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

June 8th, 2024

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.

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 most watched statistics from the last week in May were the revised first quarter GDP and Personal Consumption Expenditures, a closely watched read on inflation. For the first week of June the big number was jobs for the month of May. Wall St. is looking for a Goldilocks situation where the economy chugs along at around 2% and price pressures moderate along with a slight slowdown in jobs.

 

 

 

 

 

 

 

 

 

 

 

 

The revised growth number for the first quarter (left) came in at 2.25%, a bit weaker than economists anticipated. The first quarter was months ago so the data was not a big issue for the markets. Bonds rallied a bit in response. The Personal Consumption Expenditure reading came in a bit better than expected at 2.65% and the core (ex food and energy) at 2.75%. If this is all you looked at it would seem that the Fed's 2% inflation target is close at hand. Bonds rallied on the news (rates fell).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The jobs data was more complicated. The ADP reading came in at 152.000 and most of the big Wall St. firms were looking for a number between 150,000 and 190,000. The official Bureau of Labor Statistics tally was a gain of 272,000 jobs last month which shocked the market. Bonds fell nearly 2 points on the news and initially, stock index futures sold off along with gold and some other commodities. Earlier in the week the Bank of Canada and the ECB both cut rates slightly After the previous week's relatively weak economic numbers and benign inflation readings, market participants increased the probability of a Fed rate cut for as soon as July. The 272,000 reading crushed hopes for a rate cut. But something was not quite right under the surface. While the Establishment survey showed a robust gain, the Household survey showed an outright drop in employment. The gap between the two readings hit its widest level (right side).

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

The overall unemployment rate rose to 4% (left) and the Labor Participation rate fell!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May continued the trend of more part time jobs and fewer full time positions (upper left) along with more jobs for foreign born workers getting low paying jobs while the number of native born citizens working fell again.

Lastly, see the graph directly to the left. It is a "Birth/Death" model that the BLS uses to adjust monthly jobs data. The May adjustment used was an increase of 231,000 jobs! This model automatically added 231,000 jobs as part of the total 272,000 based on the theory that new businesses that came into being last month hired these many people. This is despite reports of 2,600 store closings so far in 2024! So, how many jobs were really added in May? No one knows but ADP's 152,000, based on their dominant payrolls processing software is most likely closer to the truth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above are two releases from the last week in May. A survey of Chicago area purchasing managers showed recessionary conditions. If you drive in the suburbs around Chicago you are amazed at all the brand name corporate headquarters in the region and the amount of manufacturing. If things are going bad around Chicago it is hard to believe some of the national data that suggests otherwise. The conference board's reading on Consumer Confidence (right) stabilized at low levels. Participants were a bit more positive about existing and future conditions than they were the month before.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The number of job openings fell again last month. Many private recruiting firms say that the job market is dead and that a lot of the posted jobs are not real. The reading on new hires and employees quitting for better jobs (right) was flat.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A purchasing managers survey from service firms in Texas showed another drop in activity (left). Prices of houses in big metropolitan areas keeps rising according the latest Case Shiller numbers (right). If you are lucky enough to own a home in one of these cities you can borrow a bit more against your equity to trade NVDIA. If your children are trying to buy a place to be near you they are out of luck.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The markets are connected. Economic news moves interest rates and changes expectations of where those rates will be in a few months along with the odds of the Fed lowering the Fed Funds rate for overnight lending. Last time I posted the chart of 10 year and 30 year rates along with a comment that they were above the level that sparked a sell off in 2022 but because stock market traders thought they could earn more than 5% they didn't care. The Thursday before the last update the stock market sold off so my additional comment was that if we had a few more days of decline, rates would begin to matter again because the dream of making more by trading than the cost of borrowing the money to trade would fade. My sense is that we are near the end of that dream.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above are six graphs highlighting the horsemen of the current apocalypse. The Mag 7 are now more concentrated into the Mag 4 and of those 4, NVIDIA is the driving force with the others being the biggest customers for NVDIA's $40,000 AI computing chips and software. After announcing a 10 for 1 split, NVDIA took on meme stock like characteristics with hundreds of thousands of retail investors buying a few shares and massive call option purchases that forced dealers to buy the underlying shares to hedge their sales of naked calls to speculators. Rarely has the money of the wealthy been this allocated to stocks and concentrated in such a small cluster of names. Things like this happen when there seems to be no alternative and all logic points in one direction. In 2004 and 2005 all logic pointed toward real estate. In 1998 and 1999 investors who embraced anything dot.com made a fortune. Everyone knows that a market driven by a small group of names is an unhealthy market but they keep going up. The wealthiest 10% own most of the stock market and the baby boom generation makes up most of those. We (I am one of them) know that Social Security is likely to fail and that at some point government bonds will default so liquid, private (non-government) assets are the only place to maintain wealth. Younger people are not confident in being able to get ahead (see employment graphs above) and are depending on markets, meme stocks and sports betting to provide a financial future. The whole edifice looks fragile but betting against it has been a loser. I thought NVDIA was cooked $400 dollars ago.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passive investing is very popular with many investors in index funds that track a popular measurement of market performance. With a few tech stocks dominating, the NASDAQ 100 is the winner because its weighting is most oriented toward the gainers. The S&P 500 is next for the same reason. It is the most popular index used in passive investing. The Dow Jones Industrials have less of a weighting in the winners and you can see the difference in its price path. The more broadly based NYSE Composite is trading at levels seen in March.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If your portfolio is indexed toward mid-cap or small cap stocks then your performance is relatively flat over the last few months. The Russell 2000 is supposed to do well if the economy is strong but it peaked in late 2021. The rally since October is only a partial rebound.

Wall St. has different narratives for why the rally will continue. Going into this weekend, the "robust economy" story looks in doubt. The "Fed has to cut rates" is iffy. "When stocks go up a lot in the first 100 days they tend to do well the rest of the year." is still in play but one bad week at the track will spoil that reasoning. The survivor is "AI will lift all boats." But only a few mega yachts are rising with a limited tide, concentrating a huge amount of capital in a narrowing group. Bulls will say that if this group begins to falter, money will spread out into laggards but did that happen in 2007 after the real estate cycle ended or after March of 2000 at the end of the dot.com bubble? No, everthing fell, but maybe "it is different this time." We will see.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last week, the Dollar broke a trend line but there was not a lot of follow through. After the jobs report on Friday, it rallied. To the right is a longer term graph of the value of one Euro with some lines drawn in. It could be that the Euro is making a long sideways contracting pattern. If the proportions are typical it will break to the upside (red lines) sometime in July or August or the down side (blue) a month later. The Dollar would do the opposite.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Are commodities "telling us something?" Or are fits and starts in some commodities just another sign of the speculative times with traders frantically jumping on anything that crosses a series of moving averages, hoping to find the next NVDIA and retire early? Last month the big winner was copper. Articles about shortages and how the rally was just getting started were everywhere. Then it hit the skids. On the upper right is a seasonality graph from Sentimentrader.com. Many commodity oriented seasonality graphs look similar with lows in the late June to early July time period. These graphs are very popular so many traders will try and front run a low and buy early.

Directly to the left is a chart of DBC, the popular commodity tracking ETF. Last week it fell below its 200 day moving average. The recent move up has the right look to it. I am hoping that it follows the seasonal pattern by pulling back a bit more into late June then starting a stronger rally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I am getting worried about the energy complex. Crude Oil has been telling us that the world's economy is not as strong as advertised. I hope I am wrong in seeing the current sideways move as a setup for another plunge. Last week, prices got over sold enough to spark a rally. Domestic inventories (aside from the Strategic Reserve) are sitting at around 4% below the five year average for this time of the year. The nations' oil refineries are operating at 95% capacity so they are sucking up the crude and churning out gasoline, distillates and other specialty fossil fuel based things at near record levels. Gasoline (right) was also over sold enough for a bounce. Inventories are around 1% below the five year average.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On the left is a six month chart of heating oil futures, a proxy for distillates in general which includes diesel. It bounced late in the week with oil and gasoline. If the economy was roaring, demand for diesel would be better. Inventories are at around 7% below the five year average, an improvement from down 14% for much of last year. On the right is a two year graph of Natural Gas prices. It rallied recently, from depressed levels. Traders are buying based on the predictions of a very hot summer that will lead to more use of air conditioners run by natural gas generated electricity. For some, it is also an AI play because of the immense amount of electricity used by data centers. Natural Gas has a seasonal tendency to top in mid-June then sell off into late summer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold had a dramatic sell off at the end of the week. The jobs number came in stronger than expected and the Dollar rallied a bit but the Dollar was stronger when gold was higher a week or so ago. Traders decided to take their money and run. As with copper, the number of "you have to buy" articles on gold in the financial press lately warned of at least a short term top. The red arrows mark theoretical 21 trading day cycle lows. We are in the timing band for one of them right now so it could be that we are close to a rebound. If you don't see something positive by mid-week, it will not look good for the metal. On the right is a weekly graph of gold with arrows marking 18week cycle lows. We are in the timing band for one of them now. These cycles can run short or long by a few weeks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver punished the faithful again last week, dropping more than $2 from its early morning high on Friday. On the right is a seasonality graph from Sentimentrader.com. July is usually a very good month for the metal. Two years ago I bought some silver mining shares going into July, hoping for a bounce. Both the metal and the shares sold off instead so you can't bet the farm on seasonal tendencies. If gold is approaching weekly cycle lows, silver should be setting up for some kind of bounce too.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platinum and palladium (left) are both down and between now and early July the metals have typically sold off. If you own them this is bad news. If you are a user of them this could be a buying opportunity. Commodity traders are watching China. Many things rallied this spring when stock markets in China (Shanghai Composite on the right) rose dramatically. Notice that when the rally fizzled, so did copper and other industrial items. The pull back in Chinese stocks looks like a typical correction following the first bounce off of the bottom. If it conforms to chart book perfection we should see more weakness into early July with support sitting at around the red dashed line. This would fit nicely with the seasonal tendencies for many commodities to hit a low at the end of June.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above and to the right are ETFs that track corn, soybeans and wheat. The Midwest is getting frequent rain so far this season which is keeping crop size estimates on the high side. The western plains also got additional rain recently that caused a pull back in wheat prices. Seasonal patterns in wheat are for a major bottom at the end of June. Remember, we are at the peak of a sunspot cycle which is why you are seeing stories about the Northern Lights and satellite interference because of solar flares. If the weather pattern turns dry over the next couple of weeks, these markets will spring to life.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last month I wrote an editorial piece on Starbucks. The theme was that Starbucks is a company that depends on an orderly, polite and well paid society to stay in business. People go to their shops expecting to mix with well spoken, educated, socially conscious fellow coffee drinkers willing to pay up for a latte made from "responsibly sourced" ingredients. The problem with Starbucks isn't just the high price of coffee. It is that the policies that their clients vote for lead to unsafe streets, bums hanging out in their stores and junkies shooting up in their bathrooms. This is the story of our times. The policies favored by our suburban well educated voters create a world that they would rather avoid.

 

 

 

 

 

 

 

 

 

Let's end with some good news. To the left is a bar chart showing acres of forests burned by wild fires in the U.S. over the years. Last year was one of the lowest in a while. When the acres are high, environmentalists say that climate change is causing catastrophic weather conditions and the wild fires are evidence of this. When the acres are lower you don't hear much. There is nothing wrong with being concerned about the environment. When I was growing up in the 1960s and 1970s there were many rivers that were severely polluted and beaches near urban areas where it was unsafe to swim because of raw sewage. Nearly all those places that were off limits have been cleaned up. The Charles River in Boston near where I live is one example. If you go to a Bruins hockey game and they win you are treated to "Love That Dirty Water," sung by the Standells, a hit in 1965. It was a reference to the Charles.

If you are interested in environmental issues I suggest that you read, Apocalypse Never by Michael Shellenberger. He is a life long Democrat and environmental activist. The book is a great read and extremely informative on the history of fossil fuel development and how it evolved, producing today's wealth. Did you know that the first plastic was invented to win a prize from a major ivory dealer? Tens of thousands of elephants were killed each year for their tusks. Ivory was used as a decorative item in all kinds of things. The dealer wasn't worried about elephants. He was worried about the high price of ivory. Plastics replaced ivory, saving thousands of animals a year. It also replaced tortoiseshell items for which hundreds of thousands of tortoises were killed. It is all in the book. Shellenberger is concerned with the religious apocalyptic turn that environmentalism made that is anti science and anti human. Again, read this book.

 

 

 

Best Guesses -

Stock Market - I thought we would see more selling into early June and aside from NVDIA and the Mag 7 we got it. The economy is slowing down and Friday's jobs report was misleading. Investors are finally focusing on the economy which is the real driver of future profits. In the past, bond market rallies were good for stocks. We could be starting a time when bond rallies will be evidence of economic problems. I am looking for more downside.

Bonds - I thought we would get a sell off and bounce which we did. Bond pulled back on Friday because of the headline jobs number. Watch for those to be dissected over the weekend and for bonds to resume their rally.

Dollar - I am neutral on the Dollar for now.

Gold and Silver - Both were overbought two weeks ago, traded sideways and took a big hit on Friday. On a seasonal basis they should be weak into late June. The trading cycles are pointing to lows a little earlier. Everyone watches these seasonal graphs and will try and front run them.

Other commodities -June is often a weak month for commodities in general. Watch China for clues. If oil conforms to my bearish pattern it is due for a short term rally before hitting the skids. Refinery focused stocks sold off recently but the majors are still optimistically priced relative to the prices of crude, gasoline and distillates.

DBE