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 20th, 2019

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 - 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.

 

If you are a financial news fan you heard various pundits talking about the "VIX" for stocks, bonds and currencies. The VIX for things is calculated from nearby options premiums on the underlying items. Part of the cost for options is an expectation of volatility. Let's say you are buying a put option on a 20 dollar stock that traded between 19 and 21 for the last year. The put option you buy gives you the right to sell the stock at 20 between now and September even if the price goes much lower. The option will be relatively cheap due the narrow range of trading on the underlying stock. Now, imagine a stock trading at 20 that started the week at 24. The same option giving you the right to sell the stock at 20 between now and September will have a higher price because of the recent volatility in the underlying stock. VIX uses the price component of options on an item that is linked to the expectation of volatility to come up with a number reflective of options' traders anticipation of price movement. Even though expectations of volatility can be on both the up and down side, a big rise in the VIX of an item is usually triggered by a sell off or the expectation of a sell off. Going into this weekend, VIX calculations on stocks (shown here), bonds and currencies are all at low levels. This kind of assumption for smooth sailing in a multiple markets is unusual. I am preparing for a more adventurous ride!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above are Barchart.com graphs of popular stock market measurements. Going into the 8th of April I was betting on a short term pull back and the market obliged over the next couple of days. Large capitalization measures such as the Dow Jones Industrial Average and the S&P 500 made their way higher over the last 13 trading sessions. Mid-cap and small-cap stocks (S&P 400 and Russell 2000) edged up slightly. Diverging performance by different market sectors is often seen near tops.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The two biggest winners were the Dow Jones Industrials and the NASDAQ 100. The Dow had a couple of companies come in with good earnings such as J&J. The up move in the NASDAQ 100 was driven by Microsoft which went to new highs last week. It has a 10.28% weighting in this index, second to Apple which has a 10.44% weighting. Amazon has a 9.934% weighting followed by Alphabet (GoogL) at 4.726%. When any of the top three has a good or bad week, the index responds with a decent move. I inserted red arrows in the Dow Jones Industrial chart to remind myself that in most weeks there is a period of weakness on Monday or Tuesday.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Health Care sector (XLV) got slammed after more political talk about socialism and a complete government take over of health care. Both sides of the political spectrum are pushing for government enforced drug price reductions. Pfizer was a big loser. It has a Price/Earnings multiple of 13.29 and a Dividend Yield of 3.66%. Thirty year Treasury Bonds yield 2.959%. The selling in this sector looks over done.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some of the major market measurements are near highs but most individual stocks look like the chart of the NYSE Composite and are trading mid-range between January of 2018's top and December's bottom. My expectation is still for a trading range market as shown by the red dashed lines. On the right is a weekly chart of the S&P 500s closing price, a one year moving average of that closing price and the distance between the closing price and its average in purple. Note that the purple line is at a level where stocks pulled back in some previous cycles.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I always include pictures of the Dollar Index because wealth is coming into the Dollar from all over the world, particularly from Europe. All money is "hot money" in that it can be moved around the world with the click of a mouse. Our pro-growth and pro-business policies are telling the rest of the world that you can make a profit in the U.S. If those philosophies change you will see the Dollar hit the skids and money flee to other parts of the world. What bothers me is that everyone is bullish on the Dollar. The most positive people see the left side chart with the Dollar just about to burst through previous highs then head toward 100. One could also see the right side chart with Friday's highs forming the "d" point in the pattern. This implies a short but possibly robust decline in the Dollar toward the lower trend line over the next month. I favor the right side chart. A move above the upper dotted red line that lasts for more than two days will have me re-thinking my position. Remember, these types of coiling patterns usually form before a final move and reversal as shown by the green arrows and red lines.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a graph from the Barchart.com web site showing recent trading in June Gold futures. Last time I drew in red numbers with the understanding that a five wave form completed with an upward correction to follow. We got a $20 rally but it lasted only four sessions before prices fell below the "5" point. On the right is my "hopes and dreams" trade. I hope that the Dollar pulls back toward point "e" on the right side Dollar chart. Often, gold trades opposite the Dollar. If the Dollar slips we could see a counter trend up move toward $1,330. The Dollar will be the key and we should know if is "breaking out" or not by next weekend.

 

 

 

 

 

 

 

 

 

 

 

 

 

On June 21st of 2013 gold closed the week at $1,296 per ounce. Friday's close was $1,275.30. Boredom is killing metals fans. Gold bulls are still hoping for a break out above the long trading range as shown on the graph to the right. Microsoft's closing price at the end of June of 2013 was $34.54. It finished last week at $123.37. Gold, as an investment asset class has been a dud for the last six years. As a "trade" it did well.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver is flirting with prices from 2007. Cost increases for mining were not matched with higher prices. Between 2005 and 2011 a generation of investors was introduced to gold and silver investing. The last 8 years are teaching them to stay away.

Whatever gold does, I expect silver to follow.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The left side chart is from the Barchart.com web site. Palladium finished an initial five wave decline from historically high prices. The counter trend up move does not yet look complete. More down side should follow. Chart gazers are watching platinum's weekly closing prices and a trend line drawn off of a couple of previous upward bounces. A move above the red trend line should encourage more buying.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Two weeks ago, chart mysticism called for crude oil to peak following its up move of $21, a near Fibonacci ratio to the big decline of almost $35. For most of the last two weeks, oil traded sideways. Could the stars be ruling one of earth's most precious commodities?

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rates continue trading near 5,000 year lows. I am convinced that in future generations people will look back at current borrowing conditions with amazement. The yield on a thirty year T bond is still under 3%!! Rates edged up over the last few weeks. If stocks pull back it could temporarily hold rates down but when you are at 5,000 year lows, odds favor higher rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corn and Weat are ETFs that track corn and wheat prices. Food is damn cheap. Money is cheap and credit available. Help wanted signs are everywhere. These are good times and our equity markets reflect the positive feeling. History shows that everything is cyclical. The years of fat cows are followed by the lean. We are in the fat years now.

Strategy for the next two weeks - I usually short stocks at the end of the week and cover on weakness early the following week. Sentiment readings on the stock market are at levels last seen near the top in January of 2018. Because of that, I have a larger than normal short position in stocks and will trade part of it while hanging on to the rest. By the end of last week gold and mining stocks looked over-sold enough to bounce for a few days. Oil looks toppy and if it starts to slide it will influence stocks. Over the last few years, oil and stocks were fellow travelers. I am buying food related stocks on weakness and these, along with coffee futures, are my only long term investments. Many asset classes are priced for the best of all possible worlds (Gottfried Wilhelm Leibniz) including ultra cheap food, expensive bonds and stocks. Time to be cautious.

Best of Luck,

DBE