

movements during the late 19th and early 20th century and the global economic stagnation that

seemed to effect even the most cut of economies of the world during the 1970s, we can see these

phenomenon are like tides of the ocean, ebbing and flowing the world over. Why did we fail to

recognize this populism in Joque's words? Why do countless polls and studies underweight the

risk of nationalism/populism? Perhaps, in part, it is because many of us performing the studies

are not quite as effected by the woes mentioned above and subsequently are not a part of these

conversations.

Although we by no means mean to relate the current state of the world to historic extremes, we

would like to offer a word of caution. The Russian Bolshevik party was seen as an "extremist"

party in Russia, after the Russian revolution (they did not immediately come to power but rather

were one of many elected parties in the Duma). The Nazi party was seen as an "extremist" party

in Germany during the 20s and very early 30s by the German population. We typically imagine

these groups as having had broad support across populations in order to simplify our historic

understanding of what happened; this is not the case. Alas, we will get off our soap box and

digress into our weekly market commentary.

The S&P 500 September futures contract retreated 87.50 handles (points) in the Friday session,

piercing and closing below our horizontal support line of 2022 closing the day at 2018.25. Both

the RSI and the stochastic indicator are issuing a sell-signal with plenty of room on the

downside. Our own indicator is issuing a buy-signal. The volume in the Friday session was very

heavy. We will need to see if there is follow through in the Monday session. Sell the rumor buy

the news anyone? Amazingly, the market’s downdraft stopped right at the 38.4% retracement

number. The 50% retracement number is 1961, just in case you were wondering. If you stand

back and assess the damage from the Brexit vote, it could have been a lot worse. The range for

the day, including the overnight session was 120.50 handles (points). Needless to say, the

volume was heavy. The day’s high was seen at 10:00am and after that the market retreated, but

in an organized fashion never revisiting the overnight lows. Clearly the day session low was into

the close as positions were adjusted to hedge for the weekend and any hysteria that might occur

on Sunday evening. Just to bring back some sanity, the weekly range was about 120.50 points

and in January we had a 133.50 range. It is likely that we will see some follow through to the

downside before all is said and done on this retreat. The most frequently traded price was 2028.

The Market Profile chart shows us a long wick and long tail on this normal curved chart.

Clearly, the day’s worst performer was the NASDAQ 100 which fell 200.50 handles (points) on

the day. The range for the day was a stunning 259.50. Just to comfort you the range in January

was 351. Both the RSI and the stochastic indicator are issuing a sell-signal with plenty of room

to the downside and our own indicator is issuing a buy-signal. The volume was very high for the

trading session. The NASDAQ 100 came very close to the 50% retracement number of

4223.375. The 15 minute chart shows the high at 10:00 and a slow and steady retreat into the

close of the Friday session. The most frequently traded price was 4297.50.

The Russell 2000 September futures contract retreated 51.70 handles (points) in the Friday

session touching the horizontal support line at 1082.10. We drew Fibonacci retracement

numbers and discovered that the 62% retracement number taken from the February low is 1033.

Both the stochastic indicator and the RSI are pointing lower with plenty of room to the

downside. Our own indicator is pointing higher. The downside liability is to 1033 with support

at 1059.50, the Fibonacci 50% line and 1052.10, a horizontal support line. It is interesting to

note that the weekly range of 97.3 matches the weekly range seen in January which was 97

handles (points). Although the downside move might have felt worse than it was, it was not out

of the ordinary regarding historic moves. What’s more, the Russell 2000 held better than the

other indices that we follow. Friday, of all day’s the Russell 2000 rebalanced. The most

frequently traded price was 1116.50 but the price with the highest volume was 1121.75 where

13.9% of the volume was traded. The initial plunge in this market was in the overnight session

at about midnight. The high for the day session was at 10:00. From there, the market retreated

but never went back to the spike low of the overnight session.

The US Dollar Index rallied 2.148 handles (points) in the Friday session as money ran to out of

the markets looking for a safe place to hide. All the indicators that we follow herein are issuing a

buy-signal. The US Dollar Index broke to the upside and then quickly retreated back inside its

trading range. The next level of resistance is 97.09, 97.70, 98.609, 99.70 and then 100.36. The

overnight high was seen at about 11:30pm when the DXE traded up to 96.70. During the day-

session the market traded between a high of 96.05 and a low of 95.110. The most frequently

traded price was 95.775 and 95.550. 9.7% of the day’s volume was seen at 95.85. The trading

range seen in the US Dollar Index is clearly seen in the weekly and the monthly charts.

Remember for this current crisis, the US Dollar Index is a safe place for money to hide, that said,

with possible anticipated instability because of the coming elections in the US, that safety haven

might be lost and the funds would likely flow into gold.

Crude oil retreated in the Friday session as the US Dollar appreciated. The intermarket

relationship held strong as anticipated. Crude oil remains in a trading range of 45.83 to 51.67

and until it either breaks to the upside or plunges to the downside, it will be stuck here. The

weekly chart clearly shows several trading ranges. Even the Bollinger Bands are going flat.

There is concern that Europe and England will or could move into recession which will impact

crude oil. The most frequently traded price was 47.75.

You have to love gold for the hysteria trade….up 55.2 handles (points) in the Friday session.

Every time-frame reviewed is positive. Gold is the ultimate safety trade even safer than the US

Dollar especially given the upcoming Presidential Election. Oh, by the way, no matter what

these candidates say they will do, they essentially can only try to do. People tend to forget that

congress must agree and then there is the judiciary which can still stop illegal actions even by a

President. Gold is an emotional trade. It is also a hedge against inflation which some see

coming. The most frequently traded price was 1320.

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.

Copywrite 2016 The Option Royals