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Bears Are Really Tested, But Could They Try Again?
Daily Update on SPY, QQQ, TLT, USO, BTC, COIN, Mag-7, Gold, PLTR
Yimin Xu
May 28, 2025
Hi YXI friends,
What a bullish day yesterday, with bonds and equities both rallying to shake off Friday’s EU tariff announcement. S&P 500 is only 3% away from the all time high, which is simply remarkable given the amount of macro and policy uncertainties we have seen this year.
Now as we approach the equity market highs again, high interest rates and valuation may be back to the table as a discussion point as the next set of potential stock market hurdles. We will focus on the valuation aspect today, for both SPY, QQQ and the relative values of Mag-7 stocks.
If you are looking for our Systematic Signals directly, you can find them in our dedicated morning note on SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA (free), PLTR (free).
Let’s dive in!
Table of Contents
DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
1. YXI Daily Dashboard
Observations from today
On a 4-week trailing basis, the Fed liquidity is expanding again. This could help the bids for bonds.
Bonds and Equities traded in the same direction on Tuesday, with TLT, SPY, QQQ, IWM all up more than 1.5 daily standard deviations.
2-year and 10-year yields are now both 30bp higher than a month ago. Will this begin to weigh on stocks? That’s an open question.
SPY, QQQ
SPDW is updated every Monday.
For SPY, the +2% move on Tuesday helps the bullish case of wave (iii), whose target is $608+.
Bears could not get past the 200 EMA on the first attempt and appear to exhaust after a fairly shallow pullback.
What could weigh on equities here is the rising bond yield, as the “risk-on/off” regime subsides. This could mean higher yields may start to weigh on stocks.
Valuation is could be potentially a problem that returns to the table.
SPY Valuation - Past 5-years, NTM
Valuation was a big concern for investors going into 2025, after a pretty relentless bull run in 2023 and 2024.
As SPY re-approaches its all time high in a very short space of time, valuation begins to look expensive again against historical levels.
In terms of EV/ Sales, SPY is nearing a 2-standard deviation high of the past 5-years. This is around the same level as just before the 2022 sell-off and slightly lower than the January 2025 peak. In terms of P/E, SPY is certainly trading above the average and on the high end since the 2022.
Within just one session, QQQ is already back to last week’s highs. The momentum seems strong enough to carry QQQ above $527, our wave (iii) target.
QQQ Valuation - past 5 years, NTM
QQQ’s EV/ Sales is close to its 2 standard deviation level that was reached in January. It is trading at a similar level to the 2021 year-end, before the 2022 bear market.
However, the P/E ratio is near the 5-year median, although COVID distorted the P/E levels for 2021.
FOMC Projections
We use the Fed Funds futures market to understand the market expectations of future FOMC interest rate decisions.
FOMC Date | Before Meeting | Post Meeting | Hike/ Cut in % |
|---|---|---|---|
06/11/25 | 4.33 | 4.33 | 0 |
07/30/25 | 4.33 | 4.23 | -0.1 |
09/17/25 | 4.23 | 4.13 | -0.1 |
11/05/25 | 4.13 | 3.98 | -0.15 |
12/17/25 | 3.98 | 3.83 | -0.15 |
01/28/26 | 3.83 | 3.73 | -0.1 |
03/18/26 | 3.73 | 3.63 | -0.1 |
05/06/26 | 3.63 | 3.53 | -0.1 |
06/17/26 | 3.53 | 3.43 | -0.1 |
Fed funds futures moved very little overnight. The market continues to price in 3 cuts as the base line for the next 12 months.
3-month SOFR Futures Yields
Yields steepened beyond the 2-year, with the 2027-2030 tenors rising by 3-4bp overnight.
2. Summary Of Today’s YXI Signals
SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR
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