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

Sept 23rd, 2023

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.

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

Due to travel again this weekend I did not get to edit my comments after a day's break as I usually do. Please forgive the typos.

Stats from the last two weeks.












There was no shocking economic news over the last couple of weeks and more importantly, no formal data indicating that the economy is rapidly slowing due to Fed rate hikes so interest rates continued to rise. Analysts were focused on the Fed's rate decision last week. It was widely anticipated that they would hold rates steady while making it clear that if prices continue to rise they are willing to raise rates again. That is exactly what they did. The markets listened carefully to Jerome Powell's comments and news conference for any hints of what the Fed had in mind going forward. He emphasized that the Fed would be data dependent. Interest rates finished the day almost unchanged. On Thursday morning the government released the state by state jobless claims number. It showed another drop in new claims for unemployment (left side graph) and a modest drop in continuing claims. Other readings on the economy have been neutral to soft lately and the one holdout is labor. After the number was released interest rates across the curve jumped sending bond prices to fresh lows, breaking last October's bottom. On Friday, Purchasing Managers' Surveys showed a continued contraction in Manufacturing and a move toward flat in Services (right side graph.) Interest rates fell a bit with bonds rallying.


















Earlier in the week last month's existing home sales showed a slight decline. You can see all the red bars on the left side graph. It is the same story of low inventory due to owners having mortgages at half the rate as new mortgages and not wanting to move. New buyers are looking at 7.19%, leaving most unable to afford monthly payments. Housing starts fell with multi family starts dropping the most. The borrowing costs to construct then rent out large apartment complexes makes them a less attractive investment.


















Another regional Fed survey of economic activity contracted in August. This one is from the Philly Fed highlighting business conditions in the greater Philadelphia area (left side). On the right is a graph from the U.S. Census Bureau showing Real Median Household Income. If you did not hear about it after it was released on the 12th it is because it showed an overall drop since the Biden Administration took over after good gains in the Trump era. It gives a snapshot of how Bidenomics is working for most people. Media outlets ignored it.







Chart of the week.


What is the economic distortion of our times? Since the late 1990s the Fed suppressed interest rates and injected money into the world's economic system to manage crisis situations. It started with Long Term Capital Management in 1998, a large hedge fund that blew up when Russia defaulted on their debt followed by the Asian currencies crisis. After 9/11 the Fed again injected billions into the banks to keep the economy going. The intervention during the Great Financial Crisis dwarfed the previous interventions leading to 13 years of lower and lower interest rates until they approached zero in the U.S. and went negative in other parts of the world. This was capped off by the Treasury giving money to people. In economics 101 you learn that when the price of something is kept artificially low, demand for the item increases while supply diminishes. With rates close to zero, the demand for borrowing went through the roof in both the private and public sector. In a normal market, that demand would lead to an increase in interest rates that would be needed to attract more lenders. But, the Fed and banks kept lending at close to zero return, supplying the market with more and more money. As a result, nearly every business venture looked like a winner because it was easy to clear the cost of carry hurdle. The tragedy is that overall growth was so low that it did not generate economic returns that paid back the borrowing, particularly in the public sector so most of the principal is still outstanding. JNK is my chart of the week because it looks ready to crash following a long sideways series of contracting moves. JNK is an ETF that tracks junk bonds, debt that is issued by companies with lower credit ratings. Many of these firms are "zombie firms," companies that stay alive with debt because the cash flow generated by their operations is not enough to keep them going. They rely on continuous borrowing, just like many municipalities, states and the Federal Government. Now that they have to roll over their debt at higher rates, bankruptcies are on the rise. Watch JNK carefully over the next month because if it breaks down as anticipated, it could be the focus of a financial panic. Economic historians have been saying that the Fed will raise rates until something breaks and then they will be forced to start another round of quantitative easing like they did when SVB bank went under last spring. If you see JNK spike lower you can be assured that the Fed sees the same thing and it might signal the peak in the tightening cycle.



















When interest rates started to rise, analyst predicted better times for banks. They are in the business of lending money. When the return for lending money increased, the theory was that banks would make more money. It didn't work out that way for reasons I mentioned in last month's update. Above are the graphs of Key Bank, a regional institution and Bank of America, a banking giant. The charts of both of them do not look good. Bank of America has an a,b,c type rally and now looks headed for new lows. Two weeks ago I showed graphs of the increasing default rates for auto loans and credit cards. When the world of debt goes south, banks are left as the bag holders.


















I have a GM Credit card which I use for some reoccurring payments. A percent of every purchase gives me a small discount on the purchase of a GM car. Capital One owned it for years then Goldman Sachs decided to get into consumer lending and bought it under the Marcus name. Goldman converted to a bank during the Great Financial Crisis in order to get bailout money. Traditionally they only did business with the ultra rich so getting into the retail credit card business was a big change of direction. Last year I heard a bank analysts say that banks don't really make much money on traditional lending and especially mortgages. The big margins are in credit cards. It is ironic that Goldman Sachs whose job it is to advise investors when to buy low and sell high, bought the GM Credit card business near its peak when the number of late payments was at its low. Now, with non-payments increasing they are stuck with a bad business. If JNK breaks to the down side, Goldman should also do poorly. On the right is the KBWB banking index ETF and it looks headed for trouble too. Many 401Ks have "High Yield Bond" funds in them. They have been the only place to earn any yield over the last decade but now look dangerous. Check your exposure to them.


















On the left is what happened in 1987 leading to the crash. On the right is our current Dow Jones Industrials graph. Given the decades of market data it is always possible to find a period of time that fits current moves so you should never bet the farm on a cherry picked past period, however, if stocks trade sideways to up over the next week I will be very worried about what we have coming in October just because I was a stock broker during the 87 crash and in my memory of it is as if it was yesterday.


















An early August update featured the graph of SMH, the big Semi-Conductor ETF with a warning that governments around the world are subsidizing new chip factories which will lead to a glut of semi-conductors in the future. I was also skeptical about Nvidia because of the nature of the tech industry. Rivals are always quick to innovate and compete, making it hard for companies to maintain margins for long. At the time, financial advisors were telling clients that the price of Nvidia didn't matter. In the future it will be higher. Just buy the stock! Right now, that advice is not looking too good.


















Above and to the left is a 2 year graph of the S&P 500 and a slow stochastic oscillator below. The oscillator is sitting at the low end of its range. Some of the biggest market sell offs have taken place in over sold markets but the majority of the time, the market bounced when this over sold. On the right is the S&P 500 with 50, 100 and 200 day moving averages. A common theme among analyst is that October might be rocky but stocks always bottom in October then rally into the new year. A few weeks ago they saw the 100 day moving average as likely support. We closed below it this week. Their next line of defense will be the 200 day moving average. When you hear them giving up on the "October low" theory it will be a better time to buy.




















The left side chart shows the current yield curve compared to two and four weeks ago. Rates are higher across the curve. The biggest moves were in longer dated paper, fives to thirties. This was the week when bond investors threw in the towel and capitulated to the "higher for longer" narrative that the Fed has been emphasizing for months. My experience as a trader is that when investors give up on a theme,you are near a reversal. My personal opinion is that we are at that point with interest rates and bonds.

The graph directly to the right shows the path of TLT, an ETF that tracks longer dated U.S. Government bonds with the daily percent change of the Dollar Index added. Much of our debt is owned by non-Dollar investors. This graph shows what the price path looks like to them. Because the Dollar rallied, losses in their bond holdings are not as big as they are for Dollar based investors. From last fall's lows the price pattern looks like a contracting triangle, a,b,c,d,e, then a five wave sell off. Most of the time, contracting triangles are the next to last move in a trend with the follow-on move leading to a reversal. If reality follows art then we are close to that reversal point.




















Interest rates are at new highs but the Dollar Index is much lower than it was a year ago. The left side graph shows a five wave decline and a sideways move that could be a classic "flat correction" in a down market. The "b" leg of the move exceeded the "5" point by the width of the yellow rectangle. The final high might exceed the "a" point by a similar width. Arrows point to a regular low to low cycle of around 21 days plus or minus a week. The next ideal low for the Dollar is in the first week of October. If rates are peaking then how can the Dollar have another leg up? If stocks around the world hit the skids in October, investors will run toward safety in both the Dollar and our government debt. On the right is a graph of the Dollar Index over the last five years and a slow stochastic oscillator. During the rate hike cycle the Dollar stayed over bought for a while as the Fed let investors know that they had much more work to do to move short term rates above the rate of inflation. Aside from this period, a reading this high on a five year graph warned investors that a correction was likely.



















The upper left side graph shows the correlation between gold and price moves in the U.S. Dollar Index. The red Dollar Index line is inverted so that when the Dollar gets stronger the red line goes down. Usually, a down move in the red line coincides with a sell off in gold. Over the last couple of weeks gold buyers in other currency blocks, especially the Yen, bought the metal to maintain their wealth as the Yen continued to fall. On the upper right is a daily graph of gold prices with arrows pointing to 21 day cycle lows kept track of by The next timing band for a low is during the period around October 12th. A lot has been written and theorized about gold over the last year but prices are flat with where they were in June and July of 2022. The October, November period also corresponds with's timing band for a weekly cycle low and is also in the timing band for a 9 year cycle low. That band extends into next year.

In case inquiring minds want to know what happened with gold during the 1987 crash, to the left is a weekly bar chart of prices from that period. The red rectangle marks the crash weeks. Stocks traded sideways into December when they approached the October crash lows. Analysts saw the sideways move as a consolidation before another collapse. Bearish sentiment peaked at the December low as did gold prices. From that point stocks rallied spectacularly and gold sold off into the 1990s.
































If the economy and stock market turn down, will silver follow gold or sell off amid worries about industrial demand? Who knows? Despite all the ink spilled on silver it is trading at the same level it was three years ago. Palladium and Platinum tend to be influenced by the direction of the stock market. Palladium's seasonal sweet spot for a low is next month as shown by the yellow box on the graph. Since 2016 copper and the stock market tended to move in tandem. If stocks hit the skids you feel silly loading up on an item whose price depends on future industrial demand.




















Did you read anything about the oil market that suggested weakness ahead? I didn't. Every analyst on TV and the press is warning of much higher prices to come. There is universal agreement on it at this point. Yes, they could be right this time but in past cycles, calls for much higher oil prices coincided with market tops. Above are charts of the weekly closing price of West Texas Intermediate and daily closes with RSI momentum oscillators below. It takes a lot of buying to get the weekly reading this high. Last week the daily RSI hit .90. The yellow dot marks a point where a high RSI was generated at the kick off of a major rally. Many of the other high readings came near market peaks. Directly to the right is a seasonality graph on Crude from We are a week or two away from a seasonal tendency for oil to sell off. Yes, it could be different this time but all the super bullish buzz around oil should make investors with long memories a bit cautious.
































Above are six month graphs of gasoline and heating oil prices and seasonality charts below. Heating oil has a couple of weeks of good seasonality before it turns down but keep in mind that these charts are the average price moves from many years so any individual year can buck the trend. Last week the financial press was full of reports about looming shortages of diesel and other distillates and late in the week Russia announced a halt to most exports of gasoline and diesel to lower domestic prices. Even after this announcement, heating oil, the contract used to hedge distillate prices and gasoline futures sold off.







How did other commodities do over the last two weeks?












Corn and Soybeans tend to sell off into fall harvest time so we are seeing typical market weakness for this time of the year. Note that we are still above levels seen a few years ago.


















Wheat continues to be pressured by plenty of rain in U.S. wheat growing areas and a bumper crop from Russia and Ukraine. Poland and other European countries are refusing to take more grain from Ukraine because it is depressing prices to the point where their farmers are losing money. DBA follows grains and meats and thanks to live cattle prices it is near its highs.


















Base metals are not doing much and will probably watch the stock market for direction. DBC tracks a basket of commodities and is holding its own for now. We might have to wait for the Dollar to finish its upward correction before commodities turn up in a meaningful way.







Back to stocks.












Stock market bulls say that as long as employment holds up, consumer demand for things will keep the economy from tanking. A lot of attention was paid to this summer's boom in travel. Bears point to the huge credit card debt accumulated by consumers and question the sustainability of the consumer led economy. On the left is a graph of the JETS ETF that tracks airline stocks. Last week I booked a flight from Boston to Texas for $228 and one back for $156.70, half of what I paid a year ago. As I booked the flights I noticed there were plenty of open seats. You don't get prices like that unless demand is down. The trading in JETS confirms it. On top of lower demand the airlines are paying very high prices for jet kerosene so their profits are likely to be dismal next quarter. On the right is EATZ, an ETF that is a pure play on restaurants. Like a number of ETFs, it was created at the top of a trend when eating out reached records post COVID shut in. Last week, Darden Restaurants, parent of Olive Garden said they are seeing weakness across the board including their highest priced restaurants. So, it looks like the consumer is already pulling back.


















Consumer discretionary items are supposed to be things that we want but don't necessarily have to have. Consumer Staples are the things we are going to buy even if we are tightening our budget such as tooth paste and shampoo. Both charts turned down recently with the XLP ETF focused on consumer staples looking like it made a broad top. For a year, analysts predicted that higher rates and inflation would curtail spending. Last spring and summer the resilience of the consumer surprised the market. Now it looks like summer is over and the bills are coming due.

Here is this week's theme song to paste to your browser and listen to.

Best Guesses -

Stock Market - Stocks finished the week with general dumping of shares before what could be a bad news weekend. Oscillators are at levels where stocks bounced in the past. If reality follows art then we should get a brief bounce into early October as in the 1987 market.

Bonds - We got the additional sell off I was looking for last time. The TLT adjusted for Dollars graph looks like it made a completed move to the downside. We should start a decent rally.

Dollar - A pull back is likely next week but I am looking for one last rally toward the "c" point in October.

Gold and Silver - They should do well next week if my Dollar prediction is correct but I see any upside as only a trade.

Other commodities - We are in a 10 week seasonally unfavorable period for commodities. So far they are trading sideways which is good.

Best of Luck,