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.
Please remember, the following is pure speculation based only on my experience and chart patterns. "Every sunken ship has a room full of charts."
David Bruce Edwards
Jan. 31, 2026
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 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.
There were some minor economic statistics released over the last two weeks. The Fed kept rates unchanged as expected. The biggest news was President Trump nominating Kevin Warsh to be the next Fed Chairman. From previous statements it appears that Warsh is an inflation hawk who believes that the Fed should have one mandate which is to tame inflation. Since the Great Financial Crisis the Fed used its balance sheet to buy trillions of Dollars worth of Treasury Bonds and housing agency bonds to keep interest rates low and inject reserves into the big dealing banks, making money plentiful. The excess reserves in the system ended up in the stock and bond markets. Since the 2020 low, more and more went into stocks, real estate and lately, into commodities, especially gold and silver. The rich got much richer as the assets they owned rose in price. Given the Fed's history, there was widespread belief that at the first sign of distress in the stock market, the Fed would always step in and buy securities, flooding the banking system with money that would stop any stock market sell off. Commentators noted that most of the consumption, driving the economy is coming from the wealthiest 10%. If their stock portfolios falls, consumption would slow. It would just not be allowed to happen. Kevin Warsh is against the Fed expanding its balance sheet and bailing out the stock market. Speculative assets that depend on excess money sloshing around in the system that can be used for leveraged buying, hit the skids with gold and silver leading the way. Bitcoin also had a bad day. Warsh believes that the only way to get longer term interest rates down is to snuff out inflation. Bonds initially fell then rallied after the announcement. The Dollar rallied.
Wall Street analysts were convinced that President Trump would nominate an "easy money" guy who pushed for lower overnight lending rates that would keep the money river flowing and weaken the Dollar. The Warsh nomination went against this theory. How does this fit into the MAGA agenda? There are many moving pieces involved but the basic plan involves two primary actions. 1. Close the borders to keep employers from hiring cheap illegal labor that drives down the wages for lesser skilled workers. Deport and encourage as many others to go back home by cutting off free stuff. This will raise wages for those of us who did not have high scores on SATs and will unburden states and cities that have been forced to provide free everything for illegal immigrants while poor native born people are on wait lists to receive that same benefits. Arrest and get rid of the criminal class that came in unvetted and made areas in our cities dangerous and uncivilized so that commerce can thrive again. 2. Raise prices on imported goods made in countries that have a combination of cheap labor, governments that offer targeted subsidies and won't allow U.S. made things to compete in their markets. By doing this the Trump administration is hoping to revive our domestic economy and recreate a middle class. Added to this second leg of the agenda are subsidies and direct investments into the production of things that are needed for defense and advanced technology. The focus of government stimulus is coming in the form of targeted Treasury disbursements that will build plants and buy equipment and hire workers as opposed to the expansion of the Fed balance sheet where the money goes into 3X leveraged ETFs. The nomination of Kevin Warsh is a part of this shift away from Wall St. and towards Main St. It also means that real industries could do better and so will workers but the share prices of those companies could sell off.
I live in very liberal Massachusetts where many of my neighbors can't wait to get their daily fill of Trump hatred delivered through their social media feeds. But, if you look at what MAGA is doing in practice it is similar in philosophy to Democrats from the middle of the last century who tried to shift more of the wealth produced by the economy toward workers through making and doing things. I also visit Red states where people can't wait to see their feeds of pro-Trump stories. Do they realize that many of the directed government subsidies would have been considered to be coercive socialist type policies before the Great Depression?
Corporations are going along with the Trump agenda because they have little choice. They moved manufacturing to Asia and Mexico, spent billions on plants, equipment and worker training and produce things cheaply then sold them here, making good profits. Do they really want to spend billions more Dollars to build duplicate capacity in the more costly United States and deal with workers who want sick days and parental leave? Of course not. They know that they will make less money by manufacturing domestically and without access to cheap illegal immigrant labor. They will fight back by using as much automation and AI as they can and to hire as few employees as possible. If Democrats win in the mid-terms, look for many of these companies to stall or back out of their on-shoring commitments.
The blue lines on the Yield Curve graphs show where rates on Government Debt finished the week. The orange lines is from two weeks ago. Rates on most maturities rose slightly in the last 9 trading sessions. President Trump wants interest rates to come down in the middle and long end. Business loans and mortgage rates are priced relative to this part of the curve. Warsh believes that getting inflation down is the only way to do this.
New Claims for Unemployment Benefits (upper left chart) rose slightly to 209,000 and are still at the lower end of their historical range. A new read on December Producer Prices came in a bit hotter than expected (upper right). The month over month was 0.5% with the year over year at 3%. The increase came from Services as opposed to Goods which means that tariffs were not the culprit. The details showed that expanded margins for machinery and equipment drove the number higher. With the government subsidizing the expansion of plants and equipment, this is the result.
To the right is a graph of the S&P 500 and the spread between interest rates on top rated company's bonds and BBB rated securities. If there is less liquidity available for refinancing and new projects, lenders should become more selective about where their money goes. Last week, I saw a graph showing that investors in Private Credit are requesting returns of their money. If President Trump is successful in capping credit card rates at 10% the result will be similar. Banks will only offer new cards to highly rated borrowers. The blue line should rise.
There are two widely watched surveys of Consumer Confidence. One is from the University of Michigan. It lost credibility over the last year because of it polled more Democrats than Republicans versus the actual voter breakdown. Until recently, Democrats gave consistently negative responses based on their hate of Donald Trump. Republicans tended to be more optimistic. The other consumer survey is from the Conference Board. The upper left side graph shows responses for general confidence (blue line), Present Conditions (green), and future expectations (red). All three lines fell last month. The upper right side graph isolates respondent's feeling about the jobs market. It is approaching COVID lows despite the unemployment rate at an historically low range. Another bad week in the stock market will not help.
Directly to the left is a chart tracking Pending Home sales. They fell 9.3% in December and were down 1.27% for 2025. Last week, President Trump said that he is working on making homes more affordable but does not want to lower the price of homes because for many people it is the core of their wealth. In November, pending home sales rose because of lower mortgage rates but so did prices. A Case Shiller report said that home prices rose in nearly all of the largest metropolitan areas of the country because the temporary lower mortgage rates sparked demand. Controlling home prices is not within the President's power. In the past, home prices and the stock market trended in the same direction. If 2026 is going to be a more difficult year for stocks, it is likely that home prices will fall in some areas too.
I subscribe to a substack by Michael Howell who tracks global liquidity - the amount of money available for borrowing. His analysis shows that liquidity is rising but at an ever slowing rate and looks like it is close to reversing. He claims that is why Bitcoin is down. Silver and Gold are also very sensitive to the amount of money in the system but they held up until Trump's choice for the Fed Chairman made it clear that the President is not a fan of endless money pumping. Last week there were numerous recommendations to get out of overvalued precious metals and buy Bitcoin because of its recent relatively poor performance. Over the last few days, Bitcoin holders lost 6.8%. On Thursday, spot silver touched $121.67 then fell 39% on Friday to $73.67 before rebounding to $83.35 on the close, a 31% loss. In previous updates I warned that when you want to sell, so will everyone else. The problem with owning physical metals is that you have to find a buyer. Coin dealers work on a combination of their own money and lines of credit. $5,000 gold and $100 silver eat through a few million dollars worth of lines very quickly. When business is slow, dealers can deliver their metal into a major gold and silver refinery. The refinery will lock in a price for the dealer by selling futures or forward contracts, sample the metal to verify its purity then loan dealers 90% or a bit more of the value of the priced metals so that the dealers can continue buying. Refineries also operate on lines of credit. When deliveries are high, they use up the lines and can only pay customers after they have refined the metals, poured them into Good Delivery bars and delivered them into an exchange or flown them to London to be priced against forwards. This all takes weeks. The backlog of metals at refineries now extends into months. Dealers that still have available credit are only buying precious metals at a steep discount because they will not get money for the metals for a long time. This is how the safest asset that requires no counter-party to determine its value turns into an illiquid investment that you can't sell when you want to and at the price you see on the screen. I read that some refineries are not even taking less than 99.9% pure silver and those that do have a longer lead time until payment.
On the left is a daily bar chart of spot gold prices in NY with arrows marking Cyclesman.com's 21 trading day cycle low timing bands. We are in one now. To the right are weekly bars with arrows marking the weekly timing bands. The next one is due from late February into March. These cycles can run a bit long or short. 18 weeks is the average over time just as 21 days are for the daily cycles. If the cycles work out, we should get a bounce next week, perhaps after a frightening Monday followed by more weakness going into the next daily cycle low timing band at the end of February.
You probably noticed that most of the recent gains in gold and silver came overnight from Chinese and Japanese buyers. On the left is a graph of the price per gram in the Chinese currency. The Shanghai gold exchange was closed on Friday. Traders will be waiting to see what happens on Sunday night. On the right is a long term graph of the Shanghai Stock Exchange. Speculators in China have a history of driving prices dramatically higher then suffering extreme draw-downs. One more thing to remember is that Sunday evening will be the first chance that dealers have to hedge buys and sells in physical metal that they transacted over the weekend when the exchanges were closed. They will usually try and anticipate the volume and hedge it late on Friday before the markets close but sometimes they will be wrong and place orders on Sunday night in the first hour or two of trading. Lopsided purchases of physical will result in sales of futures. Will Chinese buyers bail us out on Sunday night?
Chinese buying is also credited for the run up in copper over the last month. Prices pulled back during U.S. trading hours on Friday. Platinum and Palladium had a bad day at the track too, showing just how dependent they are on gold.
Last time I warned that we were approaching the timing band for daily cycle lows in the Dollar Index. We are also in the timing band for the 19 week cycle low. The Dollar hit its low on the 27th at 95.55. The Warsh announcement triggered more gains. If the weekly cycle works out then we are in for a decent Dollar advance. This will be bad for global liquidity because most big loans around the world are denominated in U.S. Dollars. A stronger Dollar makes it more expensive to pay interest and return principal.
Stocks took a hit on Friday too. For most investors, "the market" is the S&P 500 the world's most benchmarked index. During the week it made headlines for surpassing 7,000 but on Friday morning it fell below the October highs before recovering in the afternoon. Bulls are hoping that it formed a rising wedge for a break out to the upside and another big up move. Bears see the pattern as evidence that stocks are running out of steam. On the right is the NASDAQ 100. For years it was the winning sector. Now, its largest companies are holding back the S&P 500.
Microsoft was in a down trend before its earnings announcement. The stock fell more after its cloud computing unit did not do as well as expected. Investors are also worried about its huge investment in Open AI. More doubters from inside the AI industry are coming forward and claiming that Large Language Models will be great at data retrieval but never turn into super intelligence. One longtime critic said that the rush to add more "compute" in an effort to create Artificial General Intelligence is like adding more and more horses to a carriage in the belief that it will turn into a train. The longer AI is out there with mediocre results and revenue that covers only a fraction of its costs, the more worried investors will become over huge Cap Ex plans to build more data centers. Meta rallied on news of huge Cap Ex spending and more importantly, on large revenue projections for next year. Note that even after the earnings report, it is down from where it was six month ago.
AIQ is an ETF tracking companies in the Artificial Intelligence business. As doubts about the profitability of AI increased, the stocks lost momentum. Historians say that during the California Gold Rush, most miners lost money but makers of picks and shovels and other equipment did very well. SMH is an ETF that tracks semi-conductor companies. There are reports of shortages of memory chips because of data center demand. Prices skyrocketed and that is forcing makers of cell phones, lap tops and other devices less profitable. Most of the big semi-conductor firms are expanding production. Prices often peak amid reports of shortages and capacity expansions. With more questions about AI data centers being able to turn a profit, will investors rush to build more of them in 2026?
Industrial and Materials companies are some of the best performing names due to the re-shoring play and the government's push to re-industrialize the United States. The Dow Jones Industrial Average has a heavier weighting of these companies than the S&P 500 and has done better. On the right is a picture of January's trading. At one point on Friday morning, nearly all of January's gains were gone.
Mid and small cap companies hit highs a week ago and fell again on Friday. I listen to intentionally known portfolio managers early in the morning on financial TV networks. They were universally bullish over the last two weeks. Analysts talk about the economy and earnings to justify their opinions. They all know that stocks are high relative to the sales numbers of companies because Central Banks flooded the system with cheaply available cash. If the Fed will no longer cooperate, stocks will sell off and multiples will contract toward historical levels.
Crude Oil rose to $65 last week over concerns about conflict with Iran. We are positioning a large navel force near the country like we did Venezuela. Iran already showed that it will put up a better fight than Venezuela. More well known analysts are predicting a major spike in crude oil. On Thursday, one said that if you look at oil priced in gold, it has never been cheaper. He also said that the increase in gold which is real money meant more buying power for other commodities. I did not see him interviewed after gold fell $700 from when he talked about its purchasing power the day before. I am less confident in more gains for oil. If Iran and the United States come to an agreement, you could see prices hit the skids. XLE, the big energy ETF rose as oil was falling. Exxon and Chevron led the way. Many smaller firms, especially in the refining industry did not do as well. If oil runs out of steam, even Exxon and Chevron should suffer. On the right is a graph of UNG, a natural gas ETF. The yellow areas mark winter time in N. America. For the last few years we got one or two weather related spikes in natural gas prices. The odds of very cold weather are within the time period of mid-December to early February. Spring is less that two months away.
GSG and DBC, two commodities tracking ETFs had a good two weeks until Friday. The same analysts who are predicting an oil price spike say that commodities as a group should surge. Their reasons are: 1. When gold and silver rise, other commodities tend to follow. 2. Commodities as a group have performed poorly for years relative to the stock market. It is time for them to catch up. 3. All of the government funded industrial production and building requires commodities. The first two reasons are based on loose reasoning that may or may not work out. The third is the most believable. If DBC and GSG were stocks, you would look at the charts and note that amid all the enthusiasm, prices have not yet taken out the previous high.
Best Guesses -
Stocks - I remain cautious. Everyone is extremely bullish but after Friday, net gains for January were small and the S&P 500 is nearly flat with late October prices. Semi-conductor stocks are the stars based on data center demand but doubts about AI being a good investment are growing. All it will take is a word of caution from one of the big tech firms and sell orders come from everywhere.
Bonds - Borrowing needs should keep rates high. If Warsh removes reserves from the system, it is likely that inflation will come down and so will longer dated rates. We have months and Senate Hearings before any of that takes place.
Dollar - Cycles are bottoming. Watch for February to be a good month for the Dollar.
Gold and Silver - Watch the action in Asia on Sunday. If they start to sell it could be ugly on Monday morning. We should have a daily cycle low some time this week. My guess is that any rebound will be followed by lower prices later in February.
Commodities - Commodities firmed a bit but if gold and silver fail to bounce much, buyers of other things will lose confidence.
Oil - War with Iran or no war?
Best of luck,
DBE