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
Dec 6, 2025
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 next Federal Reserve rate decision meeting is this week with the announcement on Wednesday at 2 PM followed by Chairman Powell's press conference. His remarks often move markets more than the rate decision. Most economists expect a 0.25% cut but doubt remains. Recent reads on inflation show it in the mid 2% area but some measurements of intermediate prices paid by manufacturers are running hotter than that, suggesting an up-tick in inflation for finished goods in 2026. Purchasing managers' surveys are mixed, with some positive and others negative. Official economic reports were for the month of September so the focus shifted to unemployment data. The next monthly jobs report which will be for November, comes out after the Fed decision. Below is a mix of employment data from the last couple of weeks.
Above and to the left are ADP's statistics on jobs in November. According to their payrolls systems, the economy lost 32,000 jobs. On the upper right is a graph from the Real Investment Advice website showing the correlation between ADP's numbers and official BLS releases. In any one month they can vary, but over time they tell the same story.
Directly to the right is ADP's breakdown of where the job losses occurred. Goods producers saw more than services with both were in the red.
Two other private jobs survey companies also reported weakness. Revelio labs came in at minus 9,000 and LinkUp had a loss of 5,000 in October.
Indeed, the big job posting website is showing a steady decline in job postings, confirming the "no hiring" theory. There are lots of articles saying that recent college graduates from good schools are not finding employment. On the right is a graph tracking "Warns Notices." These are legally required notifications of large layoffs that will hit in the next few months.
Analysts looking only at private sector sources are sure that the Fed will cut interest rates at next week's meeting but other data is not as bad. Some regional Fed surveys show just the opposite with new orders expanding and hiring intentions rising. Above and on the left is the weekly New Claims for Unemployment Benefits data from a couple of weeks ago which fell to 216,000. On the right is this week's Claims Data which fell to 191,000 and was for the holiday shortened week. A peek inside data shows the possibility that California didn't report their new claims for the week. Continuing claims are still in the 1.9 million range.
.
My theory is that the biggest economic issue for next year will be refinancing existing debt. I showed the left side graph last time. The right hand chart is new and shows our budget deficit for this year. The number includes the roughly 30 billion per month from tariffs. October came in at 284.4 billion. With the month having 21 business days, that means borrowing an average of 13.54 billion Dollars per day. To be fair, September showed much better numbers with analysts saying that some of the spending was pushed into October. Suppose we average it out at half that number. That is still a borrowing need of 6.77 billion Dollars per day. China faces a similar problem and all of this comes at a time when trillions of dollars of loans taken out 5 to 7 years ago, when borrowing rates were much lower, will have to be rolled over. This is taking place all over the world.
The left side chart shows that $0.24 of every $1 from taxes goes towards paying interest on current debt. Recently we saw huge corporate bond issuance to finance the build-out of AI data centers. An article on Zerohedge.com on Friday claims that "OpenAI Faces $140 Billion in Losses Before It Turns $1 in Profit." What happens to that debt and who will refinance it? Friday, Netflix announced that it is acquiring Warner Brothers for 72 Billion Dollars. A consortium of banks is happy to lend the 72 billion. My point is that in both the public and the private sphere, the burden of new debt coming to market, refinancing old debt and associated interest payments will make the world's financial system more fragile. Governments will compete with each other for borrowable funds as will companies trying to roll over their debt and those seeking money for new projects. With interest rates higher than they were 6 years ago, interest payments will suck more money out of governments and businesses. The response of some is to believe that owning gold or silver will protect them, however, history shows that when governments are desperate, they sell any asset they can to stay in power and when you need to sell your gold to meet expenses, you neighbor is often in the same situation, lining up at a coin shop where the owner ran through his lines of credit an hour ago and is done for the next few days.
Two Important things to watch next year - #1 - Availability of Credit and its price.
Our two indicators of tightness in the repo market did better by week's end. The Secured Overnight Lending Rate fell into the current target range of Fed Funds and the MOVE Index which tracks bond volatility fell a bit.
The orange line on the graphs above shows how the yield curve on U.S. Government debt finished the week. The left side chart shows the very short end of the curve and the one on the right carries it out to 30 years. With overnight rate cut expectations rising, very short term interest rates fell. Maturities past one year rose! This is why the Fed cutting by 0.25% might be meaningless for rates at which businesses borrow money, including mortgages.
Above are TLT and IEF, two U.S. Government Bond tracking ETFs. TLT reflects the price path of longer dated bonds and IEF, 7 to 10 year notes. The yellow mark is around September of 2024 when the Fed first lowered overnight lending rates and it marked a high point for both sets of debt securities. Bond bears will say that the sideways consolidation on both graphs should be followed by another sell-off. Bulls will point out that hedge funds have record short positions in TLT. That means that they borrowed millions of shares of the ETF and sold them, hoping to buy them back at a lower price in the future (higher rates) and profit. An official news release on a weak jobs market or slowdown in the economy could spark a brief but violent short covering frenzy that causes TLT and longer dated bonds to briefly spike higher. There is a universal belief that stocks will rally into the new year from current levels. If the market begins to fade instead you could see a shift in investment allocation from stocks to bonds which would also spark short covering.
LQD tracks investment grade corporate bonds and has a dividend yield of 4.41%. JNK tracks junk bonds which are the bonds of companies with a lower credit rating and therefore, higher borrowing costs. It's current dividend pays around 6.57%. Both have done better than longer dated government bonds. Same analysts will say this is because the debt issued by companies with good cash flow is safer than the government. Others will point out that in times of high confidence, investors take more risk. You can see that in the price pattern of JNK which trades more in line with stocks. I know that most readers don't pay much attention to rates and bonds but in a world that needs to refinance trillions of Dollars of debt, the availability and allocation and rate on borrowable funds will be a big issue next year.
#2 - The trajectory of Data Center Technology
The world is betting billions on AI and its current technological delivery form which is massive data centers that require acres of land, huge amounts of electricity and lots of clean water. Earlier in this update is a graph showing the nonresidential investment going into data centers versus everything else. All inputs for data centers went up in price including copper. Utilities were thought to be a major beneficiary but lately, the narrative changed from using existing power plants to data centers having their own small gas fired or nuclear plants so that electricity prices don't spike higher for residential and non-data center businesses.
In November news came out on two new technologies. I covered WAFERS in a previous update. These are processing circuits that are much more efficient that Nvidia chips, require far less space, less energy and less cooling equipment. News on them spread on Nov. 28th and it has been downhill for Nvidia since then. Over the last couple of weeks more news came out on Google's Tensor Processing Unit (TPU). Nvidia's chips are a general purpose CPU that work very well with data centers. Google's TPUs are custom designed for data center use only. They need less energy and space to do the same work. Google is not making them available to competitors for now. You can see the recent divergence between Nvidia and Alpahbet, Google's parent company. Microsoft and Amazon are reportedly working on their own circuit designs that will also be more efficient. Above and to the left is a picture of a 1990s cell phone and to the right, the price path of Fermi, a publicly traded company that is building a huge data center park in Texas, with its own power sources. In my lifetime, technology constantly made things smaller, more powerful and more efficient. Are the current trillions in investment and spending building the future or something like the 1990s cell phone that will be technologically dated by the end of next year? If so, then what happens to the future value of today's current investment focus? Fermi's price action shows that others are worried about the same thing.
AI and its build-out are also at the center of our government's industrial policy. The Trump administration sees AI as a strategic tool in worldwide competition and wants to be #1. So, even the government is caught up in data center frenzy. Capitalism and free markets are deflationary. Over time, if left to competitive forces, things get cheaper. This will include the price paid for AI. Analysts are already pointing out that there is no logical path to data center profitability in the near future with current AI pricing. During periods of high confidence, investors are willing to bet on things with longer term future returns but technology has a strong track record of quickly improving so that today's winning bets are quickly eclipsed.
On the left is picture of a WANG word processing unit. Everything there, was built to do what WORD does now. It replaced IBM Selectric typewriters in the 1980s. WANG made millions off of these state of the art units because every office needed one. A single secretary could now do what a group of them did a year earlier. WANG was based near where I live in Massachusetts. It hired thousands of workers and built two high-rises 20 miles north of Boston. WANG also rebuilt a theatre in downtown Boston which was named the WANG Center. The company no longer exists and the theater's name changed too.
Summary of my two things to watch for next year -
#1 - The stock market runs on the ability to borrow lots of money cheaply. Because of the refinancing demands over the next few years, credit conditions are likely to tighten. If we a get war, it will be even worse. This will mean a more difficult path for stocks.
#2 - If processor technology improves than the billions currently poured into data center technology will be outdated along with the projected demand for everything associated with the data center build-out
Analyst who pay attention to credit market conditions say that Bitcoin is now the most sensitive barometer of liquidity. Many traders believe that it is a leading indicator for the stock market and place bets on stocks and leveraged products on a day to day basis depending on what they see Bitcoin doing. The small rebound over the last week resulted in lots of news about how Bitcoin will reach new highs. Relative to the decline, the bounce looks very small and more like a pause before more downside action. Gold is thought to be the most sensitive commodity for credit market conditions. Every analyst on TV says that gold is going higher and if you only listened to them, you would not know that it hit its high on October 10th. If you looked at the gold chart without knowing all the hype surrounding gold, you would be cautious because an initial decline, followed by a sideways to up move is frequently followed by another sell-off. even if it is in the context of a larger correction.
Earlier in the year I wrote that when gold nears a top, everything that can be associated with it rallies too. At the time, silver, mining stocks, platinum and palladium were lagging. Since then, they caught up. Optimism over a market often peaks after it hits a high, sells off then rebounds towards the previous high. Silver is the chief beneficiary of this optimism with mining stocks a close second then platinum and palladium. My worry is that even if gold eventually goes higher, the correction might run deeper and take longer to complete. Silver, in particular is vulnerable because optimism toward the metal's future is about as high as it gets.
Above on the left is a graph of gold with the daily percent change in the value of the U.S. Dollar added. On the right is gold, priced in Yuan, the currency of China. The rally that started in August was preceded by a classic contracting triangle on both charts. If you are a true believer in Chart Mysticism, you know that these forms are followed by a final burst higher then a pull back into the range of the contracting triangle. Critics can properly argue that real world conditions are more important than chart theory and gold will never get back to July's levels. This argument could also be an expression of the current positive sentiment around gold. As a fan of chart patterns I am more cautious on gold than most people.
To the left is a graph of the Shanghai Composite. A month ago the financial press was full of stories on the big rebound in China. Last week there was more trouble reported in their real estate sector which is not yet responding to the huge monetary stimulus which includes the central government taking on more debt to bail out regional governments that are impossibly indebted. Statistics on exports and imports showed a drop in both so the real economy is not painting the same picture as their stock markets. Many gold fans believe that China's buying of the metal is the reason why gold is up and will continue higher. If China's economy falls farther into deflation and credit markets around the world tighten, followed by social unrest, do you think that they won't sell some gold to raise cash to put into the hands of citizens and restore stability? In a crisis, every asset is sold.
If you are a fan of the commodities super-cycle and believe that all commodities will outperform, a sell-off. in Chinese markets will go against this so watch the path of stock markets in China.
The Dollar continued its sideways trading. It is difficult to know if it finished a large correction following its 2022 top or if it is consolidating for another sell off. The big investments coming into the U.S. are a good sign for the Dollar. Economies that are attracting wealth tend to have stronger currencies. Some Dollar bears like to talk about the petro-Dollar and oil moving away from being priced in Dollars. Oil accounts for only around 4% of world trade. The big event in the currency market is the upcoming rate decision in Japan. Lately, interest rates on longer dated Japanese bonds rose, making them more attractive. Trillions of Dollar worth of borrowing that flows into the financial markets takes place in Japan because short term interest rates are low relative to U.S. rates and the currency has been weak. This means that when Dollars are converted back to Yen to roll over the loans, it takes fewer Dollars to repay the same amount of Yen. In August of 2024, it looked like the Bank of Japan would shift their policy. Rates rose and the Yen suddenly jumped in value (fewer Yen to buy 1 Dollar). Stock markets around the world flash crashed as big hedge funds sold to raise cash and get out of their Yen based loans. The markets are worried about the same thing happening now, so watch the Yen.
Oil analysts say that there will be a big surplus next year and lower prices. With peace talks between Russia and Ukraine going nowhere and Ukraine doing its best to take out Russia's energy infrastructure, traders are on edge. Many cycle watchers are predicting more war and social unrest in 2026 and 2027. Fears of this happening are keeping oil from falling - so far. On the right is XLE, the big energy ETF and Oil. Buyers of companies involved in the exploration, production, refining and distribution of energy are extremely confident of higher prices and good margins without a lot of corroborating evidence from oil. The red square marks a point when oil was higher and expectations about the shares was less positive.
One of my favorite commodity dogs came to life recently as temperatures plunged in the northern part of the country. UNG is an ETF that tracks domestic natural gas prices. The yellow zones cover December through March over the last few years. 2022 was in the middle of the fracking revolution with big increases in production. Natural Gas bulls point to more LNG export capacity over the next couple of years and increased demand for gas fired electricity generation due to AI. Bears talk about the numerous big gas pipelines that will unleash natural gas from the Permian Basin where it is a by-product of oil production. This increase in supply is more than enough to offset projected demand. On a worldwide basis Qatar is also ramping up production to replace Russian supplies. Over the next few weeks it is all about temperatures. Early next week is supposed to be cold but I see a mix of temperatures after that with some days starting in the teens and others in the 30s. Russia and Ukraine are both big wheat producers so a peace deal would not be good for wheat prices. Ultimately, wheat is a weather market and needs some poor growing conditions. We had string of good crops but history shows there is always a bad year out there.
Two weeks ago the markets looked ready to bounce and they did. They are approaching previous highs with commentators confident that the Santa Clause rally will continue. They say that corporate buy backs and year end portfolio window dressing will drive the averages higher. Going into this weekend, the slow stochastic oscillators are approaching the high end of their ranges. Usually, a better entry point follows.
The tech sector is also up but less so than the broad market. AIQ, the ETF that tracks AI stocks is also lagging. Analysts say that we are getting sector rotation out of tech and into other companies that will benefit from the build-out in the AI infrastructure, including smaller companies. If new technology makes huge data centers unnecessary, the theme of buying beneficiaries from the build-out will also be gone. Until this becomes very apparent, Wall St. will hang on to the data center story. Given the tidal-wave of profit driving investment from the current narrative, no one wants to think about what could go wrong.
Stocks are not cheap. They are priced for good things to happen over a long period of time and most of that has to do with AI, data centers and visions of what other sectors will profit. On the right is the graph of 2007's market that had an October high, late November low then a rebound. It ran out of steam on Dec. 11th. This Monday is the 8th.
Best Guesses -
Stocks - I am in wait and see mode. There is much about the data center story that doesn't make sense. This includes the energy and water needed and the skilled worker shortage to build them. None of the three are available now. History shows that things get smaller and more efficient. Will data center dreams look like the 1990's cell phone or the WANG processor a few years from now?
Bonds - Longer term rates are not cooperating with Fed cuts. The huge short position in TLT and bonds makes me think we could see a quick short covering rally but after that, the competition for borrowable funds should keep rates elevated. All the investment in data centers could lead to a contraction in liquidity if new technology emerges showing that the billions raised are at risk.
Dollar - The world needs Dollars to run. I expect it to remain firm. Dollar based stable coins only make it more attractive.
Gold and Silver - I am neutral to bearish on the metals for now. Silver in particular is at a fever frenzy of bullishness and has a history of crushing its fans.
Commodities - We need something better going on in China to get better prices across the spectrum of commodities. Now, we have to watch the data center narrative too.
Oil - We are in a "war vs glut" kind of market. Seasonal lows are due before month's end.
Unneeded Commentary - Unemployed College Graduates become trouble makes.
All the long-term cyclical studies of the rise and fall of economies are done on agrarian societies. That is because industrial societies are new. We can study the rise of our current industrial and technology driven times and most of us have the uneasy feeling that things will be more difficult in the future. One of the signs of trouble for agrarian societies was what is referred to as the "over production of elites." This happened after a period of growth, good crop years and expanding populations. People with more money wanted their children to benefit from their higher status and sent them to school. One of the books I read said that by the early 1600s, before their civil war, one out of 20 Englishmen had acquired what today would be additional education beyond a high school diploma. In Spain it was one out of 40. In England, that ratio would not be seen again until the 20th century. Well educated people tend to have a higher estimate of where their personal star sits in the cosmos. When economies turn down and opportunities are just not there for these people they tend to blame "the system." What upsets them most is their loss of status in a world that does not reward them. Many revolutionary movements were started by people like this. If young people who got good grades and graduated from decent colleges become discouraged, history tells us that they will join radical groups on either end of the spectrum and push for "systematic change" targeting anyone who is better off than they are. The recent New York City elections are a good example. This is one reasons I think the next few years will be more difficult.
Best of luck,
DBE