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 9th, 2018

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.

 

This web site started decades ago as a way to put something interesting in front of business clients and prospects on a regular basis. As more of my income involved trading I realized that when I prepare for writing the site I review various asset classes and trades at a quiet time when markets are closed and the opportunities I see are usually better than things I think about during the busy work and market week. Stocks look ready for a turn down. Precious metals rallied a bit but need to do more if they are going to fulfill my expectations. Bonds should rebound a bit if I am right on stocks and food oriented commodities are mixed with most items pulling back.

 

1981NAS now

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is the NASDAQ. On the right is the Dow Jones Industrials from 1981. I was thinking about past markets when there was a top in January with the expectation that "it is over" but markets rallied in the spring with strong oil prices. I checked out the 1981 chart and it looks a lot like our current NASDAQ. In 1981 the oil sector had a big weighting in the major averages. Technology is now the monster on the block. I put a yellow rectangle on the 1981 chart that corresponds to our current NASDAQ peak.

 

 

 

 

 

 

 

 

 

dollar plus dow

 

International returns are a combination of currency plus asset class. You could own a stock listed in Argentina that is going up but if the currency in which it is measured is going down faster than the price is advancing you have a loss. Wealth from around the world has been flowing into Dollar and our markets. This chart shows the movement in the Dow Jones Industrial Average with the gains or losses in the Dollar Index added. The pattern it forms following the late January decline is right out of a chart text book. Following the early February bottom prices traced out a zig-zag type a,b,c advance to form leg A. They declined in a more drawn out a,b,c to form B then rallied in a five wave advance to a level just above A to reach point C. The form is so "text book correct" that one has to think that something must be wrong. Rarely does reality match theory with such accuracy. Chart art says that the next move should be another large decline that breaks the February lows.

 

 

 

 

 

 

 

 

the zonple

 

 

 

 

 

 

 

 

 

 

 

flxthe g

 

 

 

 

 

 

 

 

 

 

 

 

 

Last week some technical analysts noted that a few hot stocks were driving the NASDAQ to new highs while the majority of companies in the index were not doing as well. I heard a number of early morning interviews on financial radio stations where they asked the analysts about this group of stocks. All had the same answer - these stocks are fairly priced based on their earnings and projected earnings. When asked if they would buy more at these levels all the analysts said, "no." The patterns of three of them show consolidations then bursts higher. In other markets when forms like this emerged after a long up move it was a sign of capitulation by the last bear and almost panic type buying. It is more common to see this in commodity markets where there is a shortage of physical supply. The only one that surged up but missed new highs was AlphaBet, the old Google. Still, it was a move of 100 points. As a short term trader, when I see these types of formations a warning bell goes off.

 

 

 

 

 

 

 

 

in a rut

 

 

Last time I featured the Russell 2000 and suggested that it formed a contracting pennant or triangle and would have a final burst to new highs then reversal. At the time it was at new highs but I drew in the matching red lines and suggested it could travel the length of the red line before topping. By the end of last week it was close or "good enough for government work" so I shorted it. The rally may extend early next week and reach the red line peak. Even if it does I sold high enough so that the pain won't be unbearable. In the mean time it looked like it was running out of steam by Thursday's close and it under performed the larger cap indices on Friday. It could be that the run is over.

 

 

 

 

 

 

 

 

 

 

 

pp 02pp 01

 

 

 

 

 

 

 

 

 

 

 

 

 

The Dollar plus Dow Jones chart above and the NASDAQ correlation with the 1981 market suggest that the stock market finished a common upward correction and is ready to sell off. I am still looking for one of the two patterns in the S&P 500 shown above. Both end with higher prices but one of them predicts a break of the February lows before the market reverses to the up side.

 

 

 

 

 

 

 

 

 

big dollar

 

 

 

 

 

 

 

Two weeks ago the Dollar looked like it was in the final stages of an up move and in need of a correction It was also approaching an area of previous trading which often acts as resistance.

 

 

 

 

 

 

 

 

 

 

 

 

 

d bulld bear

 

 

 

 

 

 

 

 

 

 

 

 

 

I have friends who are Dollar bears and see the chart on the left. Many of them are committed gold and silver bugs. They think that the recent Dollar rally was just a correction in a long overdue decline. It is just as possible that the chart on the right will prove correct. The Dollar needs to work off some of the enthusiasm it attracted on its recent rally before heading higher. The bears could be 100% correct about the fundamentals behind the Dollar but the Euro is in worse shape and everyone knows that Japan will never pay off its debt. The Yen can be a short term haven in rough western markets but it is a poor place to park wealth on a long term basis. I watch gold, silver and other commodities closely. Gold and silver in particular have been trading opposite the Dollar lately.

 

 

 

 

 

 

 

 

 

boxed gold

 

 

 

My disciplined self says that gold is finishing a consolidation following its December lows similar to the two previous yellow boxes before moving higher. My traders's internal clock is telling me that the metal needs to do something to the up side in the next couple of weeks. Sentiment is fairly bearish toward gold which argues for a low risk buy. The number of contracts and volume traded also dropped. Sometimes apathy is the last move before a rally. I have to see something in the next ten trading sessions. There is no logic behind this feeling, just intuition.

 

 

 

 

 

 

 

 

 

 

 

 

xau fantasy

 

 

 

 

XAU is an index of mining stocks. I bought them, sold them and bought again late last week. The chart to the right has annotations suggesting a great rally but sideways patterns like this can break in either direction and often, when they do they move quickly, adding to or taking from your wallet very rapidly. I will be quick to sell next week if I don't see some better action. I (and you) don't want to get caught in a spike to the down side, lying awake at night thinking about all the reasons why gold and mining stocks should move higher when they are tanking instead.

 

 

 

 

 

 

 

 

 

 

 

ag bearsag bulls

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver saw more ups side action than gold. Bulls are looking at the chart on the left. They see a consolidation following the 2017 lows and are waiting for an acceleration above the recent trading range as shorts and sellers of call options are forced to cover. Bears see the chart to the right. They think the consolidation following the low will rally a bit more toward the top trend line before prices collapse into a final low. Again, my trader's sense says that if nothing to the upside happens in the next week the odds will tilt toward the down side.

 

 

 

 

 

 

 

 

wh PP

 

 

 

 

Platinum and Palladium are still within recent ranges. As stated last week, palladium seems to be influenced by the stock market so weakness in stocks should lead to lower prices. Platinum should follow gold to some degree.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

both rates

 

 

 

Interest rates rallied over the last week but the classic corrective pattern calls for another decline as shown by the green line. Markets seen to be hyper focused on the U.S. stock market. Last week when I got a chance to watch my screens I noticed that 10 year T Notes were trading down (rates up) when stocks rallied and did the opposite on declines. Above I show evidence for a possible stock market decline. That could be the trigger for a slide in rates and rally in the bond market.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coffee SeptCocoa Sept

 

 

 

 

 

 

 

 

 

 

 

 

Remember, the thesis is that the sun is producing less energy. This is a natural cycle leading to colder winters and summers and crop failures around the world. By the way, there is evidence that periods of lower solar activity correlate with higher volcanic activity like we are now seeing. This compounds the cooling effect because ash in the upper atmosphere blocks sun light. Tree type crops that cannot be easily replaced are the most vulnerable. The two charts above (and the ones below) are from the Barchart.com web site. Cocoa retraced a good part of its rally. By last week the damage looked deep enough to buy again so I did. I am still waiting on coffee. I want some new lows before loading up. Coffee is grown at high elevations and is vulnerable to frost damage so longer term it is probably the better bet.

 

 

 

 

 

 

 

 

 

Sugar OctCorn Dec

 

 

 

 

 

 

 

 

 

 

 

 

 

Sugar pulled back a bit. I am going to wait before doing anything. I would like to see a deeper test of the recent lows with a return to extremely bearish sentiment. I have the same opinion about Corn. We are a month away from a critical growing period when tassels form and the corn fills in. So far the weather is OK in corn growing areas.

 

 

 

 

 

 

 

 

 

Cotton Dec

 

 

 

Cotton has good fundamentals. Going into last week there seemed to be only one decision to make - how many contracts should I buy? According to Sentimentrader.com, a service to which I subscribe, sentiment reached the peak of its historical cycle. In the past when this happened cotton was a better sell than buy. I wonder how much its bullish outlook is influenced by the stock market rally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S&P 500 high

Strategy for the next two weeks: Last time I featured this chart of the S&P 500 and planned to buy a dip below the range or sell a pop above it after a couple of days of trading. I bought the dip. I didn't ride it all the way up. Conviction is very strong toward higher prices. One day last week, options traders bought twice as many call (bullish) options as put options (bets on the down side). That is rare. By week's end I shorted the market. You can see that most of my opinion above is "talking my book" so take it for what it is worth. The January stock market top followed a victorious Trump appearance at a Davos. This weekend we had the G7 and next week is N Korea. The market might be peaking off of these big events. Let's watch for it to become a repeating theme. I got long gold mining stocks again on Friday but the metal needs to do something in the next few trading sessions or I will dump it. Those of you who don't care about commodities might consider my notes on crop items to be a waste of time. My guess is that the next "big money" will be made in food so it is important to get familiar with the charts. I am hoping for bumper crops this year so that I can buy at lower prices. Solar scientists (as opposed to global warming guys looking for TV time and government grants) are warning us to watch for a period of colder temperatures. Historically that led to higher food prices. You don't have to trade commodity futures to play food markets. There are a number of focused ETFs such as DBA that give you a way to participate. Go to the Barchart.com web site and check out their list of ETFs by sector. Remember, food is the ultimate form of money.

 

Best of luck,

DBE