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 October 8th, 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.

 

cor t

 

 

 

Strategy for the next two weeks - Last time I wanted to step aside from the stock market. The trend was up but investor enthusiasm and faith that the market will go higher was at levels seen near previous tops. It is the same going into the next two week period. However, on the chart of the Dow Jones Industrial Average the market is near the upper boundary of a channel. I shorted it. I do not predict "the big one" to the down side. I am just a short term trader looking for a quick buck. The "all in" attitude toward the stock market makes it more vulnerable to incidents, accidents and disappointments. There is little cash cushion left for buying power.

 

 

 

 

 

 

 

 

 

 

 

 

07 17

 

 

 

I also remember 2007. My neighborhood is adjacent to a secondary road with some popular restaurants. On a Saturday evening just before the 07 top traffic was backed up onto my street with people planning to eat out and enjoy life. There was no sign of a stock market top and analysts were bullish on the market. Lurking in the background was the debt crisis. Going into next week analysts are again very bullish on the continuation of the up trend. Lurking in the background are international tensions, political hate from the left and one week after the worse mass killing in our recent history in the United States. In 2007 we had a July peak, sell off then a fall rally. This year's pattern is similar.

 

 

 

 

 

 

 

 

 

 

adJ Dow

 

I enjoy reading Martin Armstrong at Armstrong Economics. While other analysts I follow are looking for a nasty sell off he sees any decline as temporary. He focuses on capital flows and notes that the European Union's decision to go after Amazon and Apple is a signal to other holders of wealth in the EU to get their money out. The U.S. with a possible tax cut and a business friendly President would be the default recipient. In his wonderful book on the 1920s stock market he documents the flow of capital from Europe to the United States and how it powered our stock market higher. He sees history repeating. To the right is a chart of the Dow Jones Industrial Average in non-Dollar terms. It could still be making a "flat" type correction with a pull back due toward the "4." It could also be off to the races with nothing but a sideways consolidation forming before higher prices.

 

 

 

 

 

 

 

 

 

 

nasdaq 100 o

 

 

 

This is a chart of the NASDAQ 100 from Interactive Brokers. When I trade the stock market I like to use this index because of it is influenced by the big high tech names. Relative to the Dow Jones it under performed during the last few weeks. Among the big FANG stocks only Netflix hit new highs during the period and is responsible for most of the move over the last couple of days. I can make the case that it is running out of steam again.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

rut tear

 

 

 

A couple of months ago I argued that the Russell 2000 (small cap stocks) was forming an expanding pennant which would resolve in a final blast higher. The ending down leg failed to hit the trend line but it was close enough for government work. Since then it went straight up. The excuse is that proposed tax reform packages will have an outsized impact on the bottom line of smaller companies. When I see such faith in the goodness of the future I grow cautious. If this was an "expanding pennant" form then we are close to the ending point.

 

 

 

 

 

 

 

 

 

 

 

 

xlf obv

The strongest group recently propelling the Dow Jones higher was the financial sector. This is a chart of the daily closing price of XLF, the Financial SPDR. It includes all the big banks and financial firms. The red line is an On Balance Volume calculation. You make this line by taking the day's volume and putting a plus sign in front of it if the item went up and a minus sign in front of it if it was down for the day. You add the number, plus or minus to yesterday's tally. Even though the ETF is higher than it was a couple of months ago the volume is lagging badly. This is not a good omen.

Everyone expects higher interest rates and it is argued that banks will make more money with higher rates. Yes, but there has to be willingness to borrow at those rates. Existing loans on the their books are worth less when rates go up. We have been in a period of near record calm in the financial markets. The "best of all worlds" outlook is always temporary.

 

 

 

 

 

 

 

 

 

 

dollar king

 

 

 

Above I mentioned Martin Armstrong and capital flows. Over the last year the flow was out of the U.S. and into emerging markets. I was looking for a Dollar low and the market complied. From that low it appears to have made a five wave advance. Even if it is part of a correction before the Dollar gets slammed again there should be a second advancing phase. At the end of the week the Dollar pulled back a bit. My fantasy trade would be a decline toward 92.70 with a U.S. stock market pull back then a strong Dollar advance toward 96.

 

 

 

 

 

 

 

 

 

 

 

 

flat wuro

 

 

 

The Euro is still on track for having made an "irregular flat" correction in a down market. That would imply an eventual break of last year's lows at 1.05. I know, the news out of Europe is good. The economy is picking up, business is much better and Merkel turned back the non-traditional parties. But she won with less than 40% of the vote! If the charts are correct then they are telling us that the current spate of positive feeling toward Europe's future is as good as it gets for now.

 

 

 

 

 

 

 

 

 

 

 

 

 

Yen Au

 

 

 

I don't do a lot with the Yen. I can't understand why it goes up when there is market turbulence. The country is deeply in debt and its population is not replacing itself. It will never pay off the debt it owes yet investors are willing to park their money there for zero return! Week by week I keep a chart of Gold priced in Yen. It looks like it is tracing out one of those contracting triangle patterns for a blast to the upside. If reality follows art then there should be a pull back toward the lower red line followed by a large surge higher. It could be a gold rally or a Yen plunge or a combination of the two. It looks like it is a few months away so stay tuned.

 

 

 

 

 

 

 

 

 

 

 

 

21 day au

 

 

 

 

Last month I featured this chart of gold with 21 day intervals. One of my subscriptions, Cyclesman.com says there is a 21 day short term trading cycle in gold. I often say that the best $300 dollar investment I make every year is Cyclesman.com. The cycle lows are not exactly on the 21 day mark. Some run short and some a bit long but they are close enough to watch. On Thursday we hit one. The market opened lower Friday then rallied.

 

 

 

 

 

 

 

 

 

 

 

 

 

twoone

 

 

 

 

 

 

 

 

 

 

 

 

 

My two favorite futures for gold are shown above and both call for lower prices. That implies that the bounce in gold is temporary. I am warming up to the pattern shown on the right. Under this scenario we get a short bounce then a test of last year's lows. Predicting things longer term is a like a one month weather forecast, interesting but useless. Still, the last two years saw lows in early December then November. Time wise we are approaching the range of the last two seasonal cycle sell offs. If I were an investor more than a trader I would be looking toward the same time period to buy.

 

 

 

 

 

 

 

 

 

aG low

 

 

 

 

 

I don't touch the stuff. If gold bounces a bit then silver should too. My longer term outlook for gold would imply some lower prices for silver too. What bothers me is that in past cycles when the stock market did very well it also helped silver because of its industrial demand. Stocks have been up and silver is floundering. Remember, if you go back a few decades you will see that silver, trading above $10 was unusual.

 

 

 

 

 

 

 

 

 

 

 

 

the Ps

 

 

Platinum and palladium both pulled back a bit. Behind the weakness in platinum the story is the problem with diesel automobile engines which use a heavier platinum catalyst. Behind the elevated palladium price is the worry that Russia is running out of the stuff and that there will be a shortage. No one really knows what is going on with these metals and neither do I. At times the short term charts give a clue. Last month palladium looked like it was completing a short term pattern to the upside and needed a pull back. Aside from short term clues in the lines and squiggles there is little clarity on either metal. I continue to accumulate some platinum. When other guys at the gym say they are buying FaceBook I can mention my platinum and sound more sophisticated.

 

 

 

 

 

 

 

 

 

 

 

tlt safe

 

TLT tracks longer dated U.S. Bonds. Regular readers know that I dislike the bond market. Central Banks around the world have been buying sovereign debt to keep interest rates low. Their first reason is to stimulate the economy but now, economies are doing better. The unstated reason is that governments are borrowing massive amounts of money to maintain their socialist programs. They all made promises to their populations so that people would think that the future was taken care of and would spend current income. It turns out that the growth is just not there and that the debt payments will overwhelm tax revenues. It is just a question of time before bonds crater. Short term, they have been trading with gold as a "flight to safety" play. Armstrong says that gold and especially stocks will become the "flight to safety" trade for the billions trapped in a collapsing sovereign debt market! WOW!

 

 

 

 

 

 

 

 

 

 

trade of week

 

 

 

Last time's "Trade of the week" was to bet on a decline in the price of crude oil and oil related things. Two weeks ago, sentiment toward all things petroleum was sky high. Prices for West Texas Crude were above $50 and approaching previous highs. OPEC was meeting in an effort to cut production. One of my subscriptions, Sentimentrader.com had the complex as at the top of its most loved groups and going into next week it is still one of the most loved despite a $2 drop in price.

 

 

 

 

 

 

 

 

 

 

 

 

 

xoPP

 

 

 

 

XOP pulled back along with Oil but the decline is minor considering the positive expectations behind the group and the sell off in oil. It might take some trades below $49 per barrel to spark a little panic in the Oil patch stocks. After a five wave advance XOP pulled back toward a support range then rallied. If this market is any good then the 32 to 33 range should hold. I will cover my oil related shorts on a move below 33 in XOP.

 

 

 

 

 

 

 

 

 

 

 

 

 

CCZ17

 

It is make it or break it time for Cocoa. This is a chart of December Cocoa futures from the Barchart.com web site. If it has been consolidating for another move down then the sell off should start this week. You can bet that there are a lot of buy stops above the upper red line. Remember, Global Warming is a political theory to back up the theory that for the rest of the world to do well, the United States has to be cut down. None of the computer models that were hatched in the 80s have worked out. There is plenty of ice in the world still despite Al Gore's predictions that it would be gone by now. The people I read are looking for a cooling period and difficulty for crops around the world.

If cocoa sells off I will again be a buyer of NIB, an ETF that tracks cocoa.

 

 

 

Best of Luck,

DBE

 

Unneeded commentary - Robots and Bump stocks. The shooter who killed the people in Vegas used a bump stock, a device that increases the number of rounds you can quickly shoot from a semi-automatic weapon. I own firearms but I have no desire to own a device that makes them shoot a lot faster. If you look at technology throughout the history of mankind you see that advances went toward weaponry and sex. What are robots being used for? Combat and sex. Human nature does not change and cannot be legislated away. I have smart friends who are anti-smoking and anti-gun but they want birth control and abortion available to their children and liberalized marijuana laws. When I ask about the latter two things they say it is because, "they are going to be doing it anyway. There is no way to stop them." History shows that there are a number of behaviors that will always ebb and flow. Humans have put energy and interest toward weapons - period. "They are going to be doing it anyway." At times this is out of fear and in other instances as a basic fascination. The question is, what makes interest in things ebb and what makes them flow. Obama wanted to take the guns from us Bitter Clingers. That caused a big flow in gun sales. Many have called Barach Obama the best gun salesman in history. When Donald Trump won, gun sales declined. The Vegas shooter, someone who seems to have no political or religious reason for killing, is a once in a generation type of phenomenon. Gun sales have doubled over the last two decades while homicides are down over 40%. I am sure that there are many more people who harbor fantasies of doing outrageous things such as killing or bombing just as there are ones who dream of curing cancer or ending hunger. What keeps the bad ones in check? Societal norms about sex, marriage, traditional beliefs and other things that were in place for most people a few decades ago are gone. The intellectuals and college professors who want to break down the institutional norms that they see as inhibiting have to realize that some of the behavior being inhibited by strong moral codes might be ones such as "Thou shalt not kill." In the mean time, robots that look better than most women or men and ones that can kill an enemy will proliferate.