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 July 21st, 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.

 

A few times in a decade there is a particular group in an asset class that is loved or abandoned in an extreme way. Momentum oscillators on longer term charts peak or hit historical lows. We are seeing it now with a handful of tech stocks such as Amazon and Facebook on the up side and commodities, aside from the energy complex and cotton on the lower end. Within the commodities world, metals are reaching a level of abandonment that is rarely witnessed. I will be using a number of charts imported from the Barchart.com web site. This is a great place to find charts and add technical studies and it costs nothing for delayed data. Suggested music while you read: Mahler: Adagietto Sympohony 5. You can find it on Youtube.

 

 

rsi w

 

 

This is a chart of the weekly closing price of gold with a simple RSI momentum oscillator below. The RSI calculation takes the current closing price and rates it as a percentage of the last 14 closing prices. A level of .20 is considered an "over sold" reading. We closed the week at .13. In the last 19 years the reading approached these levels twice. Both led to short term rebounds. In the case of 1999 it was the buy of a life time. In June of 2013 the market rallied then reached lower prices in 2015. Web sites that track futures positions report that commodities funds are holding some of the fewest precious metals long positions in modern times. Going into this weeks lows, open interest was rapidly expanding as sellers anticipated prices that could only go down.

 

 

 

 

 

 

 

 

 

 

g 01

 

 

 

 

 

The low for the week was near $1,211 as speculative short sellers or gold miners trying to hedge future production rushed to sell Thursday morning. The market closed $20 above the early low at $1231.50. A move above $1250 should make them re-think their panic sales.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

g tri downg tri up

 

 

 

 

 

 

 

 

 

 

 

 

 

Analyst friendly to the metal suggest that the pattern on the left side chart is forming and gold will continue to trade sideways then break out to the upside. Bearish analysts note the extreme current pessimism toward gold and admit that a rally could take hold but they believe it will be in the context of an ongoing consolidation before another blood letting as is shown on the right side chart.

 

 

 

 

 

 

 

 

 

g in euros

 

 

 

 

 

Sometimes gold will sell off in Dollars and be stable in other currencies. This is during times when the Dollar is increasing in value against other currencies. Over the past two weeks gold declined against most currencies as traders around the world adopted a "who needs it?" kind of attitude.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

y g tri

 

 

 

This is a chart of the weekly closing price of gold in terms of Yen. It appears to be forming a contracting pennant. Most of the time these formations lead to a final burst in the direction of the previous trend which in this case is up. The thrust upward could be caused by higher gold prices or a lower Yen or a combination of both. This is a weekly chart so we could still have months of sideways to down action before the pattern is complete.

 

 

 

 

 

 

 

 

 

 

 

 

 

d topEuro Triangle

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a chart of recent prices of the Euro against the U S Dollar. Traders who are bearish on gold note that gold is moving in a very similar pattern to the Euro against the Dollar. They see the back and forth trading between the red lines as a contracting pennant, similar to the gold in Yen chart above except in the case of the Euro, the previous trend is down. They anticipate a spike lower. Contracting pennants tend to form right before the final up or down move in an item. If this bearish analysis is correct then one would expect an emotional, quick Euro plunge to new lows followed by a reversal along with a similar pattern for gold. On the right is a daily chart of the Dollar Index. Trackers of sentiment report that traders of all types are wildly bullish on the Dollar against all other currencies. Usually you see this kind of confidence near a top. If the Euro is making one more plunge, the Dollar should have a final pop to the up side. A break of 94 would indicate that something else is happening and would be accompanied by a break out by the Euro above the upper red line.

 

 

 

 

 

 

 

 

 

Platinum for October

 

 

According to Sentimentrader.com, platinum is one of the most out of favor commodities. The company I work for, Sabin Metal Corp. is one of the leading recyclers of platinum and palladium from industrial catalysts. When I meet someone and they ask me what I do for work they are often puzzled when I mention platinum and palladium. They have heard of the two metals but know nothing about them or their current price. Commodities as an asset class are being ignored and platinum is totally out of the picture. If you like buying things when they are ignored by the crowd then now is your chance.

 

 

 

 

 

 

 

 

 

 

 

 

 

palladium for Sept 02Palladium for Sept 01

 

 

 

 

 

 

 

 

 

 

 

 

 

Palladium was recently above $1,000 an ounce and users were worried about a physical shortage of the metal. Last week it fell an outsized amount relative to other metals. On the right is a short term chart featuring a contracting pennant, burst lower and reversal. Palladium has an historical tendency to bottom after labor day. A couple of months ago, users were close to panic mode and anxious to buy. We will have to see if they use current prices to acquire supply they were worried about in May..

 

 

 

 

 

 

 

 

 

g reap

 

 

Neither was silver spared. Note the dashed red line and the spike below this line in July of last year. That price extreme happened over night when someone dumped a lot of silver into an illiquid market. Prices recovered within a few minutes. On most of the silver charts I see on the web, that price low is not recorded. I mention this because some analysts are saying that on Thursday we completed a spike to new lows following a contracting pennant and now the market is poised to rally. Sentiment toward silver is at a pessimistic extreme along with all of the precious metals and at levels where it rallied in the past. Watch the Euro and the Dollar as noted above. If the Euro skids to a new low for the cycle silver could do the same.

 

 

 

 

 

 

 

 

 

 

 

copper

 

 

 

Copper gave up a year's worth of gains in a short time. As with precious metals, copper is greatly out of favor. In past cycles when it sold off this quickly there was usually some kind of rebound.

Copper is the basis for a lot of base metals recycling around the world. Smelters will accept mixed scrap as long as the copper content is high enough. When the price of copper falls it makes mixed scrap less valuable for recyclers and the movement of scrap metals slows. One could say that this sets the stage for a future price recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

d basethe shang

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a chart of the Shanghai Composite. On the right is DBB, an ETF that tracks the price of a basket of base metals. China is thought to be the swing consumer of most things, especially raw commodities such as copper. When traders see Chinese stock markets doing badly they assume that the economy will follow and with it, demand for base metals. If the Shanghai Composite can bounce from its current low which is also the February of 2016 bottom then base metals traders might show more enthusiasm.

 

 

 

 

 

 

 

 

 

SandPwith slow stoc

 

Two weeks ago I noted that commodities prices were falling, indicating lack of demand, perhaps because of trade war fears while stock markets were running higher and that both could not be right. The last two weeks of stock market trading were mostly dull, especially the last five sessions. We are in prime vacation time in the U.S. It could be that beaches, lakes and mountains are taking the place of investing for now. Note that the slow stochastic oscillator on the S&P 500 is near the top of its range. Over the past half year when this happened the market pulled back. We are now in our sixth month of a trading range. Both bulls and bears can make good cases for a break out up or down.

 

 

 

 

 

 

 

 

 

 

 

 

correc

 

 

 

I like making money on things that go down and have a natural bearish inclination. I am a cheap skate and think that most things are too expensive. When I look at the pattern of the Dow Jones Industrial Average I see the chart to the right, a sell off followed by a contracting pennant that will lead to a quick burst down. Given all the positive economic news I am at a loss for what would spark such a sell off. Remember, long term market projections have the same accuracy as long term weather forecasts.

 

 

 

 

 

 

 

 

 

 

 

 

 

N 1881 D

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a segment of trading on the Dow Jones Industrial Average from 1981. On the right is our current NASDAQ. The two charts have an unusual similarity. Things move in a similar way until they don't so never bet the farm on patterns that appear to be repeating. Still, if I had a portfolio heavily weighted to the NASDAQ Index I would be seeing the 1981 chart in my sleep.

 

 

 

 

 

 

 

 

 

F 2Z 1

 

 

 

 

 

 

 

 

 

 

 

 

 

We are told that the world belongs to AMAZON. Even though the NASDAQ is near it's peak, a lot of its components are trading below their 50 day moving average. Trading action and volume is concentrated in a handful of stocks with AMAZON leading the way. Check out charts of Apple, GoogL and Netflix. They have begun to not do as well. The last two big winners left are AMAZON and Facebook. One gets the feeling that when they begin to falter, everything else will follow.

 

 

 

 

 

 

 

 

 

Oil sept

 

 

 

 

In my last update I mentioned that I was shorting oil because every analyst on the three financial networks was predicting much higher prices. Inventory numbers showed an "unexpected increase" and it dropped. I got out. Given the level of bullishness toward the energy complex I suspect it might be making a major top. I want to wait and see how high the current bounce goes before doing more with it.

 

 

 

 

 

 

 

 

 

 

 

 

 

Coffee for spetcocoa for sept

 

 

 

 

 

 

 

 

 

 

 

 

 

My favorite group for the next ten years is food. Cheap food is the opposite of high stock prices, 1,400 square foot homes that sell for $400,000 and unlimited money spent at AMAZON. Sentiment on Cocoa is not bearish enough for me to get back on board. Coffee is right down there with platinum as one of the most disliked commodities. Analyst can see no reason to own it. I am loading up on it on dips.

 

 

 

 

 

 

 

 

 

Corn for Decemberbean boy

 

 

 

 

 

 

 

 

 

 

 

 

 

Corn is in the mid $3s and Soy Bean prices are at levels seen a decade ago before the bad drought in the U.S. and all the talk about Asian demand pushing agricultural prices to unseen heights and the "smart money" buying farm land around the world. Genetically modified seeds sparked a yield revolution that is letting us eat for cheap prices. Good growing conditions around the world are multiplying the supply. I am hoping for a great harvest in the Northern Hemisphere this fall so that I can buy food items at their lows.

 

 

 

 

 

 

 

 

 

buy dba

Strategy for the next two weeks:

Stock Market - I am short. My reasons: The high oscillator reading on the S&P 500. The dependence on a handful of stocks and really, AMAZON to go higher. The correlation between the 1981 market and the NASDAQ. Yes, I know I down played it but it is still there!

Precious Metals - I am long with NUGT, a leveraged ETF that tracks mining stocks. We are witnessing record levels of bearishness toward this group. Nothing is certain. They could keep falling but in past cycles this amount of contempt set the climate for a low.

Food - Coffee is also in the dog house so I am a buyer. I am waiting for harvest lows for others. DBA is an ETF that tracks a basket of agricultural items. It is a good way to invest in the group without using the futures market. If you like buying low as opposed to buying expensive things, now looks like a good time.

 

Best of luck,

DBE