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 November 26th, 2021

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 - On my wide screen monitor 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.

As usual, I will show pictures and graphs found on Zerohedge.com, Sentimentrader.com, which include the Seasonality charts and charts made on Barchart.com. I will also mention "cycle low timing bands" suggested by another market website to which I subscribe, Cyclesman.com.

All the economic statistics released over the last two weeks seem trivial after today's sell off in most assets following the news of a new COVID mutant labeled Omicron by the World Health Organization. Starting overnight, traders sold before knowing if the new bug is more or less lethal and the selling continued for much of the light volume, semi-holiday trading session in the U.S.

Hard data -

 

 

 

 

 

 

 

 

 

 

 

Thursday's data was great with fewer than 200,000 people filing first time claims for unemployment. It was the lowest weekly number since 1969. Less than two million five hundred thousand people are getting some kind of jobless benefit. After these numbers were released Fed Hawks were sure that higher interest rates would be here sooner than later.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The log jam of ships off of Los Angeles is mentioned on almost every newscast. I was surprised to see the graph on the left in a Zerohedge.com article. The number of ships arriving at the west coast for unloading is back to typical levels. That could be because the surge in retail sales is subsiding now that stimulus checks are gone. October's reading was up a bit but some of that is from higher prices on all items plus people are shopping early for Christmas after being warned that shelves might be empty by December.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The prices we pay for everything are way up year over year as shown by the Personal Consumption Expenditure numbers. Last week I reported that my local Dunkin Donuts was back to full time business after hiring new people and that credit card expenditures were also up. My take on it is that people who were not working and hoping for a new government hand out finally ran out of savings and had to get a job. The graph on the right would seem to confirm that. The big pool of savings that Wall Street says will propel the economy higher is gone!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In most updates I show longer term investor trends in behavior that illustrate how unusual the current stock market environment is. Here are two more. On the left is a graph showing the volume of call option buying relative to NYSE total volume. Call buying is a risky speculative activity that tends to peak near the end of bull markets. On the right is another graph found in a Zerohedge.com article showing the value of Zombie Companies that are staying alive by borrowing more and more money, sort of like the U.S. Treasury. Investors don't seem to be bothered by our on going deficits nor are they reluctant to bid up the prices of companies on life support.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last time I thought stocks would sell off into early December. The question was, would any sell off be a short term correction of the October rally to be followed by higher prices or are we due for something larger. Today's panic selling pulled the Dow Jones Industrials back toward the half way level of the recent up move. To rule out higher prices stocks have to break below the 34,000 level. The S&P 500 took a beating today too but compared to the October surge the pull back is relatively small.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The big tech companies in the NASDAQ 100 out performed other groups. Selling hit these stocks too but many of them were beneficiaries of 2020's government shut downs. If the new bug is deadly and politicians order closures again, tech will out perform. Over the last year we saw periods when recovery plays like the Russell 2000 small capitalization group did much better than stay at home tech. Today, the recovery plays were hammered! From a chart perspective a break below the "e" level would imply a larger correction.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid Caps and very small caps (S&P 600) have a pattern similar to the Russell 2000 with long contracting consolidations that tend to lead to a final burst and reversal. It could be that the October up side break out was leg one of something much larger. As with the Russell 2000, these indices need to stay above the consolidation range to look positive.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last few weeks I read a number of articles predicting much higher oil prices due to underinvestment in future oil fields and restrictions from government regulatory bodies and private sources of financing that want to go "green." All it took was a new mutant COVID strain along with the fear of world wide lock-downs and the price of crude had one its biggest one day price hits ever. Everything in the energy patch took a dive with some energy related stocks rebounding a bit later in the day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Traders were not interested in waiting to find out if this version of the virus is more or less deadly than previous mutations. They clicked on "sell" and kept selling for most of the day. Just as stories are running constantly about higher gas prices and inflation, the wholesale cost of a gallon fell below $2.00. If the new COVID variant is not more deadly, today's sell off will be quickly erased.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas was the only thing up on the day with cold air making its way south. Fans of Natural Gas warn that its typical seasonal tendency is to sell off over the next 12 weeks! Oil refining companies shared in today's pain but are still near the top end of their trading ranges. If you bought in May, you are at break even.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With stocks melting down, government bonds were panic bid with rates having a big one day decline across the curve. Analysts are betting that a few bad days in the stock market will be all that it takes to banish any more "taper" talk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TLT is an ETF that closely tracks the path of longer dated Treasury Bonds. The chart above and to the left adds the daily gains or losses in the U.S. Dollar Index to TLT. It shows the combined gain from T Bonds and the strength in the Dollar. Non-Dollar investors are looking at six month highs in their bond portfolio. The one area of the bond market that is doing poorly is the Junk Bond or High Yield sector. It failed to confirm new highs in stocks. Traditionally this is understood as a warning about underlying financial conditions and a shift in investors' attitude toward risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Despite all the logic behind claims that the Dollar will collapse, it rallied again, pulling back a bit like other things today. Is the rally part of a correction before another leg down or are we in the early stages of a major up move? The charts don't give a clue in either direction. Sentiment is extremely negative toward the Euro and the Yen, the Dollar's two main competitors. In past cycles when sentiment was this extreme in favor of the Dollar and against other currencies, the Dollar tended to pull back. Currencies usually trend into year's end so any weakness might be temporary with the best chance of a top coming in another month.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold rallied overnight as stock markets fell apart. As a fan of the metal I was sure it was going to do its job and stand tall when everything else cratered. By mid-morning it joined other assets and sold off. Next week we are entering another 21 day cycle timing band for a low per Cyclesman.com, a service to which I subscribe. The last few timing bands accurately spotted lows. On the right is a daily graph of gold with the percent gain or loss in the U.S. Dollar Index added. Gold often trades opposite the Dollar. The purpose of this chart is to neutralize the Dollar's effect, giving a non-Dollar perspective on the metal's ups and downs. So far, the pattern within the green lines can be seen as a normal correction of the previous strong up move.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I tried to give silver the benefit of the doubt and to see its long sideways move as a correction that will lead to another robust rally. If it is any good it has to hold the "c" level. With gold due for a short term low, hopefully silver is too. Gold and silver mining stocks (XAU) look a lot like silver. A break of the "c" area won't be good for them.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Copper pulled back a bit this week but remains fairly strong, trading sideways for months. Copper is mostly a China story and there is a lot of confusion about what is happening in China. Some analysts say that the Evergrande debacle will lead to a crash in China, taking base metals prices with it. Others believe that the government can engineer a soft landing. DBB is an ETF that tracks a basket of base metals. Traders are hoping that 19.50 holds. I am a China crash guy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platinum and palladium both fell on the virus news. I was surprised because the most infected country right now is South Africa, home to most of the world's platinum and palladium mining and much of its gold mining! If this bug is more deadly than previous versions and S Africa goes into lock-down to stop it, mining will be curtailed! Palladium's seasonal pattern turns up next week and platinum's a couple of week later. Speculators are loaded up with palladium shorts. Today they made money. In past cycles, when they were this short the metal, it rallied.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wheat even suffered during today's dump fest! It climbed back toward unchanged by the close of trading. Soybeans pulled back a bit too. Bean traders are very aware that the strongest chance of a rally comes between now and July.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lot's of very smart people believe that Bitcoin is the only way to escape the world wide government debasement of sovereign currencies. This theory goes back to the mid-90s when micro computing first made digital private currencies possible. Today it took a big hit like everything else. I don't know if Bitcoin is the savior or not. Things that go up and down thousands of Dollar while I am sleeping are not what I call currency. Bitcoin prices are back to where they were in January. I keep watching my Gold versus S&P 500 graph for signs of life. The S&P 500 is still out performing but looks like it is running out of steam. Slow moving Gold is a tough sell to younger investors who just doubled their money in bankrupt companies last year.

Best Guesses for the next two weeks -

 

 

 

 

 

 

 

 

 

 

 

 

Stocks - On a short term basis, news about Omicron will overshadow everything. Above are one year graphs of the Dow Jones Industrials and the S&P 500 with slow stochastic oscillators and a 50 day moving average line. The Dow finished the week in "over sold" territory. The S&P 500 isn't quite as oversold because it is dominated by stay at home tech companies. Over the past year sell offs like this were met with Buy The Dip sentiment. My guess is that if people are not dropping dead in the streets of S Africa by Monday morning, traders will try and buy again. If markets fail to rally substantially over the next two weeks it will tell me that stocks are setting up for another, possibly big decline. I will watch the Russell 2000, MDY, the mid-cap ETF and the S&P 600 trading. All three made patterns that imply one last surge then a reversal. If they are headed higher then they should not break below their long consolidation ranges. Instead, they should rebound strongly next week. If they don't it will be a sign that something bigger on the down side is coming. Lately the financial networks interviewed numerous experts who point to this time of the year as typically favorable for stocks. Other pundits emphasize the billion and a half Dollars of corporate buy backs per day that are suppose to keep the market from declining. If it doesn't respond like as predicted, watch out!

 

 

 

 

 

 

 

 

 

 

Bonds - Bonds were panic bid on Friday with investors looking for safety. The slow stochastic oscillator is closer to "over sold" readings than over bought. Prices approached levels that capped rallies since July. If stocks try and bounce, bonds will likely do the opposite and sell off. Notice the series of downs and ups following the first touch of the red line. If bonds are making a contracting triangle formation, the text book says they should pull back a bit early next week then thrust higher before reversing. Most likely, a thrust higher would be coincident with another big stock market sell off.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold - Above and to the left is a one year graph of GLD, the ETF that tracks gold. It is sitting at its 50 day moving average with slow stochastic oscillators nearing "over sold" readings. In the past year, low oscillator levels marked short term bottoms. On the right is a one month graph of Feb. gold futures. The sell off is taking the form of a text book five wave decline. To chart wonks this implies some kind of upward correction followed by another sell off phase. Cyclesman's 21 day timing band for a low hits this coming week.

 

U.S. Dollar - Due for a pull back.

 

Grains - If the seasonal tendencies take over they should rally.

 

Unneeded commentary - I get to the gym at around 6 AM. There are people there who work out in pairs or more, rotating between exercises. In past years, the talk was about sports and to a lesser extent, politics. Lately I notice younger guys talking about stocks and Bitcoin. One of the trainers who works there was a first time father last year. He bought 5 Bitcoin a few years ago and cashed in when it was above $50,000, paying for his infants college education. Economic historians tell us that in past eras, the first thing that happens when the money supply is expanded much faster than the underlying economy is that interest rates drop and assets jump in price, way above their traditional values relative to their earnings potential and current cash flow. Then the price inflation bleeds into goods and services in general. During the first phase of an inflation, investors can do no wrong and everyone feels like a genius. Everyone in the market feels great and negative events don't bother people. When you get up and see that your stocks are up a few thousand Dollars, the commute to work is less of a burden. You don't mind a boss who is a jerk as much because you don't think you will have to rely on your work as your major source of income in the future. Politics also take a back seat. Our leaders might be running the country into the ground but when you are making money in the markets you feel like you will be able to escape future problems, move out of bad neighborhoods, pay a bit more in taxes and for gasoline and have a great lifestyle no matter how many illegal aliens are coming across the border. When the window on speculate gains closes, everything reverses. You realize that you need that job. How things are in your neighborhood matter more because you aren't going anywhere. Politics and who is in charge becomes much more important when your escape plan disappears. Presidential approval and the direction of stocks correlates well over longer time periods. Every political strategist knows this and there will be lots of pressure on the Fed to discontinue taper talk and on Wall St. firms run by Democrats to tell you not to sell. There is a strong chance that we are at or close to a major change in trend in the stock market. Watch for bad moods to spread and criticism along with distrust of government to grow.

Best of Luck,

DBE