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
May 10, 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.
Trade war news or things that the President and Treasury Secretary said dominated short term trading over the last two weeks. After the "Liberation Day" crash, analysts who hate President Trump were predicting a recession and claiming that stocks were in a new bear market. Many lamented the fate of investors despite those investors composing a group that they usually vilify.
It is a month later and the stock market is back to pre-liberation day levels. You don't hear much about a recession and trade talks are scheduled for this weekend between the U.S. and China.
We had the usual reports on employment, economic activity and inflation. Here are some of them.
The left side graph shows the record of new claims for unemployment over the last four years. The green line is seasonally adjusted. This week's number was 228,000, in line with all the others. The right side picture shows Continuing Claims (red) and the four week moving average of new claims. The Continuing number came in at 1,879,000, under the closely watched 1.9 million. Neither chart is hinting at a recession - yet.
On Friday May 2nd we got the tally for job creation in April. Before the data, pundits predicting a "Trumpcession" were calling for a number under 100,000 and praying for a negative reading. After all, the stock market had just crashed a few weeks ago. Instead, the number came in at plus 177,000 (left). The upper right side chart shows the month by month record of government jobs. DOGE is taking its toll. Directly to the right is a graph showing job gains by native born workers (green line) versus illegal immigrants. Now that the government is cracking down on illegals, more jobs are going to native born workers. Some economists label this as "inflationary" because illegals usually work for less money than citizens. Yet, don't social activists demand a "living wage?" Is a living wage only OK for foreign workers?
GDP came in slightly negative (left) and critics had their moment, blaming the new administration. But, when the components were published they showed that imports, that are subtracted from the reading, led the downside. This was due to businesses ordering things ahead of time to avoid tariffs and the massive flow of gold in to NY to avoid tariffs and European capital controls. The other negative component was Government as shown in the employment charts above.
The Personal Consumption Expenditure Index came out on the 30th (left) and fell to an annual rate of 2.6%. Analysts predicting "Trumpflation" were disappointed. Analysts say that it is closely watched by the Fed as a measure of how inflation is affecting consumers. Lower inflation is good. The right side graph is from the Real Investment Advice guys who have some very informative free newsletters. Over time, the rate of change of the S&P 500 correlates well to the PCE reading. Those of us wishing for low inflation should remember that it is often driven by less spending and consumer spending is 70% of our economy.
The latest data for consumer borrowing is for March. The left side picture shows a small increase in credit card borrowing. The right side graph shows auto loans in red and student loans in blue. Borrowing for buying cars flattened out over the last 7 months. New loans are still being transacted but there is no real increase in the total loan amounts. Student loans rose over the last four months.
We are a month past "Liberation Day" when stock markets around the world crashed following President Trump's proclamation on tariffs. Since then, stocks erased the losses. Retail investors in particular saw the decline as an opportunity to buy with institutions being more reluctant. Two weeks ago I was in no hurry to buy because momentum oscillators were at the high end of their range. The same is true going into this weekend.
Analysts who look only at market behavior say that the kind of buying we saw over the last month, which lifted nearly all shares, correlates well with past markets when stocks were higher 6 and 12 months later nearly all of the time. Fewer pundits are talking about a recession and after the tariff agreement with the United Kingdom, there is optimism going into this weekend's discussions with China.
A month ago, my favorite "OK to buy" long term indicator triggered when the S&P 500 closed way below its 40 week moving average. Because of the subsequent rally, the odds of winning trades are lower going into this weekend. My theory is that we will see back and forth, difficult to trade markets for the next year. Analysis and opinions regarding President Trump will follow prices. After a few good sessions you will hear good news. When we hit a rough patch it will all be bad.
Most ETFs and stocks have a pattern similar to S&P 500 with prices edging back to where they were a month ago. For some reason, the 200 day moving average is the standard measurement of an up or down trend. When the S&P 500 trades above it, we are in an uptrend. When it is below the average, portfolio managers are less aggressive. We approached it last week.
The slow stochastic oscillator is still in over bought territory. Momentum traders say that when the market stays over bought for this number of days, it is a sign of strength and future gains.
On the left is a graph of the Dow Jones Industrial Average with bearish notations. The sell-off is labeled as a five wave decline that features an extended 5th wave. The textbook says that after a five wave decline, a three wave, upward correction should take the market back into the range of the fourth wave. Going into this weekend, we are close. Bears are looking for a bit more of a rally next week and a poke above the 200 day moving average that gets everyone excited just as the bear market rally peaks. The right side graph shows the Dow Jones Industrials with the daily percent gain or loss for the Dollar Index added. For non-Dollar investors, the loss from being in Dollars and the U.S. stock market is greater.
On the left is VEU, an ETF of global stocks minus the United States. Money managers did not reject stocks. They moved their money away from "overvalued" U.S. markets and into "undervalued" markets elsewhere. This coincided with a strong decline in the U.S. Dollar. The next 23 day cycle low for the Dollar is in a couple of weeks. My guess is that the rally following that low will take back a good chunk of the decline.
The NASDAQ 100 has the same look with a strong sell-off followed by a partial rebound. Going into this year, much of the world's wealth was positioned in the Magnificent 7 big tech stocks in the U.S. It is easy to label the decline as a five wave, change of trend sell-off followed by a counter-trend a,b,c.
Analysts who follow the evolution of technology say that hardware leads then software follows. Last year we saw NVDIA, ADM, TSM and other hardware makers do well amid the AI craze. Over time, competition lowers margins for hardware suppliers and the focus shifts to applications that help users make money. I see more and more advertising on TV from software companies promising to revolutionize your business if you buy their AI software. SMH is an ETF of chip companies. IGV is an ETF of computer software companies. During the recent rebound, software was a clear winner.
Smaller companies are laggards going into this weekend. SPSM tracks the S&P 600. The Russell 2000 also follows smaller businesses. Both groups are more sensitive to short term interest rates because it is thought that they depend on lines of credit for much of their financing. Over the last year there were times when analysts said that value stocks and small caps would outperform their larger counterparts. So far, we are not seeing it.
No one expected the Fed to lower overnight lending rates last week and the Fed matched expectations by doing nothing. The current Fed Funds rate is 4.33%. The rate on a 3 month Treasury Bill is 4.325%. Bond analysts say that over time, the Fed follows the rate on a 3 month Bill and usually does not move until the difference is close to a percentage point. When they cut in September, the difference was only 0.56 and in December 0.50. Many believe that that the September cut was politically driven with the December cut an attempt to show that the September cut was not just an attempt to help the Democrats. The yield on longer dated paper (blue line on yield curve graph) is close to the pessimistic levels of January with shorted dated yields doing a bit better. Above are the histories of the interest rates on 10 and 30 year government debt obligations. October of 2022 was the last four year cycle low in stocks. At that time, the market followed yields tick by tick with analysts worried that higher borrowing costs would cause a recession. We are at and above those rates now.
DOGE cut billions in expenditures but the Federal budget expanded by trillions of Dollars under the Biden administration and the "Big Beautiful" bill does little to make deep cuts and return Federal expenditures to pre-pandemic levels. Unless we see a big increase in economic activity that boosts tax revenues, the budget deficit will only get bigger. If the charts above were those of stocks they would look like consolidations before an up move. This is not good for the housing market or any other interest rate sensitive business that borrows relative to the longer end of the yield curve. Many in my generation bought their first property with 13% to 15% mortgages but the price for those properties was depressed because of the high monthly payments. Home prices are high based on a perception of scarcity and home ownership as the key to a financial future. At some point we will see prices softening and a return to their value more in line with the rise in interest rates.
Above I showed the S&P 500 graph with stars and arrows that are simple markers for when stocks are loved or dumped. The theory is that if you are going to buy something, you do so during a moment of pessimism when things look bad and everyone else is dumping. My equivalent with gold and silver are the these two graphs. The better times to buy gold are when a simple RSI momentum oscillator is close to the low of its range on a weekly chart. We are still near the highs going into this weekend. For silver I use the difference between the price and its one year moving average with green ovals marking low points and red ones the highs. There are lots of theories on why gold "has to" do this or silver "has to" do that. Some work out and others do not.
On the left is the recent trading pattern for gold. Following the high we had a sell off then an up move that can be counted as five waves. Chart purists will say that the five wave up move implies a correction then more upside action. It could be that if we get the upside action it is part of a larger correction, a long sideways trading range as shown by the purple lines. Mid May into late June is often a soft spot for gold and silver. On the right is a weekly graph of gold from 1980 when gold made a major high after Iran took over the U.S. Embassy. Short term interest rates were 20% and the world looked like it was falling apart. When gold rallied in five clear waves, traders were sure that there was more to come. After all, the chart books can't be wrong. Instead it hit the skids. I include this to remind myself that technical analysis and charts are interesting but often wrong.
Last time, I was nice to silver and worried that I would regret it. So far, it is hanging in there. The big story last week was that the gold to silver ratio hit 100. Dozens of articles speculated on what this means for gold or silver. Silver does better as a theory than a real thing. There is no reason why it has to trade at any fixed ratio to gold or Bitcoin or bread. On the right is a graph of the daily spot price of silver in NY with a simple RSI momentum oscillator below. History shows that you are better off buying when the red line is near its low point. A few bad days at the track next week could get us there. You can replicate this chart on Barchart.com with July silver futures then choose a Standard Indicator and go to Relative Strength Index.
Last time I wrote about the long term cycle in mining and that we are at the point where no one wants to be in the platinum/palladium mining business. Last week, spot prices moved above their 200 day moving averages. We have seen this before and it didn't lead to much. If we get a good move up, analysts will point to the long sideways phase and call it an obvious "base" before an advance. If instead, we get a recession and prices move lower, the same analysts will call it a "consolidation" before another sell off. I favor the "base."
On the upper left is a daily graph of Crude Oil in NY. The classic bear market trading pattern is for an item to break a major support level then trace out an "N" before heading lower. On the right is a close up of recent trading. The "N" does not have to be perfect so an overshoot or undershoot of the second leg up is common. To the left is a graph of XLE, the big energy ETF and oil. The red rectangle marks a point when oil was higher and energy stocks lower. This warns me that if we don't get a quick rebound in oil, energy patch companies are likely to have a rough time of it going into the summer.
Violence is escalating around India. Pakistan is hitting them on one side and China is using this to increase attacks on them over disputed territory in the north. It is only "disputed" because China wants it. There are political factions in Bangladesh that want to take over parts of North East India near their border. Bangladesh is aligned with Pakistan and China. The U.S. and Europe would help India with military supplies and satellite technology for targeting. None of the four countries are big oil producers but war leads to more energy consumption. Islamic elements in the Middle East could paint this as a broader struggle between Muslim and infidel countries so you never know where it could go. Hopefully, things will die down after each side takes its pound of flesh.
Above are two ETFs that follow baskets of commodities. DBC is slightly more weighted to agricultural commodities and GSG to the energy complex. DBC shows the last four years and a 200 day moving average. In the current tariff war environment no one really knows what the demand for all kinds of commodities will be. The right side graph goes back to the glory years of China spending massive amounts of money to build out its infrastructure but some of that included cities that are still relatively empty. Last week, China turned on the monetary spigots and stopped publishing some economic statistics in an effort to boost domestic demand and hide the damage from tariffs. There is evidence that some shipments are going to Canada instead so that if we reach a quick agreement with China, they can quickly reach their destination in the U.S. Other parts of the world are also seeing an increase in Chinese imports which will put downward pressure on prices. Any good news on negotiations with China should help commodities.
Above are monthly price bar charts for four exchange traded grains. My rough rice graph only goes back five years. All are closing in on the lows of the last decade. Many cycle analysts say we are in a once in 80 to 100 year generational cycle of turmoil that often involves a war, disruption of supply chains and periods of high food prices. I have been slowly adding to a position in WEAT, an ETF that tracks wheat prices as wheat bounces along its lows. Recently we got rain in the Oklahoma and Kansas wheat growing areas that saw lower than normal rain over the last few years. Wheat growing areas in Russia are experiencing colder than normal temps. Over the last five years I read numerous articles about the coming shortage in rice, a food that is the staple of billions. None of the rice theories came true - so far. Food is always the ultimate currency.
Best Guesses -
Stock Market - Recent buying interest and price action is consistent with previous markets that were nearly always higher in six or 12 months. Shorter term, I am going to be a contrarian and go with the bearish, five down, three up interpretation. That does not mean a market crash. We could poke above the 200 day moving average, get everyone bullish then spend the next two years in a broad trading range. A breakthrough with China over the weekend could prove me wrong very quickly on Monday morning. As I write there are reports that India and Pakistan agreed to a cease fire so that is good news.
Bonds - There is no serious attempt to cut back on government spending. Rates could be up and down a bit over the next month but should eventually move higher on the long end.
Gold and Silver - Same as two weeks ago - My weekly RSI is still too high and we are coming into months when the metals are usually weak. I will hold off for now.
Oil - Same as last time - Above I highlight the textbook "N." A bomb here or an attack there and it could be $20 higher overnight.
Other Commodities - Until we get more clarity on tariffs, it is impossible to know what is going up or down.
One more thing of interest - I read Martin Armstrong's blog (www.armstrongeconomics.com/blog) and subscribe to some of his services. He has a computer model that picked out weeks and sometimes the exact day of important events that moved markets. Some of these dates were at dramatic turning points such as Monday, October 19th of 1987, the day of the crash. Others were more subtle but in hind-site were the beginning of major shifts. One is coming up late next week so watch the headlines. A different computer model that he uses is predicting unusual volatility in many markets, coinciding with the second and third weeks of May so hold onto your wallet!
Remember, what is good for the future of the country is not necessarily good for corporate profits or the demand for goods and services.
Unneeded commentary - The biggest gift from writing about markets and trying to trade them is - Humility.
Why is this? Because, if you are a regular reader you know that I am frequently wrong. I write more than I trade but the trading part is very important because without it, you don't really know just how wrong you are. If you only put forth a theory about something and it doesn't work out, you can easily move on and come to a new conclusion expressing the same certainty that you had when you presented the old one. If you enter a trade based on that theory, your error hits home right away in Dollars. After a while, when you come up with a new theory, you remember just how confident you were last time when you lost money. You begin to see outcomes in terms of probabilities and your cherished theories on stocks gold or politics the same way. I read a lot of economic history while traveling and it is another lesson in humility. You find out that many of the beliefs held by large groups of well educated people were nonsense and you end up asking yourself if the same is true for you and others now.
I mention this because over the last few years, I notice that many of my baby boomer peers are setting themselves up as great judges of moral and ethical behavior, especially in the political realm. Some include moral imperatives with every email signature and constantly lecture anyone who reads their social media posts. It is the Elizabeth Warren version of life. Every day is filled with outrage and they have their favorite go-to sources to fuel their anger and pass it along to the rest of the world. What is missing is, "I could be totally wrong."
If you are over 40 and have your eyes open, you realize that there are people gifted at what used to be called rhetoric. They are great at arguing anything including politics, religion, stocks and precious metals while countering any reply with clever phrases and references to this or that statistic or study. Remember BLM days when the Koch brothers donated millions of dollars to a NY hospital? The rhetoric experts quickly came up with a logical sounding argument explaining that this was racist money. Thousands of people believed it including one of the nurses unions that led protests against accepting the cash. The Kochs had a long history of charitable contributions, just the kind of thing you would hope for from ultra successful businessmen. Many of my peers also like to argue. In fact, one has to wonder if the stimulus from arguing is more important than the point of their argument. Many are at a point in life where it seems like arguing is all they have left. When they post something, it is like a serving tennis player, throwing the ball in the air, ready to swing with all their might at anyone who dares to disagree. Many, who are better at it have a host of "connections" ready to add their own "devastating remarks" should anyone disagree. When you are with them in a social situation they throw out little zingers now and then trying to provoke someone into a fight. Many were fun people and good friends in the past but now you have to "walk on eggshells" around them so that they won't blow a gasket. Most never remember how wrong they were just a few years ago when they were ranting about Russian collusion or demanding masks and agreeing that people who don't get a vaccine should not get medical treatment. Yet, today they are ranting about "authoritarianism." If they had lost money on vaccine and mask trades like you can on a silver trade they would be less likely to be 100% certain over today's issues. Sadly, I find myself wanting to avoid them and my guess is that others do too. If there were such a trade as being convinced that you are 100% morally right in one direction or having friends in the other, I would take the friend side of that bet.
also
Some good weather news - Hunga Tonga Over? Global Temps Return To Early 2023 Levels | ZeroHedge
Best of luck,
DBE