Following are my personal comments on specific markets and issues. I chart markets for a hobby and my comments are the result. They are not recommendations to buy or sell anything and should not be thought of as such. They are for entertainment purposes only so enjoy.

David Bruce Edwards - Northern Front LLC March 10th, 2018

Please remember, the following is pure speculation based only on my experience and chart patterns. "Every sunken ship has a room full of charts."

Note - I got a new wider screen monitor and when I look at this web site with the screen size in full, the site spacing does not come out properly. By making the window less wide all of the text and graphics slide into place. Perhaps you are having the same experience. DBE.


sp nowre do 84














Last time I used the 1984 stock market correction as a guide for possible trading patterns this spring. I am sticking with it. The dotted arrow points to two weeks ago when I wrote the last entry. The solid arrow indicates a possible inflection point that could be now or early next week.










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The broad market rebounded from its "over sold" technical condition but all averages are not equal. The Dow Jones Industrials, made up of 30 big cap stocks is lagging the S&P 500 while the NASDAQ 100 races to new highs. Remember, in 2000 the Dow topped out before the NASDAQ.










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Investors cannot get enough of AMAZON and NetFlicks and are willing to buy at any price. They consider both to be "sure bets." I drew in some letters and lines on the Netflicks chart. The pattern looks like a contracting pennant form that often leads to a final manic burst then a reversal. If reality follows art then we should be close to the top now!










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Most individual stocks have patterns similar to these three with rebounds retracing some or most of the early February swoon. The bearish analysts I read say that this is typical behavior following the first leg down of a big bear market. Most stocks recapture part of the sell off while a few headliners, heavily weighted in some averages make the markets look better than they are. On Friday, the jobs report was great with over 300,000 jobs added last month and things seem to be better with N. Korea. Other stats that came out last week were good. Given all the great news it is troubling that most major averages and stocks are still below January's highs. If the 1984 pattern is a good correlation to today then volatility should decline but the market will make its way back to the February lows between now and May.










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junk rates

The world runs on credit. Nearly all major sovereign nations are deep in debt with no plans to pay it off. Since the 80s, worry about debt accumulation at all levels of government has been a major concern but has not impacted savers' willingness to lend. Above and to the left are the current rates for 30 year Treasury Bonds and 10 year Treasury Notes. Last time I wrote that the media was focusing on the future supply coming from Central Banks ending QE programs along with the strengthening economy. I took this as a contrary indicator, a sign of a short term top in rates. The yellow boxes show that rates flattened out. The pattern of trading hints that rates will go higher but there should be more of a correction before they do. This also feeds into speculation that stocks might take a rest. On the upper right is LQD, an ETF that tracks corporate bonds. Up for LQD means lower rates. Economic historians point out that we are at 5,000 year lows for rates. The companies in which you invest have had access to the lowest borrowing costs ever. There tends to be a cycle with rates, the economy and stocks. When rates first head higher it is usually in response to economic strength and cash flows are also increasing faster than the higher borrowing costs. At some point the borrowing costs over come cash flow and an economic slow down follows. Pension funds around the world are in trouble because of the low returns on fixed income. Those that could moved money into lower grade, high yield, Junk bonds. JNK is an ETF that tracks them. Over the last month there was a major exodus from junk bonds and ETFs such as JNK. Some say that it is a contrary indicator and that in previous cycles these large outflows were a "buy" signal. I wouldn't touch them.










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This is an update on the chart of gold in constant Dollars. The sideways pattern is still unresolved. We got a bounce on Friday as the Dollar backed off a bit earlier in the day but a few hours of trading does not make a trend. Every guy with a computer screen and charting program is watching the previous high at point "1" on the left side chart. If the market makes it through that level there should be a pop just based on short covering.










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If gold sells off there are two patterns to watch. On the left is a weekly chart in US Dollars. A typical "flat" correction in an up market forms a down, up, down before continuing higher. The second "down" often takes the market to just below the "a" point on the chart. If I saw such a sell off accompanied by "gold is dead" type of commentary I would be a long term investor. On the right is gold priced in Japanese Yen. Note the contracting pennant form. A move to the lower red trend line would complete it. The text book says that after such a move there should be a big burst higher just like the chart of Netflicks above. Chart perfection would be a sell off to the "c" point on the left side chart along with a touch of the lower red line on the right side chart. If both happen I will load up on the metal.
























Last time I was a bit upbeat on silver. It is at the same price. Considering that gold fell you could consider that a win. The CFTC reports that large specs, hedge funds for instance are now heavily short silver futures contracts. These guys are usually wrong. If there is a little pop in silver it should be enough to cause them to panic out of their shorts and you could get an outsized, short term spike up in the price. On the right is the daily closing price for platinum and palladium. Both seem to be following the stock market, especially palladium.










dollar question





The action to watch is in the currency pit. Traders are very bearish on the U.S. Dollar and bullish on Euros and Yen. Either the Dollar has bottomed for now (dotted green line) or it has one final attempt to move lower just to fake everyone (including precious metals buyers) out. My guess is that we will know the answer in the next four weeks. I am "talking my book" here. I have some "long Dollar, short Euro" positions. A slightly lower low for the Dollar could be in impetus for the silver pop I mentioned above!












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July cocoa


Above and to the left is a chart of DBC, an ETF that tracks the Reuters CRB Index, a popular gauge of commodity prices. On the right is DBA which is more focused on a basket of agricultural items. Recently there was an uptick in commodities but when put in perspective it is nothing. In the last couple of weeks the price declined a bit. Past readers of this site know that I think the planet is entering a cooling phase that will disrupt food production. We are already seeing it with grains. They were a hated item a few months ago when I noticed the CFTC data that showed commercials buying big positions at low prices. Now the specs are jumping in too. That warns me of a possible pull back. Corn is below $4 a bushel still so there is plenty of upside. To the right is cocoa. Readers also know that I love the stuff and have been trading it from the long side. Last fall, commentators were predicting nothing but lower prices. Now they are turning bullish and specs are loading up on cocoa. That tells me that a pull back could also be near with Cocoa. I would like to see a sell off into the summer so that I can get back on board.











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Above are two charts formed with data downloaded from the St. Louis Fed web site. These numbers are public and free. The site has all kinds of data on the economy and monetary aggregates and include graphs. The chart on the left measures the growth in money caused by additional Fed stimulus. You can look up the exact formula on the site. When it is going down it means that additional reserves put into the system are not resulting in an equal amount of economic activity. Remember 2008 though 2011 when gold fans were pointing to the huge increase in money supplied to the banks and saying that it would cause run away inflation? You can see from the chart that the added money didn't do much. In the last few years that ratio stabilized. If it starts to show more of a robust move up then interest rates at all maturities should react by heading higher. Above in the bond section I mentioned fears of the Fed unloading paper on to the market. The chart on the right shows the Fed's holdings of Treasury paper of various maturities. The "don't fight the Fed" crowd points to this chart and says that interest rates can only go up because of the huge overhang of supply from not only the Fed but other Central Banks. I think that longer term they are right. Since 9/11 the Fed has pushed for lower rates and cheap goods from China and other Asian countries beat down the price of everything around the world so that the only inflation was in asset prices - stocks, bonds and real estate plus other things that could be bought on credit. Now, the 5,000 year low in lenders's expectations of what they should collect for lending to you is at an end. As the tide turns the price of collateral upon which loans are taken should decline - stocks, bonds and real estate. For a while the cash flow from real estate and the potential growth from stocks might mask the change in trend. It will give the rest of us time to prepare by getting out of debt.

Strategy for the next two weeks: I am looking for the stock market to follow the 1984 pattern which means we should be close to a short term top. I am hoping for a short rally in gold and silver but will not bet on it. I want to see what the Dollar does over the next couple of weeks.

Best of luck,


Unneeded Commentary - A few years ago on a return flight to Boston I was sitting beside a black man in his 30s. He was a Christian pastor from Alabama. He and his wife were moving to Boston to work at one of the churches serving a mostly African American congregation in the city. He asked me, "What is it like being a Christian in the Boston area?" In his old state, Christianity was part of the culture but he heard that in New England things were different. I said to him, "I am going to be honest with you and it is not going to sound good. Because you are black it is OK for you to be a Christian in the Boston area. Liberal and Conservative elites alike have no problem with black people who are spiritual. You can sing and sway and pray all you want. At best they think it is "cool" and cultural. At worst they think that it will cut down on crime. If you are white and well educated it is a different story. In the well to do white suburbs people are suppose to be intellectual and self sufficient. Someone with an open faith in God, especially Christianity and particularly those in an emotion showing denomination are regarded as ignorant, idiots or someone who is misled or needs an artificial crutch in life. If, as a part of their faith they support causes favored by liberals they will be welcomed when needed but if they are conservative they will be thought of as a bit weird and backward. They don't mind you being their neighbor because you will most likely be a good neighbor but they don't want to hear about Jesus." He nodded and told me that it confirmed what he had been told.

Recently Joy Behar on the TV show The View referred to our Vice President, Mike Pence as crazy for saying he talked to God and that God gave him guidance. Liberals and comedians on other media agreed. Calls from Christians poured into ABC but there was no apology. Last week Oprah Winfrey was asked about running for President. She said that she needed a definitive sign from God affirming that she should run. Joy Behar called Mike Pence and apologized last week. I am sure that she still thinks he and other white Christians are religious, misguided nuts and that Oprah is a woman of depth and Spirit. Racism hides right under our noses. The things I told the Pastor on that plane are still true.