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 February 9th, 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.

 

Two weeks ago I shorted two sector ETFs in the stock market and gold mining stocks. The stock market shorts paid off with a decline going into the beginning of the week. Gold pulled back a bit but the mining stocks didn't. I covered at a slight loss. Two out of three is not bad.

 

 

This is a one year chart of the S&P 500 with a slow stochastic oscillator below from the Barchart.com web site. If you are a longer term investor you like to buy when stocks are getting hammered and others are dumping them. When this is taking place the slow stochastic oscillator will be near the bottom of its range as it was in late December. We are once again at the top of its cycle. In the past the market rallied some even with a high oscillator reading but most of the up side action was over. The financial press reports that individual investors increased their stock market allocation greatly in January, to levels consistent with tops in the past. Earnings are coming in above estimates that were lowered in December but companies are downgrading their outlook for the next quarter. When we got corporate tax breaks passed I wrote that it would boost profits for a bit but in the end companies would reinvest the money one way or another and costs incurred would catch up to the cash from lower taxes. That appears to be happening. I go into the next two weeks looking for more of a pull back.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Most of the major averages have the same form. The NASDAQ 100 was the hottest one on the upside. Bulls can argue that it made a simple a,b,c correction from last year's peak. The pattern of the rise out of December's lows appears to be in five waves. This would imply a three part correction before another up phase. Support would be in the area of the "4" point.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VEU is an ETF of stock market averages around the world minus the United States' averages. Whereas one can argue that markets in the U.S. corrected and have a shot at new highs at some later date, VEU does not have the same look. The rally from the low, shown in blue and red, has the same five wave pattern but the rebound is more subdued relative to the previous decline. The green lines show a possible future. In reviewing the charts or many individual stocks, the patterns look more like VEU than the more favorable NASDAQ 100.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil prices are making the same patterns as major stock markets. One could say that oil is leading but it is more likely that they are coincident, driven by the same hopes and fears regrading world and U.S. economic activity in the future. On the left is a chart of domestic crude prices from the top. On the right is the rebound, showing the same five waves up off of the low. The implication is that we should correct more of the rebound. The $49 to $50 zone should be decent support.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRAK is a Van Eck ETF that tracks the price of a group of Oil Refining companies. The pattern looks more like the VEU form than the NASDAQ 100. The right side graph shows recent action. As a natural bear on markets I would expect the five wave rally from December to be followed by a pull back then another five up toward the blue "4" point or slightly above. If it works out that way I will be on the look out for another sell off in CRAK and stocks in general.

 

 

 

 

 

 

 

 

 

 

 

This is a chart of the Dow Jones Industrial Average with the gains or loses in the U.S. Dollar Index added. The issues with Brexit and Europe teetering on recession again cause wealth to leave the Euro Zone currency for safety and the Dollar is the only game in town. If you are looking at asset classes on an international basis then your money is doing just fine in the U.S. Stock market. Strength in the Dollar plus stock market gains following December mean that you are close to the all time highs again.

Chart fans will be watching the current rally closely for signs that the chart is making the popular "head and shoulders" top with our current up move forming the right shoulder. Initial support is at the dashed red line.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The two potential corrective forms for the U.S. Dollar Index are both still possible. The left side chart infers more of a sell off toward the mid 93 zone. The right side pattern shows a more shallow form. So far, the right side looks more likely. Commodities like gold and silver plus internationally purchased items like grains and industrial metals are sensitive to the price of the Dollar. As the measuring stick for their value, if the stick gets bigger, the number of Dollars needed to purchase them declines.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above are a longer term chart of gold priced in Euros and the pattern following last summer's lows. The BREXIT deadline is at the end of March. Some blame nervousness over BREXIT plus the EU economy stalling despite zero interest rates for gold doing particularly well against the Euro. It is also going up against the Dollar but some would say that the focus of gold buying is potential problems in the Euro zone.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This chart shows the daily closing price of gold priced in Euros with a simple RSI momentum oscillator below. In past cycles when the oscillator approached .80 it was usually near a short term peak in gold. Sometimes the metal shot higher for a week or two then reversed. The RSI reading was .70 going into this weekend.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This is a similar chart with gold priced in Dollars. The RSI reading is .73. A high RSI reading is not a sell signal. You can consider it more as a yellow light. Often, when it gets this high on the weekly chart gold prices have been going up for a while and news of its performance is beginning to effect retail investors who tend to buy near tops.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold, priced in Dollars finished the week at price levels also seen in April of 2013. If you follow gold just think of the millions of words both written and spoken analyzing the metal and predicting future prices over the last six years and here it is at the same price. Trying to guess which way an item will "break out" from a contracting trading range can be hazardous to your wallet! Bulls will see the pattern on the left. Bears think we are close to the end of the long sideways form with a collapse in price below $1,000 per ounce beginning in the next month or two.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

People who believe in chart purity say that the form of the gold advance needs a "pull back then rally" phase to match the text book pattern that would complete an up move. Last time I mentioned that near tops, mining stocks begin to get more action. Late last week they ignored the short term weakness in gold and had some large intra-day ups and downs. This tells me we are getting close. If the purists are right then after a pull back, XAU could have a good run toward 80.

 

 

 

 

 

 

 

 

 

 

 

 

The other event to watch for near a metals market top is a pop in silver. Bulls look at this chart and see that we are Oh So Close to a "break out" above a down sloping trend line.

If chart purity wins and we get another rally phase in gold then history would suggest an out sized silver move to cap the precious metals rally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This chart is from the Barchart.com web site.

 

Last time it looked like palladium declined in five waves from its high near $1,400 per ounce. Following such a formation the text book says you should get a partial retracement of the down move followed by another sell off. We are close to the previous high as of Friday's close. If mysticism rules then palladium well head south next week.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rates are near 5,000 year lows. On the left is a chart of TLT, an ETF that tracks the price movement of 30 year Treasury Bonds. On the right is the day to day current yield of these bonds. Last week that yield fell below 3% again. U S government bonds are seen as a safe place to park money compared with European debt aside from Germany. When I see the current yield below 3% I short the stuff. Betting that rates will rise from 5,000 year lows has a good chance of success. When the vehicle for that bet is a debt instrument of a country that is taking in record tax revenue while increasing spending during an economic boom, the bet looks even better.

 

 

 

 

 

 

 

 

 

 

 

 

 

Chart from Barchart.com.

Past updates featured long term charts of Coffee Futures showing how little time they spent trading below $1.00 per pound. February is a seasonally strong month for coffee prices. In many past years, coffee rallied during February then had a miserable month of March. Prices have been trading in a range between $1.05 and $1.10 per pound. If we can't do much on the upside over the next couple of weeks I will look for a March low to re-enter the market.

 

 

 

 

 

 

 

 

 

 

 

 

 

CORN is an ETF that tracks the price of near by corn futures. It is my CHART OF THE WEEK!

Look at the pattern between the red lines. It is either getting ready for an immediate break out to the upside as shown by the green dashed line or (and my preference) it is about to suffer a final break down to new low prices before reversing in dramatic fashion. If it makes the blue line pattern I will consider it to be the buy of a life time. Remember, we are going into a solar minimum, a period of time where the energy output of the sun declines. Past cycles were coincident with increased volcanic activity that put ash into the upper atmosphere, further cooling the planet. You can read about The Little Ice Age, a cold snap that followed the Mid Evil Warming period. In past cycles global warming coincided with the expansion of civilization and economic activity. Cooling came with crop failures, famines, disease and wars. Consumers assume that their food will always be waiting for them on grocery store shelves. That may be true in the future but at what price?

Strategy for the next two weeks - The five wave advance we saw out of the December lows is likely to have more of a correction period. I am short stocks from last week. Remember, my positions are quickly closed if the market does not go in my direction and just as equally quick to close out when it does. I am not a long term investor in this cycle of the market. I am short bonds again with a small position in TMV, an inverse ETF that I will add to if they continue to rally. I am not doing anything with gold and silver this week. If these metals pull back more and the pattern looks right I might be a buyer but that is a lot of "ifs." I am watching corn futures, hoping they break down to new lows as shown by the blue dashed lines. This would likely take more than two weeks. Some brokerage firms will not let me buy an ETF like CORN because as a focused ETF it is considered too risky for the average investor. DBA is an ETF that tracks a basket of commodities and the pattern follows that of CORN fairly closely. I have not run into any restrictions on DBA. I take this weather stuff seriously. From the beginning of recorded history the activity of people has been blamed for weather that is too hot, too cold, too wet or too dry. In past eras, remedies included prayer, human and animal sacrifice, dancing and drumming. Al Gore and crew are just the latest version to demand a secular style of repentance. In reality it is all about the sun.

Best of Luck,

DBE