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

March 20, 2016

Why are Americans so angry? Well if you review the wage charts on

www.thechartstore.com you will quickly come to understand that today the average

wage earner is bringing home less income than s/he did in 1973. The statistics showing

inflation used by the Fed do not reflect the sad truth that costs are outpacing income

growth and thus, the average wage earner has less disposable income today than s/he

had 40 years ago. Costs such as healthcare, insurance, food, tuition, etc. continue to

increase and are not reflected in the government’s data. Unfortunately the average

worker has to pay these bills and feels the strain that these increased costs have put on

their budgets. Clearly when the average worker looks to the elected representatives all

they find are people who do not have to live in the system and who retire on the

government’s dime which, is an extremely generous dime at that. We believe that these

elected officials should receive the same benefits as the people that they represent.

That means live on our healthcare and pensions, or lack thereof.

So why are there fewer jobs available? This is not such a simple question. Automation

has replaced many functions with computers and robots where once stood a human.

Think of your old stomping grounds from the mid-nineties, the blockbuster, the Sam

Goody, the bank teller. Automation has helped spur frictional unemployment in our

economy as a separation of generations has created a technological skills gap in the

work force. Perhaps this is the biggest elephant in the room. It's hard to get angry at

something like technology; a wall will certainly be of no help there. We do believe that

the time will come in the future, where the sophistication of technology and algorithms

will become so advanced that it poses a serious social problem for employment.

Imagine the day when a robot can assist a doctor during surgery, when an algorithm can

decipher your tax documents and when software scans for compliance issues. Some of

these advances are already poking their heads into the present.

Automation is only starting to become an issue and we believe the days of social angst

as people are pitted vs. computer are decades away. The real culprit is a cultural one.

We live in a society that has sold a generation the dream of a college education and a

cubical. Much of the younger generation has been told that to be successful is to go to

college and to work a white collar job. Not only is this notion flat out false, but what

we in this country need are plumbers, electricians, carpenters, car mechanics etc. We

believe in education but we should encourage people to move into careers that they will

enjoy and where there is demand. We are saddened by some of the predatory practices

adopted by a number of for profit universities, gaining tuition dollars by selling a

dream. Alas, another story for another time.

S&P June futures gained 8.5 handles (points) , a 0.42% change on the day, in the

quadruple Friday expiration. Yes the March futures settled at the day’s opening price

but the June futures were affected by the underlying issues and the expiration of the

associated options on those issues. The most frequently traded price was 2032.50 but

the highest volume was seen at 2041. All the indicators that we follow herein continue

to point higher at overbought levels. It brings to mind the saying that we are bullishly

overbought. The up trending channel lines are 2006.55 and 2075. The horizontal

resistance line is at 2075. It is amazing how similar the chart of crude oil and the chart

of the S&P are. It would appear that the S&P 500 is now following crude oil. The 60

minute 0.2% by 3-box point and figure chart has an upside target of 2109.8 and appears

to be breaking out to the upside. The daily 1% by 3-box chart shows that the index has

just broken above an internal downtrend line. This chart look a lot like the mon thly

chart of the S&P 500.

The NASDAQ 100 gained 4 handles (points) in the Friday session which represents a

0.09% move for the day. The candlestick left on the chart was that of an inside day or a

narrowing of the trading range, neither removing the high nor the low of the previous

day. All the indicators that we follow herein are positive and overbought. Our own

indicator looks as though it could issue a sell-signal in the next session. The upward

trending channel lines are 4305.75 and 4519.50. The next horizontal resistance line is

at 4475.25. The most frequently traded price was 4397 and the highest volume was

seen at 4402. The 60 minute 0.2% by 3-box point and figure chart continues to look

strong although the latest price action was below the internal downtrend line. The daily

1% by 3-box chart shows a market that clearly has broken out to the upside with a

target of 4951.93. Although there does seem to be more upside left, we caution that it is

likely that a retreat will appear.

The Russell 2000 rallied 11.20 handles (points) in the Friday session. The range in the

Friday session was much narrower than the range seen in the Thursday session. On

Thursday, we broke to the upside of a pennant formation. Now we are bumping up

against the high. The overall daily volume is declining yet the intra-day volume was

seen at the upper edge of the day’s range. The Market Profile chart is a bimodal chart

showing bulges at 1085.25 and then at the day session at 1095.75 where 18.9% of the

day’s volume was seen. The 10 by 3-box point and figure chart continues to be

positive.

The US Dollar Index tested the downside in the Friday session rejecting the low and

closing the session with a slight gain for the day. The overall daily volume is

declining. The stochastic indicator and the RSI and now issuing a buy-signal. Our own

indicator continues to issue a sell-signal. The most frequently traded price was 95.00

and that was also where 19.5% of the day’s volume was seen. The daily chart looks

awful but the weekly chart shows the recent three-week decline as just a trading range

action. All the indicators on the weekly chart are negative. The 60 minute 0.2% by 3 -

box point and figure chart does not look good and shows an index under pressure. The

daily 0.5% by 3-box point and figure chart is no better and also shows a product under

pressure.

Crude oil rallied above the 41 dollar level, looked around and bam retreated. The

rejection of the high was clear and the market closed below its opening level which was

rather negative price action. Both the stochastic indicator and the RSI are issuing a

sell-signal but our own indicator is issuing a buy-signal. This divergence is important

to note because it alerts us to pay more attention to this product insomuch as something

is wrong here. So far, we remain above the trendline. The upward pointing channel

lines are 37.195 and 42.093. It is interesting to note that the chart of crude oil and that

of the S&P 500 are very much alike although crude oil does look a lot more jagged than

does the S&P 500. The most frequently traded price was 41.50. The high volume price

was 40.25. The longer view of crude oil is that of a product with a rounding bottom.

This could have been an inverted head-and-shoulders or a possible cup and handle

forming, although we are not sure yet. The 60 minute 1% by 3- box point and figure

chart looks positive with several internal uptrend lines. The daily 1.5% by 3-box point

and figure chart has an upside target of 69.63. The spread between Brent Crude oil and

West Texas light sweet crude is pretty narrow.

Gold retreated 9 handles (points) in the Friday session. The downward pointing channel lines are

1267.97 and 1214.03. Gold needs to stay above 1193.40 to maintain its upward bias. To get

really bullish gold will need to close above 1287.8. The stochastic indicator is issuing a sell-

signal as is the RSI. Our own indicator has not issued a sell as yet but will likely do so in the

next session. The most frequently traded price in the Friday session was 1252.5. It is interesting

to note that the gold vs. platinum spread is again extremely wide. The 60 minute 0.25% by 3-

box point and figure chart has a downside target of 1251.65. The chart looks as though gold is

consolidating. The daily 1% by 3-box point and figure chart has an upside target of 1794.71. At

this time gold is resting on the internal uptrend line. As to the future of gold, we remain positive

at the moment but believe that this product will back and fill for a while.

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