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 23rd, 2019

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Muller report will likely be made public by Monday or within the next few trading sessions. The biggest reaction could be in the currency market. Above are two interpretations of the Dollar's trading pattern. On the left is the form favored in past updates. It infers that the Dollar traced out a five piece consolidation that will lead to a rapid thrust to new highs followed by a reversal. On the right is an alternative view that has the Dollar falling toward 94.50 before another rally attempt. The Dollar's value against other currencies influences commodities in general and gold in particular.

 

 

 

 

 

 

 

 

 

 

 

 

If the Dollar falls below 94.00 then something else more negative is happening and a few more points to the down side are likely. The reason I favor two conclusions that end up in higher Dollar values is that the Dollar's anti-matter, the Euro looks like the pattern to the down side is incomplete. Aside from Brexit, there are elections in Europe this spring with Euro-sceptic parties likely to gain in popularity. Last week Germany reported weak economic data and German ten year paper finished the week with a yield of minus 0.015%. If Germany is faltering then how can the rest of them be doing well? The only entity buying bonds in Europe is the European Central Bank and that is not good.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The lines on this chart were drawn in for the last update and so far, the pattern followed art. Prices took back a portion of the fall from $1,346 but failed to make new highs. A lot will depend on the Dollar coming into next week. Remember, my favored pattern calls for a quick spike up in the Dollar then a retreat. The fantasy trade is a quick but dramatic sell off in gold that sets up a great buying opportunity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With gold trading in the same range for five years there is not a lot new to say about it. My favored Dollar outcome would imply the chart on the left, a quick sell off then a $200 to $300 rally. The chart on the right implies that gold will fall faster and farther before reversing. Given the size of the contracting form, a low below $1,000 would be likely. Let's hope for the left side chart!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This is a chart of gold's weekly closing price in New York and a simple RSI oscillator below in red. The red line is still close to levels that were followed by lower gold prices in past cycles. Long term investors want to buy when everyone else is dumping and negative. Those points are accompanied by momentum lows such as the low point on the red line in August.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The green and red lines are also from two weeks ago. The text book form would call for slightly higher prices for gold mining stocks before another decline but rarely does reality so closely follow theory.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The silver chart has an "or C" point on it because I was hoping for one more out sized pop in the metal prior to a sell off. Silver disappointed as it often does which is why it has the sub title of "The gray reaper" on my charts. It is a way of reminding me that my best theories about its future price have no bearing on the metal's direction.

Whatever gold does I expect silver to follow.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I wrote that if yields on the thirty year US T Bond fell below 3% I would short them and I did so on Friday. The left side chart shows the downward pattern of current yields on 30 year government paper. Tens fell rapidly to now lows for the year. On the right is TLT, an ETF that tracks longer dated US Bonds. We are still below the Sept. 2017 high but the economy is much stronger, there are "Help Wanted" signs every where and wages are increasing. Right now, the bond market is anticipating an economic slow down that is showing up over seas but not yet in the US.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Until Friday, the stock market did not agree with the bond market. Prices on most indices approached previous highs despite warnings about a slow down. Prognosticators, both bullish and bearish like to predict major moves. We had a major move after January of 2016. It could be that prices will stay in the yellow box or trade sideways as the dashed lines on the NYSE Composite chart imply and most investor's returns will be flat to down over the next year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Going into last week, the slow stochastic reading on a six month chart of the S&P 500 was near the top of its range but lower than it was during much of the 2019 surge in prices. Chart wonks would say that momentum was diverging with price. The market was making new highs but closing well off the highs of the day on many of the trading sessions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tech stocks continued higher into mid-week while the broader market did not do as well. Boeing caused the Dow Jones Industrials to lag. Late in the week tech also sold off and the NASDAQ closed near a parallel trend line drawn from a previous low. Bulls will hope that the NASDAQ is finishing a fourth wave in an on-going five wave up trending form.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bears will point out that many stocks look more like 3M, a bell weather for manufactured and consumer goods. Despite the robust rally of the last three months 3M underperformed, a warning about the world's economy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bears will also focus on JETS, an ETF tracking the airline industry. It looks like it is close to breaking down with prices approaching the point where everyone who bought since early 2017 is sitting on a loss. XRT, an ETF following retailers shows a similar warning with prices again turning down. Last week when I was watching one of the business networks a credit analyst was on. He pointed out that there is an increasing delinquency rate on consumer loans, particularly automobile loans which were granted to anyone who could show a pay stub over the last few years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These two graphs from the Barchart.com web site show Copper (left) and Palladium trading over the last five days. The blue line is the S&P 500. Analysts do a lot of information gathering about supply and demand to predict future prices. When the stock market is falling 400 points in a day no one is interested in holding metals that do well in a robust economy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last time the contracting patterns in CORN and WEAT, two ETFs that track corn and wheat, pointed toward a thrust down and reversal. Last week, both commodities rallied. Fields throughout the Mid-West are flooded making preparation for planting difficult to impossible. So far, the price response is muted and at levels below last year. If these were the price patterns of regular stocks I would be extremely bullish just based on the forms.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBA, the ETF that tracks a basket of agricultural commodities also turned up last week. I included the long term graph of it on the right to illustrate how low basic food prices are. I am "talking my book" because I bought a lot of it and my cost basis is $16.33. Food things are my only long term holding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The 25 year long graph of coffee prices shows that we are trading in the .90s, below the cost of production for much of the world and at the lower end of its price range for the last quarter of a century. I guarantee that there are traders out there who told themselves that when it got below $1 a pound they were going to start buying no matter what the news. The fundamentals and news surrounding a market are always terrible at the bottom and wonderful at the top. When prices are at their lows there appears to be an unending surplus of the item whose supply seems non-responsive to rock bottom prices. Near the top there are fears of permanent shortages. Which kind of news are we hearing about coffee? March through May tend to be seasonal lows. On the right is a chart of Starbucks, a major buyer of coffee. Has your Starbucks lowered its prices lately? I didn't think so. One of their major price inputs is trading at a very low level so they are making good money selling you a medium (sorry; I meant to say Grande) for 2 to 3 Dollars a cup. If coffee is near a low, is Starbucks at a high?

 

 

Strategy for next week: The stock market closed at its lows of the day on Friday. Rarely does a low at the end of the week end a sell off. There is usually some follow through on Monday. Still, I covered all my shorts Friday afternoon and also went home with no positions in gold. The only thing I am holding is TMV, a leveraged ETF that goes up when bonds go down (rates higher). If rates decline more next week I will add to TMV. For everything else I am in "wait and see" mode.

All bets are off going into next week because of the Muller report, delivered to the Attorney General of the U.S. after the close on Friday afternoon. The world will be watching for its conclusions. If it is a dud, stocks could have a robust bounce along with the Dollar. In most U.S. elections, power is passed from one party to another peacefully. The losers are not happy but they analyze why they lost and try again. Trump is a total outsider to politics. Insiders on both parties start at a young age on local school committees, run for mayor then state representative then US House of Representatives then perhaps Senator then Governor then President one or two times. They spend years crafting their hair and answering every question carefully so that they can switch opinions in the future depending on what group they are addressing. They hate a guy who bluntly puts his imperfect life in front of the country and wins because his message resonates with voters 30 miles outside of major city limits. Both entrenched parties want to get rid of him. Think of your life. If the law enforcement and intelligence apparatus of the U.S. had access to every record of your financial and work life and interviewed all your known and historical associates and former sweet hearts could they find something that could be construed as a crime or misdemeanor or paint you in a poor light? In what kind of a country can political opponents harness the full force of law enforcement and intelligence to go fishing for a crime when none is apparent? Already, people from the State of NY are trying to assure Trump haters that if Muller didn't find anything, the tax payers of the State of NY will pay for more investigations until some kind of crime is found and the election of 2016 is overturned. Imagine that a neighbor who dislikes you becomes mayor. He has the police stop you randomly to search your car and smell your breath for booze. He has a cousin at the IRS and gets him to have you audited every year. The same thing is happening with Trump. Even if you don't like the guy is this how the political process and justice works in the U.S. now? Is it OK for the losers of an election to overthrow the legal winner just because they don't like him? I live in liberal Massachusetts and have lots of friends with Trump derangement syndrome. When I ask them why he is so bad I get the usual, "He is a racist, a bigot and homophobe." I mention the minus 4% unemployment rate and record participation in the work force among women and minorities, big declines in the use of Food Stamps and people coming off of Disability and into the work force. I remind them that Liberals used to like this stuff. They don't care. His policies might be producing great results but the wrong guy is doing it. In their world, being in power is more important than the success and well being of citizens. What is sad is that all of these people once thought of themselves as "alternative" and "speaking truth to power." How is it that they now so strongly support the establishment?

Best of Luck,

DBE