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 April 3rd, 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 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.

 

 

 

 

 

 

 

 

 

 

 

 

Last week I mentioned that high frequency data such as credit card expenditures suggested a jump in economic activity. Friday's Non-farm Payrolls number confirmed it coming in at 916,000 new jobs. "Whisper numbers" were as high as a million eight hundred thousand but 916,000 was good enough. Almost a third came from rehiring in the Leisure and Hospitality sector. States are re-opening and summer tourist season is approaching. I live next to Salem, MA, the town infamous for the Witch Trials. This weekend kicks off their official 2021 tourist season. With almost a third of jobs coming from a lower paying sector, average hourly pay fell slightly. Education came in second with more schools opening.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Institute of Supply Manager's survey came in at its highest level since the rebound from 2009. Respondents reported that the prices they have to pay for raw materials and supplies are through the roof and so are the wait times. The price chart on the right goes back 70 years so a reading this high ranks with previous economic peaks.

 

 

 

 

 

 

New car sales surged to an annual rate of 17.5 million cars. Now we know where some of those stimulus checks went! This is happening amid a shortage of some models due to the computer chip crisis. There are no bargains. Eager buyers are paying top dollar. All these charts (found on the Zerohedge.com website) are evidence of robust economic activity. The stock market is at nose bleed valuation levels reached in anticipation of a full economic recovery in the U.S. plus some. Investors of all types are fully committed to stocks. Households now have 34% of their net worth in the market, the highest level in history.

So, with all this good news, why is the Biden administration talking about trillions more of fiscal stimulus? Why is the Fed trying to suppress interest rates to stoke a recovery when the recovery is here? Why are bond holders lending money at such low rates when non-government measures of inflation are popping?

The Fed claims that the strength and inflation are transitory so they can't let up. The new administration says we need to spend trillions on a climate crusade and to make sure every chicken in every pot is exactly the same size then raise taxes. None of it seems to make much sense but here we are. I go to bed bewildered every night.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

My guess was that the Dow Jones Industrials and the S&P 500 would make new highs and they did. The last bar on both of these graphs include the implied movement of the index based on stock index futures trading after the payrolls number on Friday morning. The two charts below too.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

My strategy called for the the NASDAQ 100 and Russell 2000 to rally some but fall short of their previous peaks. Futures on the Russell 2000 jumped a lot after the report but analysts point out that the index is priced far above any previous level when compared to the underlying earnings of the companies represented by the Russell 2000. Chart gazers will watch the horizontal green line. Prices could be tracing out an infamous "head and shoulders" pattern with the right side shoulder topping next week.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With millions of $1,400 payments hitting bank accounts, one would think that AMAZON and Wal-Mart Stores would be doing better. Surveys taken last week showed that respondents planed to use their stimulus donatives to pay down credit cards and other bills. A high number of respondents said that after the bills were paid the rest would go into savings. What people say and what they do are often different as shown by the car sales numbers. Money "burns a hole" in pockets so it could be that there will be a delayed reaction in the retail sector. One area that is seeing immediate action is restaurants. Open Table, the on-line reservation service reports a big up tick with activity higher than before the pandemic in some of the more open states like Texas. This is not just in the U.S. A friend of mine in the beer industry says that sales are going through the roof in Central and South America!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The CDC now says that if you had the vaccine you can travel and don't have to quarantine! Air traffic is picking up with many of the vaccinated elderly going on delayed trips. Major airlines took on huge amounts of debt over the last 12 months and it will affect their earnings for years to come. XLY, the SPDR ETF in the consumer discretionary area is close to its prior peak. Perhaps both airlines and other consumer spending stocks will rally on Monday following the payrolls data. If they don't it will warn that these companies already priced in a great recovery with limited upside for now.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remember February when the big brokerage firms were telling everyone to buy oil and oil patch stocks? That was the high. Last week OPEC + met and decided to gradually increase production over the next few months. Production in the U.S. is steady and at lower levels than before the pandemic despite drill rig counts increasing. Traders are watching the $58 level on crude for support. Oil and the energy sector usually do well in April. Retail gasoline prices are approaching a national average of $2.90 with demand increasing weekly. The White House is making it clear that they want higher energy prices so that solar, wind and fuel cells are more competitive. Last week they suggested a new gas tax then quickly retreated amid lots of criticism. The anticipated energy policies of the Biden administration already pushed gasoline and heating oil prices up. Because the cost of driving is a major dollar drain on most working people it makes no sense to hand out stimulus checks then do things to raise the cost of getting to work.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The volume of home sales is down. Normally, slowing sales would be a sign of declining prices. Instead, prices continue to rise. The latest national reading shows them going up at an 11% per year rate, slightly below the 14% rate from earlier in the year. Brokers say that there is a severe lack of inventory with buyers jumping on anything available. I see this in my own neighborhood. Sellers are met with multiple offers within minutes of listing their homes for sale and end up getting much more than they asked for. One house in my neighborhood just sold at a price 30% above its estimated price from two years ago before he could put a "For Sale" sign up in the yard. With prices rising it is no wonder that home builders' shares are moving higher and current owners are clinging to their appreciating asset.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What could remove the punch bowl for stocks, real estate and everything else? Higher interest rates. Rates on the 30 Year T Bond already doubled. The absolute level is not much, at around 2.4% as of today but 30 year bonds, purchased last spring at 100 are selling for 80 now. Holders of longer dated bonds suffered their worst loss in 40 years in the first three months of 2021. Analysts say that in past cycles, losses like this were followed by rebounds but we have never been in a cycle of money printing and price increases like we are seeing now.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Holders of shorter term government paper such as the ten year also got slammed. 30 year fixed rate mortgages are above 3% again. The whole system is extremely leveraged, to a degree not seen in history. This is why Central Banks keep telling us that they have to keep buying bonds. They know that if rates rise, everything collapses. Bonds sold off a bit on the payrolls number but not significantly. Traders have the weekend to think about it.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China borrowed its way out of economic collapse just as other countries did. Recently, the Central Bank has been talking about cutting back on stimulus to avoid bubbles in real estate and stocks. Above are the charts of the Shanghai Composite and an ETF that follows the CSI 300. This is what happens when a government hints that they will lessen the money spigots. The way that inflating the money supply works is that the rate of expansion has to increase to keep equities up. 90% of stocks are owned by the wealthiest 10% of the population. One has to wonder why our Fed feels committed to enriching them more and more while inflation takes purchasing power away from the rest of us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After an almost straight up move, the Dollar sold off a bit as bonds bounced. Metals responded with analysts talking as if the Dollar was about to crater due to the new "anything but Infrastructure" proposal. The pause in the buck followed a five wave advance. So far it looks like a normal correction in an up market.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last week I wrote about a seasonal tendency for gold and silver to rise during the first couple of weeks of April. We got some upside action following an early week decline. Week over week gold was about even. Those of us who like the metal watch the financial contortion in Washington and think that gold has to do something in response. Last week, when Joe Biden announced another multi trillion Dollar boondoggle that would be financed by creating Dollars out of thin air, it seemed like things might be at the breaking point! All of this is psychological and the charts have yet to confirm a good bottom. Bears will watch for the completion of an "N" kind of pattern leading to another sell off. Bulls will anticipate an acceleration to the up side with Newmont and other mining shares breaking to the upside.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver finished the week higher but not by much. Hecla, a silver mining company is in the middle of its trading range of the last year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last week, palladium looked like it was on its way to new highs. Then, a hedge fund with some exotic derivatives blew up. There were forced liquidations of stocks connected with the hedge fund along with other assets as a way to raise cash. Palladium was hit then quickly recovered, closing near its high of the week. Platinum didn't do much and looks toppy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historians point out that food was the first "money" and may yet be the one to survive as the sun goes through a downward cycle in its energy output over the next decade. COVID disruptions are already causing supply shortages all over the world. Food costs are rising everywhere with those living in poverty suffering the most.

Soybeans and Corn had brief pops to new highs then backed off later in the week. Export numbers were good but weaker than expected. Farmers are planning to plant record acreage this year with more in beans that last year. Note that corn's high was preceded by a contracting triangle pattern. This implies a larger pull back.

Wheat continues to sell off with seasonal patterns suggesting a low in the May to June time frame. I will consider this the last chance to buy at good prices.

 

 

 

 

 

 

 

 

 

Put your red hooded cape on and indulge in some chart mysticism. The theory is that the up and down moves following the 2018 high formed an expanding triangle ending at point "e." Following such a form, the cult of charts calls for a final exuberant surge to all time highs. Often the final move is related to the widest part of the expanding form by a Fibonacci number. You can look up Fibonacci and his number sequence. The ratio between any number in the series and the one above it is .382 and that below it, .618. The width of the expanding pattern is captured by red Line A. If the Dow Jones rallies 1.382 times Line A it will reach 33,670 as shown by Line B.

Wait, how about the S&P 500 or other market measurements? OK I am cherry picking the Dow Jones because industrial stocks tend to out perform other sectors in April So now, if we get close to 33,670 and reverse I can look smart.

Why do Fibonacci numbers work? No one knows why but they show up enough in trading patterns that most desk top charting programs have features that let you see where Fibonacci ratios of previous moves will end. They are worth following.

 

 

 

 

 

 

 

Neanderthal - 1. An extinct species of human that was widely distributed in ice-age Europe between 120,000 to 35,000 years ago. 2. An uncivilized, unintelligent, or uncouth person.

When Texas stopped all restrictions including masks, President Biden called them Neanderthals. Since then cases in Texas along with hospitalizations and deaths continued to decline. Last week President Biden begged Texans and others who dropped the mask mandates to put them back on "(For God's Sake!)". Rochell Walenski, the new CDC Director shed tears as she warned of "impending doom." So far, the doom hasn't hit.

I am traveling over next weekend. It is unlikely that I will do an update unless something dramatic happens and I do a quickie on the following Monday.

Strategy for the next couple of weeks -

Stocks - The good employment news could lead to a significant market top this month. Remember, highs are made on great news. Lows are put in when it seems like things are never going to get better. April has a seasonal bias to the up side for cylical and industrial stocks. My plan is to sell the rally in the coming weeks if it loses momentum.

Bonds - Any bounce should be temporary. The world is drowning in debt. The smart money is getting out now.

Gold and Silver - It will all depend on the Dollar. Going into the weekend there was nothing in the charts to indicate that the Dollar is ready to collapse. I am a big fan of the metals and keep waiting for them to adhere to all the theories about gold and silver we hear constantly. Maybe they will do it this time. I buy mining stocks when they get oversold just in case it is "the low." Given the constant debasement of the Dollar, Yen and Euro something has to give.

Commodities - They had a big run. I am looking for a period of consolidation.

Something to think about - Throughout history, spring was the time to go to war. It is also common for the "bad guys" to test the resolve of a new President, especially one who seems to be out of it most of the time and falls on stairs. There is news about things heating up in Ukraine. Watch for the new "agenda" to be disrupted by external events that take the new crew by surprise since they thought that the only reason others hate us was Trump.

Best of Luck

DBE