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
July 4, 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 old saying is that profit margins expand when either the government or consumers are spending. Government spending is dominated by safety net programs with the money ending up in basic consumption, retail and medical sector profits. An increasing amount goes to bondholders, many of whom are overseas. The Trump administration is spending heavily on critical minerals, defense and pushing Artificial Intelligence, hoping that productivity gains will boost the economy, raise wages, and along with it, tax revenues to reduce the deficit as a percent of GDP. This will increase confidence in lending to our government and save the U.S. from a sovereign debt crisis. The graph on the left shows the path of XRT, the big Retail SPDR ETF (blue) and the Dow Jones Industrials. During COVID, the blue line rose well above the Dow when the government sent money out to consumers. Now we have a third big spender; hyper-scalers competing to dominate Artificial Intelligence. The billions of Dollars they are pumping into the economy is going right to the bottom line of any company supplying goods and services needed for data centers while inflating the prices they pay for them. It broadens out to lower layers of vendors. Last year, 70% of private sector capital spending went into AI related things. The AI spending frenzy is driving markets higher without the consumer spending that benefits retailers. On the right is a graph showing the quarterly breakdown for non-residential spending in the U.S. economy. The blue line shows data center spending. It is amazing technology. The question is this; Billions of Dollars are going into AI. Will the revenues generated by users of AI be enough to pay back the sunk costs, interest payments plus current operating costs? Over the last month, doubts increased. First there were stories about the big platforms switching from flat subscription based plans to token based plans. The more you use, the more you pay. Then came the stories about "tokenmaxing" where companies used their annual budget in the first quarter. Managers who encouraged employees to use AI realized that they had to be more selective which means that future AI spend will be less.
This week, a study from Apollo Apollo Chief Economist Delivers Scathing Rebuke Of AI, Finds Zero Margin Boost Outside Of Tech | ZeroHedge showed that AI spend is not increasing margins for companies outside of tech firms. Then Meta announced that they are creating a cloud computing unit to rent out excess computing capacity. Did META Just Expose The First Crack In The AI CapEx Boom? | ZeroHedge The demand for computing capacity was supposed to be infinite which is why hyper-scalers are planning to spend billions on more data centers. If this is true, why does Meta have unused capacity with its existing data centers? Next came Blackstone unloading some of their data centers on Digital Realty (symbol DLR), a digital REIT. DLR owns data centers, leases out the capacity and pays investors distributions. Blackstone Sells Stake In Three Virginia Data Centers Amid Grassroot Outrage | ZeroHedge If it is such a good business, why is Blackstone selling? On Friday, Blackstone (symbol BX) announced that it is halting plans to build a 2,100 acre data center campus in Virginia. Other data centers are facing stiff opposition, some of it funded by China. China-Linked Socialist NGO Derailed $23.6 Billion In Data Center Buildouts: Report | ZeroHedge Apple is in negotiations with the U.S. Government to be able to buy Chinese made memory chips in its cell phones sold into the Chinese markets. The latest hype has been around memory chip makers with their stocks soaring. Apple Negotiating To Buy Blacklisted Chinese Chips To Ease AI-Driven Shortage | ZeroHedge It turns out that Chinese companies are making high quality memory chips, expanding their capacity and selling them a lot cheaper than Micron, SanDisk and Samsung. Our government has restrictions on Chinese hardware, forcing consumer electronics companies to pay top dollar for non-Chinese memory chips. Last week, there were reports that Nvidia is renting time on their own chips at data centers to keep prices up and the infinite demand story alive.
The equity and debt behind the AI play is in the trillions of dollars. If it starts to go south from here, will it be "Too Big to Fail" like banks in 2008 and 2009? am Altman and the other AI executives are paving the way for government bailouts. Sam Altman's OpenAI Discusses Handing Trump Admin A 5% Stake | ZeroHedge As usual, this means that investors selling now walk away with big profits and future tax payers end up subsidizing AI bailouts in the future. Gains are privatized. Losses are socialized.
Two weeks ago, we got the latest on Personal Consumption Expenditures, a measure of price changes in consumer goods and services. The blue line on the left side graph shows the headline reading which came in at 4.07% year over year. The green line is the core reading which excludes food and energy costs. It rose 0.3% in May and 3.4% for the year. The biggest factor was the service sector. Durable goods were flat and non-durable goods were down. The 3.4% number looks bad but traders were quick to dismiss it in light of the recent sell off in energy. The assumption is that inflation hit its peak with energy and will now subside. Consumers kept spending (right) with real personal spending up 0.3% for the month and 2.1% for the year. We continued to drain savings to maintain life styles.
On June 30th, the latest JOLTS (job openings for May) report came in at 7.594 million. Analyst consider this report to be an early indicator of strength or weakness in the labor market. The consensus estimate was for 7.295 million so the number was better than expected. On July 1st, ADP, the big payrolls processing company said the economy added 98,000 jobs last month (right).
New Claims for Unemployment Benefits came in at 215,00 (left), continuing the streak of subdued layoffs, despite reports of more job cuts in the tech sector. Continuing Claims (right, red line) rose a bit but are still near the low end of their historical range.
The Conference Board measure of consumer confidence was mixed (left). The response for Present Situation (green) came in lower while Future Expectations (red) rose slightly. Analysts reasoned that falling gas prices helped with future expectations. Respondents were less positive about labor market conditions (right).
On the left is a graph showing the one year percent change in prices for homes in and around the 20 largest cities in the U.S.. A year ago, Tampa was the only area with negative bars. Now, the number is expanding. The three pillars of consumer confidence are jobs, home prices and investment portfolios in and outside of retirement accounts. The Conference Board survey shows that people are worried about jobs and now, in many parts of the country, homes are declining in value. The graph on the right shows the results of two surveys of purchasing managers in the manufacturing sector. The green line is from S&P and the blue is from the Institute of Supply Management. Both turned down last month. Anything above 50 indicates expansion so readings in the 53 to 54 range are still good. The red line shows the path of hard data as opposed to surveys. Analysts are hoping that lower fuel prices help next month's numbers.
On Thursday we got the monthly jobs number and it came in at 57,000 jobs added. The consensus was for a gain of 113,000. What was surprising was the drop in the civilian labor force (right) which has been trending steadily lower. The unemployment rate fell from 4.3 to 4.2 with only 57,000 jobs added because overall, there were fewer workers. The last two months' numbers were revised lower with April dropping by 31,000 jobs and May down 43,000. How will tax receipts rise with fewer workers and AI allowing lower paid workers to complete tasks you used to have to hire an expensive specialist to do? The simple answer is that it will come from a future increase in corporate taxes.
The Labor Force Participation Rate (left) fell to 61.5% and the gap between Payrolls and actual Employed Workers widened (right). Fewer people are working but many of them have more than one job. Going into the holiday weekend, analysts reviews were mixed. The low rate of unemployment is good but if the economy was as good as advertised, why didn't it add more jobs last month. Within the data, one subset of numbers doesn't seem to make sense. Leisure and hospitality employment fell by 61,000 jobs. Usually, there is an increase going into summer vacation season and especially this year, with World Cup tourists in some big cities. We will have to wait a month to see if this series get revised higher.
The blue line shows the yield curve on U.S. Government debt going into the 4th of July. Rates rose slightly over the last two weeks despite lower oil prices. On the right is a graph of the interest rate on a U.S. Ten Year Note, the most watched debt instrument in the world. The letters label the sideways move as a contracting triangle that will lead to a final spike in rates before a significant reversal. If reality follows art, we are in the final decline before rates burst higher. The textbook pattern calls for a drop to the lower red trend-line, however, sometimes the "e" is a sideways move that hovers around the upper trend-line as shown by the yellow box.
The markets were closed on Friday in the U.S. but overseas, chip stocks recovered from Thursday's strong selloff. Behind every major boom is debt and recently, billions of debt was sold to fund the purchase of chips and future construction of data centers. Aside from the big public sales of debt, billions were raised by private credit firms. Banks might not be visible lenders for data center construction but they are big lenders to private credit and venture capital firms involved in AI. If something goes wrong, there will be defaults in unexpected places so it is time to watch the path of Junk Bonds and Credit Spreads. For years, investors have been willing to lend to lower rated creditors. As time passes and there are no major mishaps, the spread between loans to lower quality borrowers and the most creditworthy has collapsed as shown by the blue line on the right side graph. Note that lows in this spread coincide with peaks in stocks. Over the weekend, the brokerage firms and government spokesmen will be active on financial TV networks, assuring investors that the AI story is as strong as ever and that we are just at the beginning of the demand for more "compute." When asked about the growing resistance to data center construction they will respond, "We can't let China win."
On the left are SMH, the semiconductor ETF and MAGS, the big tech companies paying up for computer chips. Earlier this year I wrote that both MAGS and SMH were going up together and that this went against economic common sense. The chip company executives were boasting about their profit margins, basically saying that they are gouging their clients, the MAG7. The reason for buying the chip makers was the reason for selling consumers of their expensive products. Last month, this became apparent to other investors and the big buyers of Nvidia and memory chips sold off. Two weeks ago, Micron posted their earnings. The numbers were great and their margins were 84%. The stock rallied on the news then began to sell off. No one can keep profit margins that high for very long. Apple's request to use much cheaper Chinese chips is an example of what happens. The other memory names struggled too. High margins invite competition. Last week, Taiwan Semiconductor started a partnership with a memory chip firm to compete. World's Largest Chipmaker, Taiwan Semi, Accelerates Local DRAM Supply Chain With Winbond Collaboration | ZeroHedge All the semiconductor companies are expanding operations, often subsidized by Federal Governments around the world including ours. When does a pullback in data center construction intersect with increased semiconductor production and the resale of previously purchased chips that no longer have a future home?
For years, technology has been the leader and the market measurements more heavily weighted with those stocks out performed the Dow Jones Industrials. Last week, the Dow was the star. It's two most heavily weighted issues, Goldman Sachs and Caterpillar tend to trade with the AI story and were down but money flowed into health care. United Health is one of the highly weighted stocks in the Dow. Microsoft rallied too. Many analysts say that despite its spending on AI, earnings from other parts of the company make it look cheap at current levels. Some believe that a pull back in Cap Ex spending on AI is coming and that when Mag7 companies announce this, they will all rally. The upper left graph shows the weekly closing price of the Dow Jones Industrials and a simple RSI momentum oscillator. A high RSI reading does not always signal a major market top but it tells you that your odds of making a lot of money over the next month are limited. If you believe in buying low and selling high, the reading above .80 tells you that we are not at a low point. The upper right graph shows the daily closing price of the Dow Jones Industrial Average with the daily percent change in the price of the U.S. Dollar added. This is what a non-Dollar based investor gains from movement in the market average plus the appreciation (or depreciation) of the Dollar. The red line is a simple RSI oscillator. With this graph, highs in the oscillator often coincide with market peaks. For years, there has been a steady movement of wealth out of Europe and Asia into the United States due to fears of war, socialism and possible capital controls or confiscation if you step out of line. When invested in stocks, it tends to flow into the biggest companies that are in the Dow Jones Industrial Average. This trend could be getting an extra boost from the World Cup and U.S. 250. Visitors from everywhere are posting videos on social media with exuberant praise for the United States. One of the best soccer players in the world posted one showing him loading up his shopping cart at a Wal-Mart. Many Europeans have been fed a steady diet of negative news about the U.S. and are very surprised by the friendly, positive atmosphere here that contradicts everything they hear daily at home. Ranch style salad dressing and air conditioning are now international favorites. We could be in an atmosphere of peak positivity toward the U.S.. One of my investment rules is to never buy when an RSI reading is at the top of its range.
Returns to U.S. investors are overwhelmingly linked to the performance of the S&P 500 because of the popularity of S&P 500 Index funds. Above and to the left is a graph of the the weekly closing price of the S&P 500, its 40 week moving average and the difference between the two in purple. Red stars mark peaks in the purple line. They are not always coincident with market tops. If you go back to the "buy low, sell high" theory, the stars tell you when the climate is high. The upper right side chart shows daily bars of the S&P 500 following the March low. Red arrows mark theoretical 39 trading day cycle lows as theorized by Cyclesman.com. The next one is due in the middle of July. His next 22 weekly cycle low is timed for the third week in August. These cycle timing bands can run short or long so they are one thing to watch among many. Directly to the right is a shorter term picture of the index showing the recent sideways moves following the early June top. Chart wonks are watching for my favorite pattern, the contracting triangle or pennant formed by the a,b,c,d,e with a move to the lower trend line and "e" point now due. The textbook says that following the "e" you get one final thrust to a new high then a change in trend to the down side. If, instead, the market breaks lower, taking out the "c" point, look for a waterfall decline.
The upper left side graph shows daily bars of the Russell 2000 index, made from smaller companies. Analysts are suggesting that investors diversify into these shares as the focused government spending and data center money spreads out through the economy. If cracks in the data center story expand, one of the pillars for future earnings will evaporate. Since the end of May, gains in the index have been muted. It shows up on the RSI momentum graph on the upper right.
Around 40% of the companies in the Russell 2000 do not have operating profits. The graph to the left tracks the performance of Russell 2000 stocks that are making money and those with losses. It is a sign of the times that investors are more interested in unprofitable names.
During the first Trump administration and continuing into the second, President Trump used social media or had one of his top spokesman say something positive on Sunday evening or early Monday morning to rally stock index futures. Trading in stock options that have a life of only one session has become a major factor in the first hour of trading. When the futures are higher, options traders buy millions of call options contracts, forcing dealers to buy the underlying stocks and sparking an early rally. After the initial options fueled rush higher, the market pulls back. From a technical perspective, I am watching for a change to this pattern. If the same options day traders who have driven early rallies begin to lose enthusiasm, you won't see the early bump and more intense selling could follow.
My Dollar fantasy pattern is that it traced out an expanding triangle a,b,c,d,e that is finishing which will be followed by another leg down. One problem with this trade is that the Dollar is due for a Cyclesman.com 23 trading day cycle low, next week. This goes against my grand theory. The Dollar sold off after the latest jobs number with traders reasoning that the economy might not be as strong as advertised. Much of the Dollar's strength came at the expense of the Yen. Late last week the Yen rallied slightly after a Bank of Japan spokesman implied that they would intervene in the currency market to support the Yen. They tried that last month, spending huge sums of money and it didn't work. Japan might be forced to raise rates to keep their currency from collapsing. Last time, I wrote about the carry trade that supports billions in U.S. stock and bond holdings and depends on low Japanese rates and a depreciating Yen. What will the Bank of Japan do?
Two weeks ago, gold looked like a decent play. The RSI momentum oscillator on the weekly closing price was in the range where some recent bottoms formed and we were within one of Cyclesman.com's 21 trading day cycle lows. Gold had an overnight sell off that sent it lower for a few hours then it rallied strongly. Cyclesman.com has an 18 week cycle low due around the 3rd week of July along with the next 21 trading day cycle low. If we pull back into that time frame, it could be another set up for a low.
Silver was in a similar situation with a low momentum reading on the weekly closing graph. It also tends to follow the same cycle timing bands. The most bullish interpretation of the daily graph is that it completed an A,B,C downside correction and is now poised to rally. With the 18 week cycle in gold due to bottom later this month, we could see another dip lower. These cycles are approximate and sometimes bottom early or late. A low three or four weeks early would not be out of the ordinary. Bears will point out that the action following point A on the right side graph could be part of a larger sideways consolidation within an overall declining phase and that any rally is temporary.
Platinum and Palladium sold off in sympathy with gold and should benefit if gold rallies. These metals often have seasonal lows in the fall. On the right is a graph of Coreweave and CPER, the copper following ETF. Copper bulls say that data center construction demand for more energy infrastructure will drive prices much higher. Coreweave owns "compute" and rents it out. It's price reflects investors' worry or enthusiasm about future compute and data center demand. Copper highs and lows are influenced by the same concerns. Last week I watched a podcast with a commodities analyst who said that copper demand is much higher into the foreseeable future and that lack of investment in finding and developing deposits over the last 20 years means that shortages will persist with much higher prices. Everything I have read and watched confirms this, however, predictions of forever shortages often coincide with market peaks. Forty percent of the world's palladium comes from a single mining district in Siberia, under the control of Russia. That same mining complex supplies 10% of the world's platinum with most of the rest coming from S. Africa. I continue to believe that we are in a period of insecurity and turbulence. Countries without their own supplies of natural resources will try and lock in future supplies as we are now seeing with tungsten in Kazakhstan. Others will hoard when the price drops and hoard more if prices begin to rise. In these environments, it pays to tie up capital in inventory, especially if it is a commodity that is vital to your company's basic operations.
Last week, Samantha Dart, head of Goldman Sachs commodities research, predicted an oil glut in 2027 with approximately 3 million barrels per day surplus capacity. Morgan Stanley's commodities department lowered estimates for oil prices too. The upper left side graph shows weekly West Texas Intermediate Crude prices going back to the 2008 high along with Goldman Sachs predictions near inflection points. I added their most recent one to the right side of the graph. The upper right graph shows weekly bars with my favorite a,b,c,d,e pattern. As the textbook predicted, it led to a thrust higher then a reversal. Usually, the thrust takes out the previous high. It could be that this one failed or (and hopefully not) what we saw was the first wave of a five wave advance. In this case, we are near the low of wave 2 with a powerful wave three higher to follow. I consider that to be a very low probability event. The lower left side graph shows the drain from our Strategic Reserve which went straight overseas to keep the price of oil from skyrocketing. Analyst say that it was our exports and China dipping into its Strategic Reserves instead of buying more Crude that limited oil's advance. Every non-producing country that has storage or can build it, will be re-filling and adding to storage which will increase world-wide demand far above rates of consumption. On the lower right side graph is a graph of the daily closing price of West Texas Intermediate, using the most active futures contract and a simple Relative Strength momentum oscillator. Some previous low oscillator readings did not mark lows in price. I would not be surprised if this one does.
Traders are assuming that the Strait is reopened for good and that any problems will be quickly resolved. This weekend starts the funeral ceremonies for Ayatollah Khamenei. To the right is an Iranian artists interpretation of the event. It is estimated that between 15 and 20 million mourners will turn out. This is going on at the same time that U.S. TV shows tall ships and military fly overs in NY City for our 250th and fans are having a great time drinking beer and watching World Cup games in giant stadiums in the U.S., the country that worked with Israel to kill the Ayatollah. Have you noticed that often, there is violence after the funeral of a popular rapper or politician? Is it likely that funeral orations will encourage peace and reconciliation with the United States or is it more likely that we will see a replay of "Friends, Romans and Countrymen, lend me your ears" from Shakespeare's Julius Caesar. The real life civil war that followed the killing of Caesar lasted two years.
I am a big fan of the work of Martin Armstrong. You can find his blog at Armstrongeconomics.com and subscribe to more of his work. His computer tracks cycles going back thousands of years and was correct in warning that the cycle of war would turn up in 2014. It also flagged Ukraine as the likely hot spot. He talked about it at a conference in 2011. His computer also predicted an uptick in the pandemic cycle for 2019 into 2022 and another one for 2027. One of his tools is his Economic Confidence Model. It had a cycle turning point last week on July 1st. Major events tend to take place near these dates with the exact day of the 20% 1987 stock market crash being one of the most famous. Some markets tended to peak or bottom around these dates and major geopolitical events took place. Some of them seemed minor at the time but in hindsight, ushered in major changes that effected the world-wide economy. What worries me is that his cycle of war model turns up in July and keeps ramping up into 2027, warning that forecasts of oil gluts and good times ahead might be premature.
Best Guesses:
Stocks - I am still sitting on the sidelines for now. WD Gann, the great trader from early in the last century said that the 4th of July is one of the most frequent times for a change of trend.
Bonds - Will Armstrong's turning point signal a slowdown in the economy and was the weaker than expected jobs number on July 2nd the first indication? If so then government long bonds will do well.
Dollar - My favorite expanding triangle interpretation is holding but with a cycle low due this week it is in danger.
Gold and Silver - We got an initial rally. Let's hope it can hold up for a few weeks. My worry is that lately, metals traded with stocks and if stocks run out of steam, they could drag metals lower with them.
Commodities - Commodities tend to do well in times of war. Armstrong's war cycle model turns up this month. Wheat's seasonal cycle bottoms around now.
Oil - Physical supplies of oil are low everywhere. I am still looking for a bounce.
Best of luck,
DBE