The document provides a weekly market summary and outlook for various indexes and commodities. It notes that the S&P 500 and NASDAQ 100 ended the week lower after reaching new highs earlier. The Russell 2000 and crude oil performed poorly, with indicators pointing lower. Gold also looks weak with support at $1182. The US dollar index remains strong with indicators pointing higher still. In closing, the author advises caution given mixed signals in markets and recommends tight stops if positions are held.

1. Jeanette Schwarz Young, CFP®, CMT, M.S.
Jordan Young, CMT
83 Highwood Terrace
Weehawken, New Jersey 07086
www.OptnQueen.com
September 21, 2014
The Option Queen Letter
Here we are in the third week of September and so far, the September blues have been avoided. We have conquered the September roll of futures and quadruple options expiration with no scares or battle wounds. The bulls are out in full force the bears in hibernation and so the saga continues. Ah but will it last? Yes and no, there are too many expecting to see a 10 to 20% correction just waiting for the opportunity to jump into the trade. Naturally, that is supportive of a market resulting in shallow retreats. The problem as we see it is that it takes an awful lot of effort to move this market higher that is warning us of a possible distribution top. With that in mind, should the market begin to rally to the upside with conviction, that means not only generals leading but the troops following, we will see the trend following algorithm traders dog piling aboard and really could start off a rally.
The S&P 500 closed down in the Friday session after printing a new all-time high. This past week this market rallied for all days but the Friday session. In the Friday session the sentiment changed to the downside and much of the trading after the New York opening was to the downside. It is interesting to note that the volume did improve on the upside for most of the week. Was it selling in front of a weekend, option and futures flattening or something more ominous? Was the volume increase attributable to the expiration of futures and options, was it short covering or the beginning of another leg to the upside. These questions cannot be answer at this time but will become clear and we progress into this coming week. The indicators are mixed, the stochastic indicator has just issued a sell-signal, the RSI is pointing lower and our own indicator continues to issue a buy-signal. The 5-period exponential moving average is 1996.50. The top of the Bollinger Band is 2004.88 and the lower edge is seen at 1976.94. The Bollinger Bands look as though they are beginning to expand. The S&P 500 is above the Ichimoku Clouds for all time-frames. The Market Profile chart shows us a bimodal pattern. The 1% by 3-box daily point and figure chart continues to look positive with the upside target of 2371.33 in place. The 60 minute 0.1% by 3-box point and figure chart is less promising with a downside target of 1970.83. Key advice is that caution is warranted. Keep your stops tight, don’t chase the trade, and if elected by your stop stay in cash until a better signal of something is seen.

5. The NASDAQ 100 rallied for the middle three days of the week ending the week on a sour note after printing a high for the year. The Bollinger Bands have become narrow and look as though they could again signal an increase in volatility. The 5-period exponential moving average is 4077.95. The top of the Bollinger Band is 4102.70 and the lower edge is seen at 4039.67. The volume increased in the Tuesday, Wednesday and a little in the Thursday session and dropped off a bit in the Friday session. Our own indicator, the stochastic indicator and the RSI are curling over to the downside. Neither our own indicator nor the stochastic indicator have issues a sell- signal but look as though they will do so in a day or so. If this market retreats below 4004.25, we believe that there could be some unpleasant downside for the bulls. We are above the Ichimoku Clouds for all time-frames. The Market Profile chart demonstrates the confusion in this market. The action was clearly a downside push in the Friday session. The 1% by 3-box daily point and figure chart continues to look positive. The 60 minute 0.1% by 3-box chart has a downside target of 4007.22, which number is very close to our line in the sand number of 4004.25. The tech heavy NASDAQ 100 index has been struggling a bit telling us that we need to exert some caution.

9. The Russell 2000 gets the award for the worst performing index for the week. This index gave up 18 points (handles) in the Friday session clearly winning the prize as the dog for the week. The 5-period exponential moving average is 1147.04. The top of the Bollinger Band is 1179.26 and the lower edge is seen at 1139.53. The Bollinger Bands are beginning to expand telling us that volatility is expanding. Our line in the sand for this index is at 1134.10, below which, we would expect to see a flush to the downside. The stochastic indicator and the RSI both are issuing continued sell-signals. This index is below the 50 and 100 day exponential moving averages but still is above the 200 day moving average. The downward trending channel lines are 1160.92 and 1129.69. The Russell 2000 is inside the Ichimoku Clouds for the daily time- frame but remains above the clouds for both the weekly and the monthly time-frames. The market Profile chart shows us that although the Russell 2000 started the Friday session on a positive not it could not hold on to that and gave way to the downside.

10. Crude Oil continued its retreat in the Friday session. The only thing positive about crude oil is that the volume is that the volume fell on each of the three down days this past week. All the indicators that we follow herein continue to point to lower levels. The 5-period exponential moving average is 92.14. The top of the Bollinger Band is 94.82 and the lower edge is 90.42. The downtrend line is 93.60 and the lower channel line is 87.86. The uptrend line is 89.95. We are below the Ichimoku Clouds for all time-frames. The 60 minute 0.2% by 3-box point and figure chart has a downside target of 88.19 and nothing positive to be seen so far. The daily 0.9% by 3-box point and figure chart has a downside target of 81.39.

14. It truly is difficult to look worse than crude oil or the Russell 2000, but we think gold has achieved that honor. Worse yet, all the indicators are pointing lower at oversold levels. At this point we must remind you that both gold and crude oil are traded in US dollars. The US dollar has been on a tear to the upside. We are sure some of the weakness in both gold and crude is attributable to that fact. The next level of real support is at 1182…..yikes! The very steep down trending channel lines are 1229.97 and 1202.72. The 5-period exponential moving average is 1226.54. The top of the Bollinger Band is 1303.91. The lower edge is found at 1210.44. The 60 minute 0.1% by 3-box point and figure chart has a down side target of 1208.88. There is nothing positive about this chart and it seems that the target is achievable. The daily 1% by 3-box point and figure chart has a downside target of 1113.19. Again with the 60 minute point and figure chart we see nothing positive on the charts. It seems too late to short this and way too early to nibble on the long side thus we will avoid for now.

17. The US Dollar Index left a bullish engulfing candlestick on the chart in the Friday session. This index has been on a tear moving to the upside. The 5-period exponential moving average is 84.59. The top of the expanding Bollinger Band is 85.39 and the bottom edge is seen at 82.205. The stochastic indicator and RSI continue to point higher at overbought levels with room to the upside. The market closed at the high of the session showing real strength. The upside target on the daily 0.5% by 3-box point and figure chart is 85.1062. The chart continues to look very positive. The 30 minute 0.05 by 3-box chart has a target of 86.5….”pow zoom to the moon.” We are above the Ichimoku Clouds for all time-frames. The weekly chart has pole like qualities. We remember during the tech bubble many charts looked just like this chart. Hard to measure poles ya know. I this market rallies above 85.66, it will likely visit the 87 level and could be on track to go to the 90 region. That seems to be a bit aggressive but then so is this index.

21. 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. You should carefully

22. consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment.