We are in the last quarter of the year and you know what that means! Get ready for:: the September sell-off, October crash-a-phobia,

1. Option Queen Letter
By the Option Royals
Jeanette Young, CFP®
, CFTe, CMT, M.S. and Jordan Young, CMT
4305 Pointe Gate Drive
Livingston, New Jersey 07039
www.OptnQueen.com
optnqueen@aol.com
September 4, 2016
Hurricane Hermine is ripping up the east coast of the United States, leaving power
outages in its wake. We look forward to a much needed break from Hillary and “The
Donald.” For the first time in what seems an eternity, both candidates will hopefully
take a back seat. This election season has been one of the dirtiest, nastiest, and
valueless seen in modern history. We must remind our readership that no matter who
wins, and unfortunately one of these two will win, what they promise will have about as
much chance of happening as palm trees growing in the dark cold permafrost of Barrow
Alaska next year.
We are in the last quarter of the year and you know what that means! Get ready for:: the
September sell-off, October crash-a-phobia, November Presidential Election, and
finally December tax selling season. While this doesn’t sound great for the bulls, much
of this is seasonal and as such will pass.. Money is flowing to the USA from abroad
because we actually have companies that pay decent dividends and bonds that pay
interest rather than charging the investor to park their money. Another piece of support
for the market is that baby boomers are retiring and cannot live on the paltry interest
rates seen on government bonds and are subsequently looking for dividend paying
equities as investment to pay their bills. The only rub is that equities move both up and
down and may or may not keep their value while bonds fluctuate in value but eventually
pay off at full value when due or called. Seniors have less time to recoup any losses
simply because the clock is running on their time horizon.
The S&P 500 broke out of its trading range on July 8th
and after a sprint to 2141.50 has
been in a tight trading range from 2141.50 to 2191.25. The market rallied 12 handles
(points) in the Friday session. The Bollinger Bands have been in a contracted state
since August 8th
and at this time are even tighter. We believe that this state of range
bound dull trading will continue until we start to see the Bollinger Bands begin to
expand. This is awful news for option seller insomuch as the premiums received for
sales of options are cheap. That said, these cheap options just might be good buys.
Both the stochastic indicator and the RSI are pointing to the upside with plenty of room
to move. Our own indicator is still issuing a sell-signal but the momentum is flat. The
most frequently traded price was 2178-2178.50-2179. When looking at the Market
Profile daily chart, which shows the actual trading for each day, you can clearly see the
congestion in the trading range. The market seems to be having trouble getting through

2. the upper resistance level and therefore it is possible that it will just jump above that
level. The less likely scenario is that we will retreat and fill in the area from 2141.50 to
2120.50 where little trading has occurred. The monthly chart looks bullish.

4. The NASDAQ 100 gained 21.25 handles (points) in the Friday session still remaining in
a tight trading range. The Bollinger Bands are contracting, which began about two
weeks ago. As this index did not experience the Bollinger Band contraction seen in the
S&P 500, this change should be noted and watched. We are seeing volatility contract.
All the indicators that we follow herein are pointing to higher levels with plenty of
room to the upside. The most frequently traded price was 4798.75. The congestion can
clearly be seen on the daily Market Profile chart. The weekly chart looks as though the
market is forming a flag. This will have to play out and we are in the early stages of
that formation. We are in wait and see mode and until or unless the market give us a
good reason, we will sit and wait patiently.

8. The Russell 2000 rallied 13.20 handles (points) in the Friday session and looked like
the day’s winner, not necessary for points but for trying to push to the upside. We did
see this index make a marginal new high for the month and for the year. Both the
stochastic indicator and the RSI are pointing higher and are approaching over bought
conditions. Our own indicator is pointing lower. The Bollinger Bands are beginning to
expand from their contracted levels. The most frequently traded price was 1248.00
which was also where 10.3% of the volume traded. The overnight session saw 1237.50
as the most frequently traded price but on miniscule volume. The point and figure 12
by 3-box reversal indicates 1251.60 is an important resistance level and that the Russell
2000 continues to be in an uptrend. The index is not near the all-time high of 1292.30
and although it wouldn’t take much to achieve and surpass that number, we seem to
need a bit of a rest before an attempt can be made. We are entering into the last
quarter of the year and have quarterly expiration and roll-over in two weeks when the
September contract rolls to the December contract. This index has historically been
home to a lot of yearend tax selling and following from this has also been the best
upside mover in January, enjoying the January affect.

12. The US Dollar Index rallied 0.215 in the Friday session leaving a long tailed
candlestick on the chart. Both the stochastic indicator and the RSI are pointing higher
with room to the upside but our own indicator is pointing lower. Although this market
rallied a bit, the trend continues to be down with a lower high and a lower low. The
weekly chart is positive showing that the US Dollar index gained for the weekly. The
most frequently traded price was 95.825 but the highest volume was seen at 95.80
where 8% of the day’s volume traded. The monthly chart shows that the index is
coiling. The point and figure chart is positive but clearly shows a need to either remove
96 on the upside or otherwise move a bit lower. The 15 minute TTFlow chart shows
that volume entered the market with the release of the “Jobs Report” at 8:30am. By
11:15 the high for the day was printed then the volume and the action went to sleep for
the rest of the session. Traders clearly left their posts to get a jump on the holiday
weekend traffic.

16. Crude oil rallied 1.04 in the Friday session remaining above the low of 43 printed in the
Thursday session. Support for this product is at 41.10 and 39.19. Resistance is at
45.83, 46.26, 47.49, and 48.46-48.75. The RSI is giving us a buy-signal and the
stochastic indicator is curling to the upside and will likely give us a buy signal in the
next session. Our own indicator is also curling to the upside but is further away from a
buy-signal. The weekly chart shows a downside bias, but nothing scary, just more
range-bound trading with the cap at 51.67 and the bottom at 35.24 and then the low of
January-February of 26.05. Looking at the intraday charts of crude oil, it appears that
traders sold on the close, perhaps to be flat the three-day weekend or perhaps to be
short. We believe it was the former.

19. Gold rallied 11.30 in the Friday session touching the upper downtrend channel line. The upper
edge of the channel lines is 1330.64 and the lower line is at 1299.90, the middle line is 1315.83.
The recent decline in gold could continue to the 1253.70 level. Right now the lack of inflation
has put to bed the inflation hedge story. As to gold acting as a currency, the hysterics of Brexit
have passed; neither England nor the world fell apart. Thus, gold is now acting as a commodity.
The strength of the US Dollar keeps all commodities traded in dollars in check and they react to
changes in the dollar insomuch as nothing economically has really changed. We are in
stagnation, not really growing very fast but not exactly falling apart either. Gold will rally if
there is turmoil in the globe and if fear returns. For now, things are quiet on the hysterical front.
Gold enjoyed a strong rally in the Friday session but the weekly chart shows a lower weekly high
and low, not a good thing for the bulls. The weekly stochastic indicator and our own indicator
are both pointing lower while the RSI is pointing higher….divergence! The monthly chart
shows the importance of staying above 1302.1 as does the daily chart. All the indicators on the
daily chart are issuing a buy signal. We like gold as a hedge against something blowing up
somewhere.

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.
Past performance is not necessarily indicative of future results.
Copywrite 2016 The Option Royals