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 19th, 2022

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,

Last time I listed different investment themes that are put forward to justify buying or selling stocks, bonds and commodities. All are still in play. The reasons to buy stocks are: Seasonality - stocks tend to rally from around this time of the year into the new year. Holiday period - Stocks tend to rally a few days before and after a major holiday. Momentum - The strength and participation seen in up days since Oct. 13th is nearly always a kick off to higher prices over the next year. These justifications are all based on historical data and assume that past behavior will repeat this year. More cautious views come from those looking at economic data. They argue that recent gages of economic activity imply future weakness that will translate into lower earnings next year. Even though earnings estimates have been lowered they do not yet reflect a likely recession. The most popular investment paradigm is that the Fed controls everything. If data trends down the Fed will pivot. Last week, different Fed officials said that softness in some data is not enough to let up on rate increases. It is all very confusing. The bullish "correlations with past behavior" evidence is very compelling and if you looked at this alone you would be 100% invested in stocks. Here is some of the data from the last two weeks.












On November 10th the Consumer Price Index for last month showed a slight month over month decline but a substantial increase from a year ago. Markets spiked higher on the data believing it to confirm that Peak Inflation is in the rear view mirror and that it is only a question of time before the Fed stops tightening. The "Fed controls everything" narrative won the day. There was massive short covering in the stock market with those hoping for a higher CPI reading caught on the wrong side of the trade. Bears pointed to the continued fall in real wages. Increases in pay are still not keeping up with increased costs of living. Consumer spending is 70% of the economy. How can we buy more stuff with less money?


















The University of Michigan Consumer Sentiment poll showed another decline in Current and expected Future conditions. These are among some of the lowest ever. Bulls were quick to point out that previous low readings correlated with major stock market lows except for one time period. That was in 2008 when the stock market suffered a large loss into March of 2009. That was the only failure in the data series. Do you buy stocks based on "most of the time" or sell because this could be 2008 all over again? Auto loan delinquency rates are running above previous years. According to Fed statistics, credit card borrowing jumped last month as consumers bought essentials on credit while interest rates on loan balances also went up. Stock market bulls say you still have to buy based on patterns in previous cycles.


















Existing home are down again. Mortgage rates fell a bit after the CPI release but are still around 7.4% for a thirty year fixed. House prices are falling a bit around the country but lack of supply in many areas is keeping them high. Single family housing starts also declined while multi family starts were relatively flat. Home construction is a major direct and indirect employer. Without new starts all the things that go into a home see lack of demand. Another report said that 54% of people 18 to 25 years old are still living with their parents. They cannot afford the current high rents and are in no position to buy a home.


















Retail sales were better than expected. Analysts were quick to point out that the biggest gains were in California where the state sent out stimulus checks to citizens to offset higher fuel prices. Cynics also noticed the timing of the payments to midterm elections. On the 15th, Walmart released excellent earnings and the stock gapped higher. They reported that consumers are buying lower priced goods and less of a lot of other things. They are seeing an increase in food sales and higher income shoppers in their stores. Bullish analysts interpreted this as a sign that consumers are in better shape than expected. Bears saw the opposite. Everyone knows that Walmart has the cheapest prices. When times are tough you ignore Whole Foods and go to Walmart instead. A Bloomberg article says that banks are worried about the future credit worthiness of consumers and are tightening up on lending standards. In past cycles this was followed by weaker consumer spending.


















Industrial Production was down a bit last month and so was capacity utilization. Looking at the charts above one would come to the conclusion that things are slowing down. Fed speakers made it clear that they are not ready to end their tightening cycle. Bulls will point out that they were just as vocal last year when they declared inflation to be transitory. So, do you buy stocks because recent data suggests we are at the end of a Fed tightening cycle and the big up days in the stock market were signs of a new bull market in the past or do you stay away because it looks like the economy is about to hit the skids?










Millions of words are spoken and written every week on the yield curve and what small shifts in rates on various maturities are "telling us." After the late in the week hawkish speeches by Fed Governors, rates on U.S. government paper with maturities of one year and less were slightly higher while longer dated yields all fell with the largest drop in ten year maturities and beyond. Note that shorter rates are higher than longer dated rates with the curve being "inverted." In past cycles these kinds of inversions were followed by a recession every time. Stocks tended to see their greatest losses after the curve uninverted. This is because the Fed ended their tightening cycle when economic activity was about to implode. Our current "Fed controls everything" bulls ignore past history and say you have to buy when the Fed shows signs of pivoting.

Analysts say that the drop in yields past one year means that we are close to that pivot point. Given past history does that mean we are also close to stock market losses?
























The energy sector is thought of as the most economically sensitive barometer. One headwind for all commodities is the strength in the U.S. Dollar but over the last two weeks the Dollar fell dramatically. Despite this, energy prices were weaker with traders very worried about a worldwide recession next year. Recent data on crude oil supplies were bullish! For the week ending on November 11th non-government inventories fell 5.4 million barrels. There was also another 5 million barrel release from the Strategic Reserve so the total drop in oil supplies in the U.S. was over ten million barrels. Commercial supplies are 4% below the five year average for this time of the year. Withdrawals from the Strategic Reserve are supposed to end now that the election is over. Traders are so worried about a recession they ignored this otherwise bullish data. There is a conflicting picture on what is happening with China lock-downs. On some days, reports say that they are going to ease up and the energy complex rallies. The next day, government officials claim that there is no policy change and prices decline. A big driver of the higher reading in retail sales last month was purchases of gasoline. Prices fell again last week despite commercial inventories 5% below the five year average for this time of the year.


















Distillate inventories are 15% below the five year average for this time of the year. Two month ago that number was 23% so there is some improvement. Over the last month there was widespread media coverage of the shortage of heating oil and diesel. Those stories were popular when prices were higher than they are now. Last week China started exporting diesel. Natural Gas is giving consumers a break from the higher prices seen last summer. Here in the U.S., temperatures are colder than normal but in Europe they are warmer than normal, helping to preserve supplies. They claim they have enough natural gas in storage to get them through the coldest months of the year.

So, the energy complex is much more worried about a recession than our stock market.






















The Dollar was much weaker in the last two weeks. This was supposed to be good for commodities. DBC tracks a broad basked of them and it rolled over last week. DBB focuses on base metals and it sold off a bit at the end of the week. DBA follows grains and meats and it is well below summer highs. Are weaker commodity prices a good sign for stocks because they signal peak inflation is behind us or does the price action in the face of a weaker Dollar warn of a worldwide economic slow down?























The Dollar sell off was dramatic with the Dollar Index falling back to levels last ween in July in just a few sessions. One reason is that hedge funds were extremely long the Dollar against other currencies. Once it fell below late October levels there was a rush to cover shorts and sell the Dollar. Usually a big move like this is followed by a consolidation then a smaller sell off before a meaningful rally. Analysts universally see Dollar weakness as good for everything else including the U.S. stock market. Above we see that it didn't help commodities that much. On the right is a chart showing the daily closing price of the Dow Jones Industrials in blue and the same closing price with the percent gain or loss in the Dollar Index added in red. The red lines shows you how a non-Dollar investor is doing in terms of their own currency. There is a lot of "hot money" around the world. It looks for a currency block that is showing relative strength against other currencies and the best performing asset class in that currency. The strong Dollar attracted wealth to the U.S., our stock, bond and real estate markets. When the Dollar topped out there was an immediate move of wealth into emerging markets. If the Dollar continues to fall it will not necessarily be a good thing for the U.S. stock market.




















Gold responded well to the Dollar's demise. Last time I mentioned that according to we were due for daily and weekly cycle lows. On the right is a graph of the daily closing price in NY and a simple RSI momentum oscillator. In past up moves the oscillator topped out at .80 or above before the final price peak. Gold stalled when the Dollar stabilized last week so traders are watching the Dollar Index closely.


















It could be that the current bounce is just a partial correction of the sell off since March. Gold bulls are hoping that the recent low was the end of a sideways consolidation with new highs ahead. Gold and silver mining stocks have been "dead money" for a while. A major cost for all mining operations is energy. They consume lots of diesel for loaders and trucks. They use huge amounts of electricity for conveyors, crushers, ball mills and pumps. If oil keeps selling off it will be a plus for the bottom line of miners.


















In the last few months I had nice things to say about silver. In August the difference between the metal's price and its one year moving average hit lows seen around some previous inflection points. Supplies of physical silver in exchange warehouses are dwindling. The metal had a decent rally and hopefully will continue higher. I am worried about its performance in a recession. Aside from its popularity as the poor man's gold it is an industrial metal with demand ebbing and flowing with economic activity. I still like silver but am not as friendly toward it as I was when it was clearly over sold.


















On the left is a six month graph of January platinum futures. The blue line is XLI, an ETF that tracks the performance of large industrial companies. It trades closely with the Dow Jones Industrials. Lately the metal and the industrial sector of the U.S. stock market were aligned. Last week they diverged a bit. My guess is that platinum traders could not ignore the weakness in crude oil. Palladium was also weak, following oil late in the week. It has a shelf of support in the mid 1700s. The end of the chip shortage was supposed to mean more car production and with it more catalytic converters and demand for palladium. If China stays on partial lock-down and a recession hits the world along with higher financing costs for new car purchases, the increased supply of cars might be stuck on dealers' lots.














 is a great investment website that tracks market sentiment and current conditions relative to past behavior. One can always ask, "Is it different this time?" Their answer would be, "Yes, but the odds favor outcomes that are similar to the past." On the left is one of their seasonality graphs showing the typical trading pattern of the S&P 500. It has a slight decline into day 226 of the trading year which is next week then goes straight up. In some recent years, stocks made November/December tops so nothing works all the time. On the right is a graph showing hedge fund exposure to stocks. Hedge fund managers are supposed to be the smart guys but they tend to own lots of things at the top and want nothing to do with them near lows. Right now, hedge funds are at the low end of exposure. In past cycles, the stock market showed good returns a year later almost every time. In 2008 it got worse before it improved. A number of their models show now to be a decent time to be long stocks with the caveat that in past rare times when a recession hit, these models failed. Recently, stocks in many industry groups went from trading below 50 day moving averages to trading above them in a very brief time. This is rare and was almost always followed by higher prices over the next year. Their studies of economic indicators run against their behavioral type graphs. They point toward weakness going forward.


















The Dow Jones Industrial Average is out performing other market measurements since the end of September. Large industrial and basic materials stocks that have better earnings in a strong economy are the stars. If stock market performance predicts the economy then this goes squarely against the calls for a recession next year since these groups of companies are the most sensitive to ups and downs in the economy. The S&P 500 that includes more tech sector members in its leadership is lagging. S&P 500 funds that equal weight the companies in it are doing better than the capitalization weighted index.


















Mid - Cap and Small - Cap stocks lag the Dow a bit. Both have a series of declining tops. It is thought that the increase in borrowing costs will effect smaller companies more than mega-cap firms. Many of the huge winners on the way up from the 2020 lows borrowed billions of Dollars at very low interest rates. Smaller companies don't have the same access to the credit markets. In most businesses there is a gap between the expenditure to provide goods and services and payment for them that is filled by short term borrowing. Rates on that borrowing are three to four times what they were a year ago which cuts into profits for companies without a lot of cash on their balance sheets.


















Big tech was very "over sold" two weeks ago and rallied with everything else but compared to most stocks as shown by the NYSE Composite, it is under performing. I heard one analyst say that performance chasing funds loaded up on so much Apple, Alphabet and Microsoft in 2021 that it will take them a while to unload it which is why these stocks lag.


















Above are charts of XLB, the materials SPDR ETF and XLI, the industrial SPDR ETF. These are the two best performing groups since the September low. Look at their largest holdings. If the economy is headed toward a recession you would not want to own most of these except for some of the military contractors in the industrials given the current war. Clearly, portfolio managers are convinced that the Fed will engineer a soft landing. We shall see.


















I am watching sub-prime lenders Ally Financial and Credit Acceptance Corp. In past Fed tightening cycles the Fed did not stop until something broke. So far, there are signs of stress in sub prime loans but nothing has snapped yet. Delinquencies are climbing in auto loans as shown above and other reports say that a large percent of small businesses are behind on their monthly rents.


















Last year, rates to ship things from Asia to the U.S. skyrocketed and ports on the West Coast were backlogged. Now, those same rates are plunging and the ports are reporting much lower traffic. Rail car loadings are down from a year ago which is reflected in Union Pacific's stock.


















Shares of Old Dominion, a big trucker, rallied from the September lows but late last week, investors started selling again. Fed Ex is already well off its highs as it sees a slow down in business. The demand for basic goods is down and this is reflected in the activity and price of companies that move things. Money manager who are buying Materials and Industrial stocks must see something else that they like.







I never got involved in Crypto Currencies. They are a computer created symbol that is supposedly worth something because there is only so much of them. They are great because they ought to be great, sort of like characters in Championship Wrestling. They are also "fragile." They require a computerized infrastructure to exist and access and a government can ban them at any time. Supporters will argue that the Dollar, Euro, Yen and nearly every other centralized government created currency is also just a symbol that we trust to hold its value and that nearly all transactions in these currencies are digital with debit and credit cards moving most wealth around and payment apps like PayPal and Vemo doing the same with nothing tangible leaving one location and moving to another. They have a point which is what gold and silver fans have been saying for years.

Maybe it is a generational thing. I just don't trust young people with little experience in the financial world telling me that something that exists only in the digital either is the next financial savior. Before a couple of weeks ago I did not know what FTX was or who Sam Bankman-Fried was. Now, billions of Dollars just went up in smoke with lots of small investors' life savings disappearing overnight. Stocks and bonds rallied as if nothing happened but my guess is that the fall out from this scam is far from over. When this much wealth turns into zero there is always a domino effect. At first it is thought to be a small group of associated companies and lenders and then over the following weeks more and more problems surface as other things are liquidated.

We now read that Bankman-Fried and crew were a polyamorous group that constantly pumped themselves full of amphetamines. You can see him shaking from the drugs in the different interviews that are showing in stories covering the scam. David Portnoy from Barstool was on Tucker Carlson last week. He said that he can't even walk down the street holding a woman's hand without it making negative news about him. Bankman-Fried and his employees blogged about their sex and drug use. If this were going on in any board room at other companies it would be a major scandal. It appears that they avoided this buy spreading millions of Dollars around, mostly into the hands of Democrat politicians and a few Republicans who hated President Trump. This bought them a get out of jail card until the whole thing crashed. Where is the call for politicians who took their money to resign? Where is Elizabeth Warren? In the race between money and virtue, money always wins.





Best Guesses -

Stocks - All the historica behavioral studies say you just have to close your eyes and buy. The seasonal tendencies confirm this and companies are buying back billions of Dollars worth of shares. But, something just doesn't look right. Most of the economic data points toward future weakness. I know that these historical type correlations worked out nearly every time but I have to stay away. Why would it be "different this time?" The number one elephant in the room is debt. The number two issue is war and social unrest. I think this is only going to get worse. For now I will watch and see what happens.

Bonds - Longer dated bonds should do better. They had a good pop and are likely to back and fill a bit as they wait for confirmation that the economy is slowing down.

Dollar - It is "over sold" on a short term basis but should have a follow on bout of weakness before a better rebound.

Gold and Silver - Likely to trade opposite the Dollar. With the economy not looking good, gold should do better than silver.

Other Commodities including Oil - Despite the drop in the Dollar they look weak. Oil is the big surprise. I though it would rally in anticipation of no more supply from the Strategic Reserve. Traders must see something bad coming for the economy.


Unneeded Commentary - The Obvious Problem south of us.

Most of our political class and commentary sees Russia and China as threats to the United States. Right over our southern border are a group of warlords who are earning billions of Dollars a month from human smuggling and the drug trade. The Biden administration's open boarder policy is enriching these paramilitaries beyond belief. Videos show them armed with heavy weapons and they have enough money to buy anything they want. Because of the drug trade and human smuggling they have thousands of foot soldiers in the U.S.. The President of Mexico, Andres Manuel Lopez Obrador is buddies with the cartels and travels through cartel controlled territory without being harassed. He refuses to do anything to stop them and is their man in Mexico City. Now he is proposing changes to the structure of Mexico's government. He wants to reduce their Congress from 500 to 300 people and their Senate from 128 to 96. A couple of weeks ago over 200,000 people took to the streets of Mexico City to protest this obvious grab for power. Did you see it covered on TV here in the U.S.? No. They are too worried about Twitter. Obrador would like to turn Mexico into a drug cartel oligarchy. The cartels are very comfortable doing business with China from whom they buy the ingredients to make Fentanyl It is killing over 100,000 young people in the U.S. every year. If we were sending a drug into Mexico that was killing 100,000 people per year do you think they would stand for it? Would Human Rights groups say nothing? My guess is that it is just a question of time before a few of the major cartels make peace with each other and use Obrador or some other politician to openly take over Mexico. For China this will be like having a fort on the U.S. border. With thousands of workers who owe their paycheck to the cartels already in the U.S., who knows what kind of instability we will be facing. President Trump recently started calling for the death penalty for drug smugglers and human traffickers and promises to shut down the border. My advice to him is that if he starts leading in the polls he had better triple his security force. There will be a big target on his back from people who are used to getting their way.

Best of Luck