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 June 17th, 2017

dedwards-1@comcast.net

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.

 

GoogLAMZN

 

 

 

 

 

 

 

 

 

 

 

 

 

Both these charts are from the Investools.com site. Last time I warned about the vertical move in Amazon and AlphaBet (GoogleL) and compared it to past commodity markets when physical shortages caused panic buying. Both stocks reversed violently wiping out the gains of recent investors. I heard one analyst say that the stocks are now cheap and that it was only the "weak hands" that sold. They always say that when a market they favor hits the skids. AMAZON rallied on Friday after announcing their purchase of Whole Foods but failed to take out its previous peak. Whole Foods' problems are well publicized. Fewer people are shopping there because most regular supermarkets upgraded their selection of natural and organic foods and sell them at more competitive prices. After the announcement the shares of other supermarket stocks plummeted, as investors assumed AMAZON would sell groceries for lower margins than the already skimpy ones on which the industry barely survives. That would imply less profit in this sector, not more. I don't see that as a reason to buy a stock. Suppose someone came to you and said that IBM just bought Whole Foods and plans to lower the prices of things in the stores, making less per item than the already struggling Whole Foods does. Would you jump into IBM? Both Amazon and AlphaBet look like they need another leg down.

 

 

 

 

 

 

 

 

 

NAS 100Dow Ind

 

 

 

 

 

 

 

 

 

 

 

 

 

The charts above are from Barchart.com, a free web site from which you can view and download charts. On the left is the Dow Jones Industrial Average and on the right, the NASDAQ 100 that is propelled by the previously hot big tech stocks. Up until a couple of weeks ago the NASDAQ 100 was vastly outperforming the Dow Jones Industrials. It took just one day at the track to wipe out a month's worth of trading. The Dow is edging higher but at a slow rate of change. On June 2nd the peak of the day was 21,225. Two weeks later it is only 160 points higher. If you read market commentary you know that on many days over the last month there were lots of stocks in the NASDAQ Composite and the NYSE Composite hitting new 52 week lows even as the averages moved up. These declines triggered technical warnings such as the Titanic Syndrome and Hindenburg Omen that predict big sell offs following this kind of divergence in stock market price movements. The history of the Syndrome and Omen are spotty but worth noting. The most likely times for a stock market change of trend are Labor Day, January, following the new year and the 4th of July. I would like to see prices drift higher into the 4th but market internals are warning that we might not make it that long.

 

 

 

 

 

 

 

 

 

NFLXthe AAPL

 

 

 

 

 

 

 

 

 

 

 

FB

 

Not all stock declines are equal. Here are Apple, Netflix and FaceBook from the Investools.com site. Over the last year a small group of stocks accounted for an oversized gain in the market averages. In order to perform competitively big money managers had to buy them because without overweighting them in their portfolios they would be under performing the major averages. On the 9th and 12th when they all took a big hit, hedge funds and money managers in most equity funds lost an oversized amount of money. You can be sure that all of them are watching these stocks to see if they can recover and the smart ones are trying to lighten up on strength. Optimists say that the weakness can be confined to the previously high flying tech stocks. Hedge funds and mutual funds are committed to stocks at record levels with a relatively small amount of cash on the sidelines. I think there is more weakness on its way and that it will spread into other sectors. Until I see a more favorable pattern in the NASDAQ 100 and its top members I will trade from the short side.

 

 

 

 

 

 

 

 

 

 

d gookd amer

 

 

 

 

 

 

 

 

 

 

 

 

 

Here is an update on the pattern of the Dow Jones Industrial Average in nominal terms (the way we see it) on the left and with the plus or minus that movement in the U.S. Dollar Index gives it on the right. If you are an international investor the recent weakness in the value of the Dollar against a basket of other currencies took away from gains in Dollar based assets. The letters and line on the regular chart to the left suggest that our stock market will make an "irregular flat correction." If so then prices should exceed the A point by about the same amount that they now have risen above the March high. That would mean a 1,400 point decline. A natural pessimist like me can always dream. See the palladium chart below for a real life example of this pattern.

 

 

 

 

 

 

 

 

 

US Dollar PNG

 

 

This is another chart from the Barchart.com web site. The Dollar appeared close to a low a couple of weeks ago and we got it last week. The larger declining pattern would look better with another sell off into July. Negative sentiment toward the Dollar's prospects was so strong going into last week that a bounce was imminent. It could be "the low" for months to come but I favor some kind of rally and further sell off sequence. The biggest rival to the Dollar is the Euro and traders are certain that it is headed higher. Usually the crowd is wrong.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PD BiGlittle pd

 

 

 

 

 

 

 

 

 

 

 

 

 

Last time I wrote about commodity prices rising rapidly when traders sensed a shortage of the physical item. This happened last week with Palladium. One symptom was lease rates on palladium. If you are a user of palladium to catalyze an industrial process you can lease (rent) the metal. When the catalyst is changed out the spent material is sent into a company like the one that employs me, Sabin Metal Corp. Sabin is one of the world's major players in the recovery of palladium and platinum from industrial catalyst. The refined metal is then used to pay back the lease. A month ago the rate for a six month lease was 2% per annum. A couple of weeks ago it jumped to 6% as traders became worried about above ground supplies of palladium and started buying nearby futures contracts so that they could take delivery of the metal against the futures. Last week it hit panic levels. Futures for September delivery traded at a $20 premium over those for December and 6 month lease rates were quoted at 20% per annum. By Friday the market calmed down a bit and December closed at $853.50 an ounce with September at $864.10. Spot closed at $863. Sales from Russian stock piles have been making up for a perceived deficit in the physical market for years. There is now the belief that the Russians are out of metal and dealers are scrambling to get their hands on it. Note the pattern on the right side chart. It shows a "TOP" then an "irregular flat" pattern leading to another rally. Short term the market is "over bought" but that means nothing if the Russians are truly out of palladium and there is not enough above ground to satisfy demand. Palladium's biggest use is in catalyst of different types. Spot platinum closed the week at $927 per ounce. In recent years platinum was a lot more expensive than Palladium and catalyst manufacturers switched to palladium from platinum wherever they could. If palladium's price gets too much higher relative to platinum they will switch back to platinum.

 

 

 

 

 

 

 

 

 

GDX more

 

Here is an update on a very popular Gold Mining Share ETF. The pattern (from the Investools.com site) appears to be coiling for some kind of larger move. Bulls believe that the action subsequent to the February peak is some kind of consolidation for a big up move. Bears see the series of back and forth moves following December's lows as a contracting triangle that will lead to a thrust down. If the bears are right then there should be one more little rally phase to complete the text book look of the form. If the bulls are correct then we should be off to the races toward the up side by the time I write the next update.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

 

Here is a chart of August Gold futures from the Barchart.com site. The June sell off keeps chipping away at the price week by week. Oscillators on my weekly and daily charts are not yet in extreme oversold territory. By Friday the market reached the levels of a previous consolidation. I took a shot on the long side with some gold mining stocks. Lately, gold and bonds have been trading opposite to the stock market. With stocks looking "iffy" coming into the next few weeks gold looks like a decent alternative.

 

 

 

 

 

 

 

 

 

 

 

 

 

reaper

 

 

 

 

 

 

There is not much new to say about silver. Supporters of the metal say that the sell off from point A to point B is simply a test of the lows and that we are setting up for a move higher. A decline that takes out point B will change their minds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

T Bond

This is a Barchart.com graph of September Treasury Bond Futures. Bond futures trade opposite to interest rates. When bonds are going up interest rates are headed lower. I subscribe to Cyclesman.com, a web site that looks at market cycles of varying length. It is the best $300 per year that I spend. For instance, there is a short term trading cycle in gold that is due to bottom now according to Cyclesman. He also says that the 3 year cycle low in bonds was in March and that the longer tem cycles are headed higher. Like gold, bonds have been trading opposite stocks for a while. Lately, data on the economy has been mixed with some growth and employment numbers coming in below expectations. This supported the bond market. I see any rally as an upside correction to the big decline we had after the election. My greatest fear is that economies around the world do not generate enough tax revenue to support government debt and spending. All it takes is one big default to open fund manager's eyes and cause panic selling.

 

 

 

 

 

 

 

 

 

still junk

 

Watch the trading pattern of JNK and other "high yield" (junk bond) funds as an early warning to a credit market crash. As of Friday, JNK was sitting just above an up sloping trend line. A break of this line will not go unnoticed by the market. Retirement funds are loaded up with these low quality bonds because the yields they pay are higher due to their risk.

Debt makes any household budget or corporate balance sheet or economy more fragile. The history of debt buildups like we have now is that it never gets paid off. It gets written down. Gold bugs say that this will cause inflation. It is more likely to cause deflation because billions in savings disappear. Remember, it was the collapse of debt markets that caused the Great Depression. Stocks followed bonds. Watch JNK.

 

 

 

 

 

 

 

 

 

 

cbdabd

 

 

 

 

 

 

 

 

 

 

 

 

 

I am by nature a person who likes down markets but something potentially positive is shaping up in the commodity charts. On the left is DBA, an ETF that tracks a basket of agricultural commodities. It closed near support on Friday and if it holds next week and rallies above $20.40 it will look like a completed bottoming pattern. I drive a great deal in the corn and soybean belt. While conditions have been good for crops in our Mid-West I notice many fields that are unplanted . I contrast that to past years when prices where higher. Every square inch that could be seeded was sprouting corn or beans. On the right is DBC, an ETF that tracks the Reuters CRB Index. It also approached support on Friday. Could we be in for a summer commodity bounce?

 

 

 

 

 

 

 

 

 

Cocoabean

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a coffee chart. It is approaching previous lows. Commercial hedgers, companies that deal in coffee are now net long futures contracts, locking in current prices. On the left is another Barchart.com chart of July Cocoa futures. Prices are consolidating after an initial up move. Sentiment toward both markets is extremely negative with traders believing that prices can only go lower. In the past this was a good time for longer term investors to start buying.

 

 

 

 

 

 

 

 

 

xopthe crude

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a chart of Crude Oil. A friend of mine who is an experienced trader wrote, "I can't think of a reason not to be bearish." I agreed with that double negative. Inventory numbers are up and big producers locked in higher prices with futures and forward sales contracts when oil was above $50. They can pump at these lower prices because they are delivering against those higher ones. Yes, there is no sane reason to think that oil will rally. On the right is an Investools.com chart of XOP, an ETF of oil exploration and producing companies. Investors in this industry group also agree with the bearish outlook for oil. On business radio and TV last week I heard the same opinion expressed multiple times. Analysts assumed oil prices are headed lower because of North American production. In the past, when I was certain of the downward direction of a market, my friends agreed and we held the same opinion as professional analysts - - It was time to buy. Note the red moving average on the slow stochastic oscillator at the bottom of the XOP chart. Previously when it was at these levels we got a bounce.

 

 

 

 

 

 

 

 

 

watch it

 

 

 

 

 

 

 

 

Watch it every morning. The pattern looks weak.

 

 

 

 

 

 

 

Strategy for the next couple of weeks - I am trading stocks from the short side. Big money is all in on stocks. They owned a lot of the ones that just took a hit. If things start to slide again they will step up the selling. It would be more in stride with market theory if stocks held up until the 4th of July. There is no reason for commodities to rally but sentiment is very negative on them and the charts are hinting at a bounce. Gold has been trading opposite stocks. If stocks start to slide you could see gold rally. The JNK chart above worries me because it looks close to a break to the down side. The build up of debt at all levels means that the system is more fragile.

 

Best of Luck,

DBE