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 April 15th, 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.


Dear Friends, I usually update my web site every two weeks and last weekend was the time for the regular posting. On Saturday the 7th, my mother passed away. She was 97 and it was her time. The last few months and she looked forward to being with The Lord. I understood all that but my sisters and I are still left with a deep sadness. My mother was not a "character" and she didn't "have issues." She rarely complained and was never "a victim" of anything. She simply got up each day and did what had to be done to be a great Nurse, mother and wife. I will always miss her. This weekend's update will be short and to the point.


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Two past markets to view for a possible guide to our current patterns are the 1984 correction and the 2007 period. The chart on the left has red lines showing an idealized resolution in line with the 1984 model. The right side chart shows a possible path if we follow the more bearish 2007 graph. Red arrows in the upper charts show a point that might be indicative of where we are now.










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Both the chart of the Dow Jones Industrial average and the S&P 500 are from the web site and give a closer look at the trading action over the last month. The rally leading into last week's highs formed a series of upward over lapping bars. This is usually not the kind of action that indicates a strong up side market. Rockets flew on Friday night in Syria. This recent history of military action is that markets are apprehensive before hand. Stocks hesitate or decline and gold rallies. After the bombing begins gold sells off and stocks rally. Given the recent pattern, if we get this kind of action early in the week I plan to sell any stock market rally and buy a mid-week gold pull back.










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On the left is longer term chart of the U.S. Dollar Index. On the right is a close up of the action between the red lines. It could be tracing out one of those contracting triangle forms that leads to a final burst below the initial "low" followed by a large reversal to the upside. Traders who are more constructive on the Dollar think that it is consolidating for a break out move above the 90.50 area. I am going with the pattern as shown on the chart for now. It would imply that we finished or are close to finishing the "d" leg and will rally toward the upper trend line before tanking.










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The upper left chart shows that after the previous two December lows, gold rallied, formed some kind of "M" consolidation then broke out to the up side. The upper right chart has the large "M" in it. If the Dollar makes the "e" leg of a contracting triangle and heads a bit higher it could be the excuse for a quick pull back in gold to complete the "M." Note the down sloping trend line on the upper right chart and the chart of gold in constant Dollars to the left. Recent market action broke above the line and is consolidating around it. I find it hard to be bullish on gold but this kind of chart action is consistent with text book charts that show markets eventually moving above trend lines. No matter what you "think" about gold, the trading pattern tilts the odds in favor of higher prices over the next few weeks. Nothing is certain. Patterns shown in text books frequently don't work out in real life the way you think they will. Still, I have to give gold the benefit of the doubt.











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If gold is finishing a correction with higher prices to follow it has to be good for silver. The big talk among metals analysts is the huge short futures position currently held by hedge funds and other large traders. This group is usually wrong when large positions are established and currently, their bearish bets on silver are at historic levels. If gold starts to rally again you could see panic short covering in silver and dramatic up side days. The levels to watch are the dashed blue lines where previous rallies ran out of steam. On the down side the red dashed lines are past support.













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Don't you wish you could simply look at a chart and know which way it is going to go? There is always ambiguity and that is what makes it fun or painful. Both of the above graphs show the Philadelphia Gold and Silver mining company index, XAU. When markets make long sideways trading patterns it is nearly impossible to forecast the direction of the move out of the consolidation. The left side chart sees a brief pop to the upper trend line followed by a washout to the down side. The right side chart has letters and arrows indicating the opposite. Above, I tilt the odds in favor of some kind of rally into late April or early May. I will be watching the trend lines on XAU for a move one way or the other.










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This chart shows the current yield on thirty year and ten year Treasuries. The scale for the rate paid is on the left side of the chart. The right side shows the spread between what you earn on a ten year and a thirty year. It is down to .207 of a percentage point as shorter term rates are going up faster than longer term rates and the yield curve is flattening. Traders will be watching earnings season for clues to economic strength and demand for borrowing. The updated CBO reports note that tax revenues are much higher than predicted despite the recent tax cuts and that the deficit will be lower than projected. From a purely chart stand point, the upward move in rates does not look complete. The classic chart pattern would call for another surge higher in both charts before some kind of larger decline.











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On the left is a weekly chart of U.S. Crude Oil Futures. On the right is a daily graph with more recent action. On the weekly charts I am postulating that "A" and "C' will be roughly the same length. That makes the $70 area the target. One could argue that we are "good enough for government work." right now but I am going to hold out for $70 or above. A break of $57 would convince me that the party is over and that much lower oil prices are coming. Remember, this whole thing is a corrective up move in a larger down market. That means that there is a top coming and lower prices after that. It is just a question of how high oil makes it before the slide begins.










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It is April 15 and as I write this there is a mixture of snow and rain outside my window in the Boston suburbs. The sun continues to be inactive with the implication that colder weather is headed our way over the next decade. On the left is a chart of July Cocoa futures and on the right, July Corn. Longer term readers know that I am a fan of both and trade them from the up side only. Both have pulled back from recent highs. I am going to look for a point to get back into Cocoa while staying long Corn.










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Let's look at one of the best weather market crops; coffee. Like cocoa it grows in a certain band around the equator. It also grows at elevation, in mountains which means it is more prone to frost. Cocoa and coffee are grown on trees and bushes that take years to become good producers. When bad weather reduces the corn crop in the U.S. there is another crop coming within 12 months and corn grown elsewhere around the world. Bushes and trees have a longer cycle so if a freeze kills part of the coffee producing area in Colombia or Brazil, the replacement cycle is much longer. The yellow band is the price level where coffee producers start losing money and we are there now. Yes, prices dipped below this point in the past but you can see that over the last decade this was a decent level to place bets.



Strategy for the next two weeks - The short term stock market pattern looks lousy and gold is making moves that led to higher prices in past cycles. I would like to see an early week stock market rally and gold pull back followed by reversals in both by mid week. Everything I do is very short term. I don't care about asset allocation or long term investing so don't confuse my comments with safe strategies for your retirement. The only long term things in which I have interest are corn, cocoa and now, coffee. I have a corn position and will now start to build one in coffee.

Best of luck,