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
March 15, 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 rampage of tariffs and counter measures dominated trading last week along with the realization that President Trump's plans are not great for corporate earnings; something you read here months ago. We still had economic statistics and here are some of them.
Shortly after President Trump took office, critics attacked him for having no plans to carry out his campaign promise to lower inflation. Last week we got the first look at inflation data for his first full month in office. The Consumer Price Index (left) rose 0.2% month over month with the annual rate at 2.8%. The Core reading (right) which subtracts food and energy was 0.227 month over month and 3.117 annualized. Both readings were lower than The Street expected.
Shelter and Rent inflation (left) continued their downtrend with year over year numbers in the low 4% range. The Super Core (right) services ex-shelter fell to a rate of 3.91 annually with the month over month at 0.21. Note that all of these reading still show higher prices but the rate of increase was below economists' estimates. If these kinds of numbers came out last fall, stocks would have been up. Now, market participants are worried that lower inflation readings are because of a recession.
The next day, the government published the Producer Price Index. The headline number (left) was unchanged month over month and up 3.2% on an annual basis. The Core reading (right) fell by 0.1% month over month with the annual at 3.4%. Both readings were better than analysts predicted.
Economists track the Producer Price Index relative to the Consumer Price Index as a rough indication of how well companies can pass their cost increases to consumers. The theory is that when Producer Prices are rising less than Consumer Prices is is good for corporate margins. The left side graph shows this measurement. It was still in the red for the month but better than last month. Finally, egg prices are coming down. Neither political party can control Bird Flu but egg prices became symbolic of the Biden administration's ineptness and were effectively used during the campaign. After President Trump's inauguration the Democrats tried to use them as a sign that Trump had no plan for inflation. I heard a chicken farmer interviewed who said that hens mature very quickly and start laying eggs at a young age. The herd can be quickly replaced.
On March 7th we got last month's payrolls number. It seems like ancient history now, just a week later. The official number was an increase of 151,000 jobs. Those anticipating a recession were looking for something below 125,000 so the number was better than expected. Average hourly earnings rose by $0.10 or 0.3%.
Initial Claims for unemployment (left) came in at 212,800 on a non-seasonally adjusted basis and 220,000 on an adjusted basis. The four week moving average (right, green line) stood at 226,000 and continuing claims stayed below the magic one point nine million level with the reading at 1,870,000
If you did not know that the stock market got hammered and you saw the collection of statistics above you would think that things were chugging along, employment was OK and inflation is headed in the right direction. Last fall, traders were hoping that unemployment would pick up a bit to confirm that the economy is slowing down and the Fed could lower short term rates. Now, the same crew is afraid of the same thing.
Two weeks ago I was worried that there could be another "crushing thrust down" the following week into one of Cyclesman.com's 39 trading day lows. I also thought that the rest of the world was becoming more invest-able which would lead to money leaving the U.S. for Europe and other parts of the world. Above on the left is a graph of the S&P 500. On the right is VEU, an ETF of stocks around the world minus the United States. The blue shaded area on VEU highlights the action over the last month when the U.S. stock market crashed. The rest of the world did OK. This doesn't mean that the rest of the world will continue to do OK. Europe rallied on plans to abandon prudent fiscal policy to finance defense spending. This was good for shareholders but bonds took a beating as European interest rates rose in response to plans to run up deficits
Last week I heard a Bloomberg European analyst say that there was a massive flow of money out of big U.S. Tech and into European banks. On the left is the U.S. Dollar Index. It fell as money shifted back to Europe while the Euro spiked higher as the interest rate differential between interest rates and equity investors hoped military spending will pull the Continent out of the doldrums. The right side graph is XLK, the huge technology ETF. The guys at Sentimentrader.com keep track of sector performance. One thing they watch is the percent of stocks in a sector trading above or below their 50 day moving averages. In truly "over sold" markets, all sectors have a large percentage of their member shares trading below their 50 day moving average. Tech is the only sector of the U.S. markets with enough of its members trading below the average to be categorized as severely "over sold." That does not mean that other sectors will not get there eventually. It is just a snapshot of things going into this weekend.
By the middle of last week, momentum oscillators on the S&P 500 and other market measurements were at levels where markets bottomed in past cycles. The vertical bars mark previous over sold conditions. Some of them were good bottoms and others led to pauses before more down side action. It is impossible to know which of these scenarios is in play this time.
In past updates I warned that investment advisors were telling clients to go "all in" on stocks. Wall Street and Las Vegas invented increasingly leveraged ways for people to put their wealth at risk and individual investors had allocated the largest percentage of their wealth to stocks ever. These are all signs of a major high but the final peak could still lie ahead as part of a larger topping process. Just don't ask the investment advisor who told you to load up on stocks for direction.
Dramatic sell offs are like plucking a guitar string in that they set up an emotional back and forth that often takes time to play out. The 1987 crash was very quick and the initial 41.7% rebound high was not bettered for a few months. The lowest point of the sideways trading that followed the plunge came 6 weeks later (31 sessions). In 1984 stocks made a pattern very similar to this year with the initial low in late February. Red ovals mark where we could be this time around going into this weekend if we trace out something similar to the 1984 pattern.
Directly to the left is what this would look like. Past markets can give us clues about today but it is important to not bet the farm on the same thing happening. After the 1987 crash and the 1984 pullback, analysts were convinced that recessions were coming with lots of blame aimed at the party in power just like now. In both cases the market ultimately moved higher. It could be that we have a larger sell off in front of us. In bear markets, surprises happen on the down side.
Bulls will repeat what I wrote above regarding the tech sector being the only group that really hit the skids. Because of the weighting of these companies in the major averages the tech debacle made "the market" look worse than it was. What we are seeing is a rotation into other areas of the market that will eventually power the averages to new highs. This argument sounds good but it could also be that tech was most vulnerable because of elevated valuations and instead of money being reallocated to other areas of the market, selling will spread to them, leading to more oversold conditions in the future. As of this weekend, no one knows.
Much of the world's wealth was stored in a handful of companies that make up the Mag 7 and the MAGS ETf. In the last couple of weeks, some of that savings migrated and those who held are probably downsizing their vacation plans for this summer and checking ZILLOW to see what they can sell their vacation homes for if things get worse. Directly to the right is an up close view of MAGS trading. I noticed that it hit a low on Monday and held that low later in he week when the Dow Jones Industrials and S&P 500 made lower lows. That was a hint that the broader market was close to a low.
SMH, the big Chip ETF sold off too but is still in the trading range it has been in over the last year. It didn't even break its August lows. I am still worried about this group because of the plans to expand semiconductor production all over the world. Last week, President Trump put tariffs on all imported aluminum and steel. Sixty years ago, steel production was considered to be vital just like chips are now. Every country subsidized steel making and now the world has excess capacity.
I was on a trip in January when Delta Airlines gave very positive guidance for the first half of the year. Earlier in the day I sent my wife pictures of the airport in Boston because there was no one there. Later in the week I sent her one from the security line in New Orleans. There were only 5 people in front of me. Usually it takes 20 minutes to get through that line. It turns out that my eyes were correct. Last week, Delta revised their outlook lower blaming a slow down in domestic consumer demand. If you have frequent flier accounts with Southwest or Jet Blue you know when bookings are soft because you get frequent emails notifying you of discounted fares to certain destinations. On the right is CRUZ, an ETF that tracks a broader group of companies in the vacation travel sector. It hit the skids along with the stock market. In 1987, earnings in the fourth quarter following the crash were good but some sectors of the economy took a long time to recover. Going into the crash there was a speculative market in condos. Demand disappeared after stocks fell 20% in a short time and many faced foreclosure. Developers went bankrupt, leaving partially built condo complexes. Another group that suffered was ski resorts. Just like this year, stocks had done so well that people were talking about retiring early and planned expensive winter vacations. After the crash they canceled their plans. One of my clients owned a popular ski resort in Vermont and went bankrupt that winter. If we don't get a quick recovery there will be pockets of the economy that are similar.
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The left side graph shows the shape of the U.S. Bond market yield curve with the blue line being last week's closing rates. I am going to keep the red series that shows where we were around the inauguration when everyone was predicting higher rates and I will keep the green line from the first Fed rate cut when the pros were all predicting lower rates to come. What is interesting is that rates out to 7 years are below the Fed Funds rate. The right side graph shows the path of TLT, an ETF that tracks U.S. Longer dated government bonds. The blue series shows the path of bond prices the way we see them daily. Two weeks ago I thought they would rally as a flight to safety as long as stocks sold off. That proved to be the case. My theory is that bonds will continue higher (rates lower) due to DOGE cutbacks and slower consumer demand that slows inflation. The red line shows TLT with the daily gain or loss in the U.S. Dollar Index added to TLT. It has me worried about my bullish outlook. There are billions of Dollar worth of hot money sloshing around the world, looking for a currency that is on the rise and a safe asset class within the currency block so that they can get a "two for one" gain in terms of the asset class and the currency. Over the last month and a half, hot money investors lost on U.S. bonds because the Dollar hit the skids. Last week's treasury auctions had good demand from domestic buyers but foreign money bought less than usual. How dependent are we on foreign demand for our debt? A typical auction has 60% to 75% of it taken down by foreign money. If you are an international investor you are not going to pile into an asset in a currency that you think is on a losing streak.
On the left is a graph of the U.S. Dollar Index and a simple RSI momentum oscillator. Vertical dashed lines mark previous low points on the oscillator. A few were lows but others marked pauses before more down side action. On the right is a graph of the daily spot closing price of gold in NY and the Dollar Index inverted so that when the Dollar goes down the red line goes up. I invert the Dollar to show the long term correlation between a weak Dollar and better gold prices. The yellow rectangle highlights a period of trading when both gold and the Dollar did well. My two hunches are: 1. If stocks stabilize then so will the Dollar with gold topping out. 2. We are near peak Trump chaos. President Trump is like a guy who comes into your parlor and messes up the jigsaw puzzle you have been working on for the last year. Just when the mess seems most outrageous he finds a way to reassemble the pieces. I think we are close to the start of things getting put back together. I have been following precious metals closely since 1988 and attended a number of World Gold Council meetings international gold mining conferences. Usually they have a well known analyst projecting long term gold price charts on the screen then using a laser pointer to highlight highs and lows. At the highs there is always something chaotic that traders are worried about being unleashed on the world. Investors are front running it by buying gold. In past cycles, fears were greater than reality and that made the high in the metal. I think we are close now.
The gold graph I am watching closely is the left side picture. It takes the daily bars of spot gold in NY and adds the percent gain or loss in the Dollar Index to see the pattern minus the influence of the Dollar. Last fall it traced out a classic a,b,c,d,e contracting pattern. Chart Mysticism fans know that these types of patterns usually lead to a final five wave advance then a reversal. Caution is advised because we could be close to finishing the 5. It would be fun to see an out sized spike up as the final move but we might not get it, especially if the stock market stabilizes, we get a truce in Ukraine and some compromises emerge from the tariff chaos. On the right is a chart showing the weekly closing price of spot gold in NY and a simple RSI momentum oscillator below. It finished last week around 0.80. One of my personal rules is that I don't buy something when the weekly RSI is above 0.80. Often there is an additional move that I miss but by the time the weekly momentum reading are this high, most bets have been placed and optimism is through the roof with projections of much higher prices. I like to read the Zerohedge.com blog which aggregates economic news from all over the world. When they have multiple stories about gold on the same page we are usually close to a high.
On the left is an update of the hourly trading in gold from two weeks ago. My wishful thinking was that the downs and ups marked by red letters and numbers completed a "3,3,5" correction in an up market that would lead to higher prices. If we keep the same count and stay with chart wonk dogma then we are now looking for a five wave advance. It could be that we finished one through three last week with a wave 4 pull back early next week then a final up move. Sometimes the wave five rally in commodities is a thriller. The downs and ups could mirror and be the opposite of stock market moves. Trying to play what all logic tells you could be a big final burst up can be hazardous to your wallet. I highlighted an area in blue. Sometimes the pattern in the blue blocked area is the sideways correction with a five wave advance ahead. If so, we could be closer to a high than my optimistic assumptions and with the weekly RSI getting up there I don't want to bet the farm. On the right is Newmont, the big gold mining company and gold. In the past, when gold was making its final up moves, buyers of mining stocks plunged into the market and bought the peak. It hasn't happened yet which leads me to think we have more upside. The green rectangle shows just how frustrating it is for mining share investors. Gold was lower and the shares were a lot higher.
Being a silver investor comes in at a close second to being a gold mining share investor as far as frustration. Gold is at all time highs and silver fans celebrated it hitting $34 last week even though it traded at $50 in April of 2011. Just like mining shares, silver sometimes has an out sized rally as gold makes its final highs. On the right is a chart showing the daily closing prices for platinum and palladium in NY. They both closed a bit above their 200 day moving averages last week but they have been trading sideways in a narrow range for so long that the long term moving average is now a sideways line with both metals straddling it every month. What is surprising is that they are not reacting to the brewing fight between the U.S. and S Africa where around 60% of the palladium is mined and around 89% of the platinum. S Africa wants to confiscate the land of all white farmers. At some demonstrations, protestors advocate murdering them. President Trump is calling for 100% tariffs on goods from the country and last week we kicked their ambassador out of the U.S. It looks like the recent small rally was more to do with gold's advance than anything else.
On the left are daily price bars of West Texas Intermediate Crude Oil. Last week, prices approached a trend-line and bounced a bit. Old time traders used to say that when the price of something touches a trend line for the fourth time, volatility follows. Unfortunately, the old timers did not have a rule for the direction of that volatility. In the case of oil I fear it will be down. Short term it is over sold enough for a bounce. OPEC+ stuck with their higher production plans which is bearish and President Trump is trying to cut off Iranian oil from the market which is bullish. A settlement in Ukraine is widely thought of as bearish because it is likely that it would come with some easing of restrictions on Russian exports. On the right is XLE, the big energy ETF along with the price of oil. Red rectangles mark a low in oil prices and show you where XLE was trading at that time. Shares of XLE are optimistically priced relative to crude. Some of its biggest components like XOM have done well with prices where they are but others like Chevron announced big layoffs.
DBB on the left tracks a basket of base metals and DBC follows a larger collection of commodities with a heavier weighting on grains. DBB did well last week and managed to close above its 200 day moving average but has done so in the past with only temporary follow through. DBC is still trending sideways. It will be hard to convince investors to be excited about commodities in a weak stock market.
Grains, my favorite market segment, all took a hit last week amid tariff chaos and retaliation. Our trading partners know that some of President Trump's strongest support comes from areas of our country that depend on agriculture so our grain exports are natural targets for retaliation. Spring is coming and so is planting season. Weather will be the number one factor going forward. No matter what countries say about never buying U.S. grains, if bad weather looks like it is going to impact this year's harvest, governments around the world will want to make sure they have enough food. High taxes and not enough food are big causes of social unrest and no politician, no matter how much they hate the U.S. wants that, so watch the weather.
Best Guesses -
Stock Market -I am going to watch for the 1984 type of pattern with a good initial bounce off the low followed by downs and ups with lower lows in around the June time frame.
Bonds -I am cautious because hot money is moving away from the U.S. I will stay with my overall bullish interpretation but won't have a big allocation to fixed income. Money Market funds are still paying well.
Dollar - We got a good sell off. There should be more to come but before that happens a counter trend rally is likely.
Gold and Silver - I think we are approaching peak Trump chaos and are close to a high. I would like to see a final spike up that temporarily lifts silver and gold miners.
Other commodities - Are we headed in to a recession or was this stock market pullback like 1987 when the economy was doing well and stocks went their own way? I tend to think that things are slowing down so I will just sit and watch commodities. I am worried about oil breaking its long standing support in the mid-60s. Hopefully we get a bounce from current levels before it sells off again.
Remember, what is good for the future of the country is not necessarily good for corporate profits or the demand for goods and services.
Europe - The Euro and European stock markets rallied based on fiscal stimulus. The reason for the stimulus plan is to increase defense spending right as President Trump is trying to put an end to the war. Does Europe see war as a way out of their economic malaise and if so, how willing will they be to support peace in Ukraine? If I were Ukraine, I would work out a peace deal based on staying out of NATO, wait a year then ask to become a special state of Poland so that I could slide into NATO. I would then hope that Russia takes some aggressive action that forces NATO to respond. If you read the history of this part of the world you know that stranger things have happened!
Best of luck,
DBE