Hi YXI friends,

Both Trump and Bessent have been announcing “positive announcements to come” lately. China is finally acknowledging that they plan to join the negotiation table. Reuters reports that “Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's economic tsar He Lifeng in Switzerland this weekend for talks’.

This will be a welcoming step to deescalation, but it is unclear what both sides would be exactly negotiating for. “Fair Trade” does not equate to the elimination of trade deficits. Chinese exports deflate in price over time due to their overcapacity. If the goal is for price parity between Chinese exports and US homemade products (or even make the US ones cheaper), there would still need to be some level of tariffs, which China may not accept. I suspect the larger goal is actually around the export of US oil, purchases of US Treasuries, and geopolitical stability in Taiwan.

For those looking for our machine learning Model Signals directly, you can find them in our dedicated morning note on QQQ, BTC, TSLA (free), AAPL, AMZN and TLT. We also show them in the main content below.

Let’s dive in!

Table of Contents

• 1. YXI Daily Dashboard

  • Observations from today

  • SPY and QQQ Charts

  • YXI QQQ Model Signal

• 2. TLT

• 3. Bitcoin (BTC)

• 4. Magnificent 7 Stocks

  • Apple

  • Amazon

  • Alphabet

  • Meta

  • Microsoft

  • Nvidia

  • Tesla

• 5. Trade Updates & Monitoring

• 6. Notable ETF Flows From Previous Day

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

1. GDPNow projects Q2 GDP growth to be 2.2%, up from 1.1% a week ago.

2. Truflation’s inflation reading has also ticked up to 1.58%, up 13bp from yesterday. Together they pain a near-Goldilocks economic picture, where the economy expands with inflation running along the Fed’s target.

3. Global M2 readings continue to expand. This bodes well for risk assets in Q3.

4. Gold (GLD) was up big on Tuesday, challenging the all time high but fell short.

5. Oil (USO) jumped by 3.6% yesterday, but appears to be a bear market rally.

6. Equities were down across the board, but nothing of significance.

SPY and QQQ Charts

SPY Daily Model Signals Are Coming Soon.

The primary expectations are inked in black. The alternative expectations are inked in red where applicable.

SPY vs USDJPY (https://www.tradingview.com/x/ka36JLmT/)

Since the Bank of Japan raised interest rates at the beginning of the year, the US stock market has trended in the same direction with USDJPY. The move in USDJPY was not just due to Japan raising rates, but also a weakening US Dollar as investors exit the US capital markets.

JPY is a cheap funding currency for carry trading. Lower yields in the US relative to higher yields in Japan make the rewards of carry trades less attractive. We have seen multiple times when the US-JP yield spread tightens, US equity markets capitulate.

We are therefore more reliably bullish on US equities, if USDJPY can break above its downward trend line.

SPY vs VIX (https://www.tradingview.com/x/LjfaX1s5/)

SPY also trades in a mirror image to VIX. This is due to the asymmetrical nature of market moves - rallies tends to be gradual, while selloffs are often abrupt, leading to spikes in volatility.

Rising volatility is therefore nearly always a sign of investors worrying about the downside. Since July 2024, floor of the VIX is shifting upward, from 12-14 to 16-20. This suggests elevated macro uncertainty and more frequent tail-risk hedging by institutional players.

As VIX still trades above 20, the market has not quite got out of its stressful mood.

SPY (https://www.tradingview.com/x/Mnghihxx/)

The near term question is - will SPY retest the trend line first, before breaking above its 200 EMA and wave (iii) target?

It is currently sitting right at a heavily supported region by volume. Breaking below the current level could definitely see a sharp move all the way to the trend line ($530ish).

For bulls, SPY must quickly get above the 200 EMA from here directly, to reduce the above possibility.

QQQ (https://www.tradingview.com/x/irD7QgiE/)

QQQ was down two days in a row, although still sitting comfortably in a large volume-supported price region above $470.

We still don’t want the price to linger here for too long. QQQ needs to capture the 200 EMA immediately to sustain the bullish momentum.

FOMC Projections

We use the Fed Funds futures market to understand the market expectations of future FOMC interest rate decisions.

There were little changes to the Fed Funds futures overnight. There is no chance the Fed will cut tonight.

The odds of a June cut also look small due to the strong Nonfarm Payrolls report last week.

3-month SOFR Futures Yields

YXI QQQ Model Signal

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