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 May 19th, 2022

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.

Due to travel over the weekend I am doing an early and brief update. Please forgive the typos. My editing time was limited.

Economic Data -

The weekly jobless claims number was up again last week. Relative to the last two months the trend looks bad but 218,000 new claims for unemployment for the week is a very good number. California led the country in layoffs. Retail sales were weaker than expected. Past updates featured graphs of consumer credit card spending which is at record highs. You can only charge so much before you have to cut back.

The slow down in retail sales was evident in the earnings reports of Amazon and Wal-Mart. For some reason, analysts expected Wal-Mart to do much better while they were paring estimates for other companies in the retail space. The shares of both companies are in numerous ETFs and indicies so lots of investors took a hit.

Industrial production reached a new high just as analysts are talking about a recession. Capacity utilization is back to 2018 levels.

Economists will argue that industrial production and capacity utilization are backward looking with factories catching up on orders that were placed a few months ago. Over the last 6 weeks, real data disappointed relative to expectations which caused a dip in the Economic Surprise Index. New and Existing Home sales are falling with would be buyers still facing sticker shock and higher monthly payments as mortgage rates rise. Realtors and builders report that many would be buyers are priced out of the market.

Above are two graphs from the Sentimentrader.com web site. The left side picture shows their Fear and Greed oscillator. It is extended on the Fear side and at levels near major stock market bottoms in the past. The right side graph tracks the spread between Smart Money traders who tend to buy near lows and sell near highs and Dumb Money traders who tend to do the opposite. Like the Fear and Greed chart it is at levels usually seen near lows.

Above are graphs of the S&P 500 and the NASDAQ 100 going back five years with slow stochastic oscillators below them. In both cases, the oscillators are at levels that coincided with stock market lows in past cycles. The four charts above showing an extremely "over sold" stock market are known by all money manager with more than a week's experience on the job. Everyone is looking at the same thing. Why are they not buying? Because when you look back in history, stocks were higher nearly every time following such readings. The only exceptions were in a few very nasty bear markets when "over sold" readings tricked investors into buying at the start of huge sell offs. Even though the "odds" favor weeks or months of better prices the news is so bleak that everyone is afraid that "this time it is differnt."

The Dow took out last week's lows but the broader S&P 500 held. On the NYSE, there were 136 more winners than losers in Thursday's session. On the NASDAQ the ratio was 13 to 10 in favor of stocks that closed higher. Advancing volume was at 57% on the NYSE and 59% on the NASDAQ so the internal action was better than the averages, a positive and maybe a hint that we are close to a bounce with something like the red lines on the S&P graph coming our way. Tomorrow is an options expiration day so watch for big swings and fake outs.

Wednesday was a monster down day but both the NASDAQ 100 and Mid-Cap indicies held above their previous week's lows!

Small Cap stocks were the weakest last month but over the last 5 sessions they held well above the previous week's lows. I take this as a hint that we are close to a decent bounce such as something like the green dashed line on the Russell 2000 index.

Stocks are over sold to the extent where it seems like any kind of good news could spark a big up day like we had last week. Could it be something in the oil patch? The left side graph shows the bullish interpretation. In this case, oil is tracing out a contracting triangle that is close to bursting to new highs before a reversal. Bears will look at the right side picture and note that oil made its highs two months ago. Since then there has been constant talk about much higher prices while prices moved sideways. This could be a shelf of support that is close to breaking. Will the good news be something out of Ukraine? All it would take is a 3 AM (NY time) headline about truce talks. Oil would head south and Dow Jones futures would be a thousand points higher.

Traders thought that as soon as China lifted restrictions in Shanghai, oil and everything energy related would surge to new highs. They bought in anticipation. When the announcement came, the energy sector did nothing. Earlier on Thursday, gasoline dipped back toward prices seen in February. Heating Oil, the futures contract used to hedge diesel, did the same.

The world seems chaotic and no one in charge has a clue what to do. These are the kinds of times that gold and silver promoters warned would come. Gold rallied a bit today but it is not responding like its fans claimed it would. My hopeful theory is that it is making a long sideways consolidation for a break out in the next year or two. The old saying is "An investment is a short term trade that didn't work out." Silver fell back in the lower $21 range for the fifth time. Usually these kinds of patterns are a set up for lower prices.

Platinum and palladium are following the stock market, rallying when stocks go up and selling off when stocks decline. Copper is following the green script I drew in two weeks ago. Hopefully a decline to the "5" point will be a low.

Rates on bonds fell a bit. Analysts are saying that 3% might be the upward limit on rates with the Fed slowly increasing the Fed Funds rate toward levels already priced in by the market. It could also be that the stock market sell off is so frightening that money coming out of stocks is going into Treasuries for safety. Over the last week when stocks bounced a bit, rates went right back up.

Did you say the Dollar was going to collapse? So far it has done the opposite. It pulled back slightly over the last few sessions. If stocks can manage a bounce, the Dollar should do the opposite.

The two charts above show the Dow Jones Industrials (left) and gold in regular terms (lower lines) then with the percent gain or loss in the Dollar added. The strength of the Dollar supports our stock market. Investors from weaker currency blocks will get back more units of their depreciated currency if they sell. If you owned gold and are based in another currency, it did what it was supposed to do and rallied to offset your depreciating money. This can be a two edged sword. If the Dollar starts to weaken, foreign investors might start to pull money out of our markets, thinking that the good days are in the rear view mirror.

Corn and soybean prices are trading sideways. I was in the Mid-West last week and did a lot of driving. Many fields were untouched and others were plowed but not planted. Heavy rains delayed the planting season. Farther to the West, drought is reducing spring wheat yields. It looks like another difficult year. I bought another 60 days supply of 25 year storage food!

GSG is a popular commodity ETF. The pattern of its trading looks a lot like Oil. Highs were in March with a sideways pattern into this week. A break to the down side will have analysts talking about a peak in inflation. Fund managers are very short the bond market in anticipation of more inflation. If commodities back off a bit you could see a big short covering rally in bonds. The question for stocks will be, "Are commodities peaking because we are going into a recession or worse?"

Best Guesses -

Stocks - Stocks are extremely oversold. Any good news will spark a few big days to the upside. In 1973 and in 2008, over sold reading like we are seeing now didn't matter. Stocks kept going lower. I think we are in a bear market where violent rallies will interrupt a slow grind lower and keep investors in a losing market. I will look for one of those rallies to start in the next few sessions.

Bonds - I am looking for more sideways action in bonds. A break to the down side in oil or other commodities could spark a short covering rally. We are near 5,000 year lows in interest rates so eventually they are going higher (bonds lower.)

Gold - I am still agnostic, hoping that the long term pattern is as shown, a big sideways move that will lead to higher prices. Sri Lanka defaulted on their debt this week. If other countries can't borrow, they might sell gold to raise cash. That is the danger of owning a reliable store of wealth.

Best of Luck,

DBE