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
Aug. 29, 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.
The Weather Channel is great at building up suspense while tracking a potential hurricane coming across the Atlantic toward the U.S. Most of the time, the storm is a dud, but while it is on its way, they get everyone watching. The financial media does something similar with certain economic statistics such as the Consumer Price Index or monthly Jobs Reports. By the time 8:30 comes around on the day of the release, you think that the future of western civilization rests with one statistic. Over the last couple of weeks there was a notable absence of excitement over government data. Chairman Warsh's Jackson Hole speech dominated the narrative. Coming in second was the Personal Consumption Expenditure reading. Former Chairman Powell once said that it was his most watched measurement of inflation. It is uncertain how closely monitored it is by the new Chairman. On the left is a graph of both the headline (blue) and core (green) reading. Both were up 0.2% for the month. The year over year was 3.7% for the headline and 3.3% for the core, in line with market expectations. The right side graph shows the path of Core Services, Less Housing, another Jerome Powell favorite. It was up 0.28 on the month and 3.85 over the last year.
Goods inflation continued to moderate. Services costs are what drove the increase and most of that was from Portfolio Management and Investment Advice (red line, left side) which tends to mirror moves in the stock market. Analysts pointed out that most Americans are not paying for these kinds of services which means that the PCE is overstating the rate of inflation for most people. On the right is a graph showing the path of Real Personal Spending. It is my theory that the economy is slowing down. The Spending number from last month supports this view.
There is no sign of AI driven job losses. On the left is the latest on New Claims for Unemployment Benefits. The most recent was 203,000, a very low number. Continuing Claims (right side, red line) were down too. The light line on the right side graph shows the four week moving average of New Claims which sits at 205,500. In the old days, a reading above 400,000 was considered a signal for the Fed to lower rates. We are a long way from that level.
A flash estimate of Purchasing Managers Surveys on business activity showed a gain to 56.8 for services (left side blue) and a decline for manufacturing (green line). Anything above 50 means growth. The red line shows the path of hard economic data. The right side chart shows an S&P reading on Purchasing Managers surveys (blue) combined with actual GDP numbers (gray). If the correlation holds, growth for the current quarter should rebound from last quarter's 1.5% rate.
New Home Sales were down 6.3% in August as mortgage rates rose (left). The Median Price fell to a five year low (right).
Chairman Warsh's comments sparked a strong reaction in the bond market. Expectations for a Fed rate hike on overnight lending rates jumped (left) and interest rates across the curve rose (right). Shorter term rates moved more than longer dated rates. Chairman Warsh said the obvious: the economy is doing well, the U.S. is at full employment, capital expenditures are robust, thanks to AI, financial conditions are easy and and inflation is too high. He also said that the Fed will use adjustments to interest rates as opposed to other, more exotic manipulations. It was not as if any of this was hidden from traders. The statistics are in plain sight. Recent gains in the stock market, compounded by spokespeople from major Wall St. firms telling us how great things are, created a "look beyond what you see today" mentality that was brought back to sea level by Warsh's comments.
The blue line on the left side graph shows the move in shorter term rates. The yellow band is the current Fed Funds target rate. Over time, it follows shorter term T Bill rates which are currently above the band. The right side graph shows the entire curve. Twenty and thirty year rates are very slightly below where they were two weeks ago. Warsh's speech let the bond market know that he cares about inflation and will not settle for higher inflation to keep short-term borrowing costs down for the Treasury.
On the left is a graph of IEF, an ETF that tracks the path of 7 to 10 year Treasury Notes. The ten year Note is the world's most benchmarked debt instrument. Chart Mysticism art calls for a brief rally (rates lower) before a final plunge (rates spiking higher). On the right is LQD, an ETF that follows corporate bonds. Corporates are trading more positively than Government debt, something that didn't happen in the past. One of my favorite commentators, Martin Armstrong, says that we are in a cycle that favors private assets over public and that this cycle has farther to go as investors lose trust in governments. During this process, they will migrate from sovereign debt into asset classes including corporate debt, stocks, gold, real estate and even collectibles. Most of my readers don't care about bonds because their focus is on other assets such as stocks, gold and silver and the value of their homes. However, when the prices of these things stalls or goes down (gold fell $146 on Friday), a 5.2% yield on a AA rated corporate bond looks appealing. If you diversify into a bond fund, you need to know if they are holding recently issued debt from hyperscalers (Google, META, Oracle etc.).
These companies recently issued hundreds of billions of Dollars of debt. Bond issuers trade current wealth for a future cash flow to investors from their operations over a number of years. The problem is that as these graphs show, they are also committing themselves to trillions of Dollars in future purchases and data center leases that do not show on their balance sheets. Investors in the shares of these companies don't care but the credit market knows better. The lower right side graph shows the path of share prices in blue. The red line is the cost of Credit Default Swaps for these companies. The line is inverted to show a correlation. When the red line goes down, the cost to insure hyperscaler bonds is going up. This means that some of the most sophisticated investors in the world are increasingly worried about the accumulated debt combined with future purchases and leases versus future cash flow from operations. Last time, in my Unneeded Commentary section, I wrote that the CEOs of these companies believe that if they are the first to get to Super Intelligence, they will rule the world. Therefore, cash flow and balance sheet issues don't matter. These graphs illustrate this. The details of how all of this works are complicated but the basics go something like this: A company wants to build a billion Dollar data center. It secures a commitment from Anthropic or Open AI or Goolge, Metal, Microsoft, Oracle or one of the others for a long term lease for the data center once it is built. The builder takes that commitment to Private Credit investors and other pools of wealth and convinces them to lend them the money to build the data center and buy Nvidia and memory chips and processors. This is all predicated on the belief that the future revenues to these companies from AI will be in the trillions of dollars. Microsoft's revenue in 2026 is projected to be 331.84 billion Dollars. This is revenue, not profit. Given their investment in AI and future commitments, it is estimated by some analysts that they would have to double that number, with another 330 billion coming just from AI to meet spending obligations. Microsoft is the only hyperscaler that is not going revenue negative in panic spending on AI.
The left side graph is the same as the lower right one above with the blue line added. It shows the path of token costs for users of AI. The whole data center financing and data center build-out costs will be repaid from consumers spending money on AI which is priced in Dollars per token. The problem is that the models on which all of the financial logic rests are Open AI, Anthropic and Google's Gemini and Microsoft CoPilot. There are Chinese models that charge pennies on the Dollar for their tokens compared with Anthropic and Open AI and do 90% of the tasks just as well. If you are trying to find a cure for cancer or figure out nuclear fusion, you will pay up for the best. If you need to write job descriptions, do you need to pay top dollar? These cheaper models are already undermining the financial logic behind the whole data center build-out On the right is a graph showing the path of SMH, the computer chip ETF and MAGS, the magnificent seven. SMH is the current recipient of 70% to 90% profit margins on semiconductors, paid by MAGS companies. The MAGS are paying vastly inflated prices for current supplies that include everything inflated by data center spending, from land to aluminum. This puts a huge burden on their future cash flows. The cost of all of these supplies will have to be depreciated in future years which will eat into their reported profits. Right now, investors don't care.
The left side graph shows the week by week flow of funds into the stock market. The upper blue bars are for all stocks. The lower bars are for tech shares. Nvidia posted earnings last week which saved the bid for tech. Aside from that, the pool drained last week. If tech fades, what is left? On the right is the path of copper during the great China infrastructure build-out. I keep this as a reminder that all things come to an end. In hindsight it is easy to say that traders bid up the price of copper based on a temporary event. Today's fans of the data center craze keep telling us that we are still on the launching pad with much more to come. They were saying the same thing about copper in 2006.
Above are four measurements of "the market." The S&P 500 is the most benchmarked. It is also the recipient of passive inflows because of the popularity of index funds in retirement accounts. Most of those passive inflows are going into stocks associated with the success of AI and data centers because they are the most heavily weighted in the index. Last month, it looked like the market was due for a final bust higher. This weekend's riddle is, did we get the final bust or only wave one of what will end up being a five wave advance. The last Cyclesman.com 39 day cycle low came early because of war news. It was on July 23rd or 29th. This puts the timing band for the next low between the second and third week in September. If we make it through the next couple of weeks without taking out the lows at point "4" on the S&P graph then the odds will tilt towards the most recent high being only wave 1 with more to come. If we take out "4" then something more serious and hazardous to your retirement money is starting.
What do these two graphs have in common? On the left is a chart of the daily spot closing price of gold in NY and XAU, an index of gold and silver mining companies. On the right is a chart of the daily closing price of the most active WTI oil contract and XLE, the big integrated energy company ETF. In both cases, the underlying commodity bounced from recent lows and shares of the companies that benefit from higher prices rose even more. This comes from investors who missed the big up move, convinced that these commodities have to go highe and going all in. In past cycles, this did not work out well for buyers of the shares.
Iran and Oman are negotiating some kind of tariff sharing arrangement for cargoes going through the Strait. Estimates are that flows of oil and refined products are at two thirds of their levels from before the war. Reports are that producers in the Gulf are loading up tankers in anticipation of reopening. But, what about the concept of no tariffs on international waterways? If oil drops back to pre-war levels or even to the low $70s, that will more than compensate for any tariff. Trying to stop tariffs is costing the whole world. The United States is paying an extra tariff because of military expenditures. Last week, the cost to rent a very large crude tanker that carries roughly 2 million barrels through the Strait rose to $647,000 per day! That is a bit more than $0.32 per day per barrel of oil. Before the war, the rent was around one-tenth of that. These tankers usually unload their cargoes outside of the Strait and go back for more. The tankers that take the oil to Asia are renting for $220,000 per day, up from around $131,000 just a month ago. The latest official government statistics on domestic oil inventories are for the week ending August 21st. U.S. Crude in storage, aside from the Strategic Reserve sit at 428.9 million barrels, a level that is 1% above the five year average for this time of the year. In the U.S. we do not have a shortage of oil. To use it in machinery, it has to be refined into gasoline and distillates. Gasoline inventories are 6% below the five year average and distillate inventories are 14% below. Distillates would sometimes fall 20% below without any reaction in prices before the war. That is because there was plenty of diesel around due to surplus product from Russia. Ukraine is blowing up every Russian oil refinery and export terminal that they can reach and now, the U.S. is exporting its diesel and gasoline. Diesel in particular is in short supply around the world. On the right is a graph showing the crack spread, a measure of profitability per barrel on diesel. It came down a bit recently as more flowed from the Persian Gulf. Refineries are not causing this. Our U.S. Oil Refineries ran at 97.4% the week ending August 21st. I have been tracking this data for years and this is around the highest capacity utilization ever. Most refineries do maintenance in the fall and spring but many are trying to defer their fall overhauls to keep units running. This is risky. People think that oil refineries are like laundromats where the equipment might need some maintenance but runs trouble free for long periods of time. This is not the case. Oil refineries are like a laundromat where a third of the equipment needs to be shut down and overhauled every spring and fall and even with that, there are constant problems that cause some of the machines to be out of order weekly. This is because oil refineries are extremely complex and the processes they run are very hard on the equipment. By deferring maintenance, refineries are risking more unplanned outages. The upper left graph shows my chart mysticism interpretation of the future of XLE. The pattern since the first high at $63.46 looks like a textbook "flat correction" in a bull market with a zigzag down, one back up and a five wave down move to follow that will take prices a bit below the first low. This implies that we get a break for a few months in energy prices before things hit the fan again.
The left side charts show the path of gold and silver (Dec futures for silver) prices. Arrows on the gold graph mark Cyclesman.com's theoretical 21 trading day timing bands for a low. The next one is in a couple of weeks. Silver did not get the love that gold received. Gold took off again after the Treasury announced a new interest rate manipulation program. They will buy longer dated government bonds to quell "volatility." They will do this by borrowing more on the short end or by using existing Treasury balances. The program doesn't start until next month but it fit the gold bug narrative of the government screwing around in the markets because the debt is unsustainable, what has become know as the debasement trade. On the right are GLD, the most popular Gold ETF and below it, GDX, a popular gold mining company ETF. Both registered overbought levels on simple Relative Strength oscillators and you can see how much more the shares rallied compared to the metal. If this market is any good, gold should hold above $4,275 on a pull back over the next couple of weeks. If it falls below that, something more complicated is going on. Even if it stops in that range and rallies again, it could be part of an up leg in a complicated correction of last year's big up move that lasts for months. Mining share buyers are convinced that the metal has to rocket higher from here. Those who bought over the last couple of weeks are likely to be punished.
Platinum and Palladium are not doing as well as gold. Palladium had a big day on Friday. September Palladium futures are coming up on first notice date so long positions rolled into December by selling September delivery futures and buying December. Palladium is a fairly illiquid market. Some of the big commodities trading houses probably took positions prior to last week that forced traders who waited until Friday to pay up, big time, for the December leg. On the right is CPER, an ETF that tracks the most active copper future contacts. Over the last few months, copper analysts were wildly bullish on the metal based on data center construction demand, revamping of the world's grids to accommodate data centers and looming tariffs in the U.S. Traders drained copper from London and other locations and shipped it to the U.S. to front run those tariffs. Despite all the bullish banter, prices are not that much higher than they were last spring. Chart fans will see the multiple touches of the same area and look for a big breakout to the upside. However, physical supplies in the U.S. are high. If things go sour with data center construction and the economy slows down, copper will hit the skids.
My Dollar fantasy trade made it through another two weeks but will be tested in September. The art labels the sideways move on the left as an expanding triangle, a,b,c,d,e that should be followed by a move below the "d" point. The initial sell off from point "e" looks like five down, three in the direction of the lower trend and two corrective waves. The low coincided with one of Cyclesman.com's 23 trading day timing bands. If we get through the next week or two without making a new high, I will look for another down leg to follow. This would fit with the more bullish gold theory where gold pulls back while the Dollar takes back half to two thirds of the recent sell off.
This morning I saw another article that predicts a global commodities super-cycle based on supply chain shortages, data center build-outs and increased military procurement. On the upper left is DBC, a commodities basket ETF weighted toward grain prices. On the right is GSG, another commodities fund tilted toward energy. The interesting thing about GSG is that before its last rally, it traced out a contracting triangle that often precedes a final up move. If my chart art on XLE is correct, we could see a let up in supply chain issues for a few months. Much of the world's consuming population is flat to declining so demand for "things" has to come from more disposable income from each buying unit in their prime spending years.
Directly to the left is WEAT, the wheat ETF that I loaded up on last year. It jumped last week after some major brokerage houses published pieces predicting food shortages. The Relative Strength Index rose into the .80 range. Previous trips to this level marked short term peaks so I lightened up on my position. In a real bull market in grains, momentum oscillators don't matter. If it keeps going, it will be an indication that this one is real.
Best Guesses:
Stocks - For now, I am watching to see how far the market corrects over the next two weeks. If they can't drop it below the previous sideways trading range on the S&P 500, I will look for more upside after mid-September. On Thursday, when stock averages were much higher, I was listening to Bloomberg on my car radio. The commentator said that anything having to do with tech was up. Everything else was down. When one theme is driving the world, you have to try and diversify out of it, even if that is sitting in money markets for a while with some of your wealth. Things you think would trade differently from semiconductors are walking the same path. If the chips break, others will follow.
Bonds - After Treasury Secretary Scott Bessent announced his new scheme, bonds rallied a bit then sold off. On Bloomberg the next morning, all the bond analysts were screaming "crisis" but I noticed that prices were above where they were a week earlier. The "emotion, compared to actual market action" rating was at a 10, usually an indication of a short term low. If oil falls, bonds will do OK. A return of 5 % and above for some of your portfolio is not a bad way to go for a month or two.
Gold and Silver - I am looking for a pullback over the next two weeks. Depending on how deep it is, I will look to buy or sit and watch.
Oil - The world is already paying a toll. Is a $2 toll on $65 per barrel oil worse than no toll on $80 oil? We just slapped a toll on lots of Canadian goods!
Other Commodities - The weather issue finally hit the mainstream media so I will sit and watch my grains. Other commodities should follow oil.
Unneeded Commentary on 2 unrelated issues.
1. Last week I watched an inteview with Brett Adcock, CEO of Figure, the leading humanoid robot company in the United States. As they started the inteview they showed pictures of some of the robots with very attractive human faces. The first question asked was, "Why make them with attractive human faces?" Mr Adcock was quick to respond, saying that it is important to remember that these are humanoid robots, not actual humans and "There is no "there," there." He said that currently, the robots can do certain things better than humans but as far as general intelligence, he estimated that by 2029, they would get to the level of a first grader. As time whent on, with improvements and computing power, they will gain on humans.
I immediately thought of an old question that goes unanswered. Suppose you are in a bar and a guy walks in with a humanoid robot that has a very pretty, female face. You automatically know that the robot is a human creation. It is extremely complex with moving part and sensors sending data at the speed of light to data centers that return information just as quickly to the machine so that it can walk, talk and imitate human behavior. It's owner also walks, talks and does not need billion dollar circuitry to perform extremely complex tasks. It's computer is onboard, above its neck in a small compartment inside a skeletal structure. It converts organic matter, oxygen and water into energy and does not need batteries.
Why do we assume that the robot is a creation, the result of decades of thought and technology but the human, who is more complex and efficient, is the result of time and probability? Would we ever assume that if we could stand by a pond for a billion years, a data center and humanoid robots would eventually come out of the water? We know that light and sound sensors are needed for robots. In the chain of evolution, how would creatures without eyes even know that light was a thing and that having sensors such as eyes was benefiicial? We know that eyes involve tens of thousands of parts and constant chemical reactions. If any of them evolved before the eye was complete, they would not be of benefit or aid in survival. It would have to be all, at the same time, or nothing. The same goes for stomachs and many animal parts.
Yet, here we are. A sci-fi novelist might postulate that humans are another species' AI, gone rogue, quaranteened on earth. The increase in UFO sightings might be because our creator is afraid that we are on a technological path to break out and infect the rest of the universe.
2. While Socialist Organizations push for radical redistribution of wealth and confiscation of the assets of "billionaires," the funding behind their movements depends on billionaires. Did you ever wonder how so many people have the same printed signs and who sponsors the websites feeding constant hate into the elderly white people who wake up angry every day and stand on overpasses each Saturday Morning? Seamus Bruner, Peter Schweizer and the Government Accountabilty Insitute have all done reports on the flows of money. It is billionaires versus billionaires backed by a group of ultra wealthy men and women who hate Trump. No Kings 2.0 got 79.7 million from Arbella network, 72.1 million from Soros network, 51.7 million from Ford network, 45.5 million from Tides foundation, 28.6 million from Rockerfeller and 16.6 million from Warren Buffet. The George Floyd riots had similar backing. In many cities, pallets of bricks were left overnight on streets in areas targeted for riots the next day. Someone paid for them. Most projects, be they captalist or communist require the concentration of wealth. In ancient days, temples that acquired funds acted as banks, investing in ventures on the perifery of the Roman empire. Banks were organizations that concentrated wealth and lent it out for projects that could repay the loans with interest. Mayor Mamdani's socialist grocery stores will need pooled wealth to build and stock and pay employees before a single loaf of cheap bread is sold. It is a fact of economic life that making and building things requires a concentrated pool of capital. Political movements are no different. Neville Roy Singham is a successful high tech entrepeneur who sold his company, Thoughtworks for $785 million in 2017. He lives in Shanghai and sends money to Socialist and other left wing groups determined to overthrow capitalism. The Soros crew does the same. Even though Soros is pushing for redistribution, his family just bought a large tract of land in The Hamptons on Long Island. It is thought that Buffet, a king of capitalism, gives money to lefty organizations so that when they are burning down neighborhoods, they spare his house because he paid for the matches and gasoline. Our current crop of "tear it all down" activists are happy to get money from their set of Kings. They are not really against Kings. They would be happy to have their Kings running the show. Another reason why concentration is necessary is that getting a room full of people, each with a small sum of money, to agree on a project is nearly impossible. Anyone who volonteers to be on the Board of a local organization knows how hard it is to get anything done. Even when a project is needed and sounds well planned there will alway be someone who objects. When wealth is concentrated it makes decision making easier. 50 million depositors don't vote on a Bank of America loan. A small group of bankers make the call. So socialists can scream all they want about fairness and redistribution. If they refused donations from billionaire led organizations, they would look more honest.
DBE
Best of luck,
DBE