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Equity Indices Continue Pushing Higher In Our Bull Party
Daily Update on SPY, QQQ, TLT, USO, BTC, Mag-7, SOXX Gold, PLTR
Yimin Xu
June 04, 2025
Hi YXI friends,
Today we start with sharing some of my pipeline work in the background for June and July.
In between the background technology stack improvements, I am going to be working on simple trading implementation strategies based on the model signals.
I will also be exploring a unique way to combine our model signals with the macro assessment and technical analysis into a simple summary format, so you can maximise my research in the most efficient and clear manner.
All of the above work, which may sound simple conceptually, will take time for me to accomplish. Therefore, there will be minimal formatting or coverage changes to our newsletter at least in the month of June, if not July too.
If you have any suggestions or feedback to what you would like to see within our pipeline, please leave a comment or write back in the “poll” at the end of the article.
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
The Three Daily Observations
The 2-year and 10-year yields are only 20bp higher than a month ago, while equities soared higher in the same timeframe. The yield curve showed no change. The overall financial conditions are yet to be a headwind for equities.
Equity indices closed higher yesterday, at a new high since the April 7 low. However, 3 out of Mag-7 names closed in red.
Yield curve as an indicator has reduced the recession odds to less than 30% for the next 12 months. I think this is about right, given a robust Q2 growth in GDP. A recession occurs with 2 consecutive negative growth quarters in its formal definition.
Yield Curve as a recession indicator, by New York Fed
Click here for the past YXI article explaining many of the components of the dashboard.
2. SPY, QQQ, (SPDW)
SPDW is updated every Monday.
SPY has now received the clear “permission” to attempt the 1.382 extension of wave (i), with a wave (iii) target of $607+. Tuesday’s small rally cleared the May 19 high, which puts SPY just 2.5% away from the all-time-high.
Ideally, I want to see SPY reaching this wave (iii) target as soon as this week, before seasonality headwinds and Wall Street holidays make it harder.
While this comeback has defied the Big Money’s calls for doomsday, we have been on the right side of the market in the past 6 weeks.
SPY vs US-Japan 10-year yield spread revisited (https://www.tradingview.com/x/AHl2Kifz/)
This is a slightly more zoomed out version of the SPY vs US-Japan yield spread chart from yesterday.
The relationship between the two was not entirely clear before August 2024. For example, the 2023 bull market raged on despite a tightening in the yield spread in Q3 2023.
We saw the great carry trade unwind in late July / early August 2024, which most of us remember vividly. It occurred right after the BOJ hiked rates in July. However, not all of the carry trade positions were unwound. UBS estimated that only 50% of the positions were unwound by the August crash. JP Morgan estimated the unwind to be 70% by mid August 2024.
As JPY remained a funding currency for global risk assets (alongside Swiss Frank and Chinese Yuan), I suspect some of the carry trade positions were put back on the table when the US-JP yield spread widened.
The correlation between SPY and the US-JP yield spread (with a 20-day lag) has been the strongest since the 2024 US Election. US yields soared in late 2024 expecting higher inflation and greater budget deficit from Trump’s tariff plans, driving the spread wider. This coincided with US equities moving higher on the “business-friendly deregulation” optimism around the new Administration.
However, when BOJ hiked rates again in January 2025, the US stock market crashed a month later. We actually highlighted this issue on January 29 (You can read this article here).
Will the BOJ U-turn its hawkish mode in the face of Trump’s global tariff threats?
Japan’s headline CPI is at 3.6%, with strong wage growth and a tight labour market. Reciprocal tariffs could raise import prices further, which means the BOJ is unwilling to loosen its monetary policy too quickly.
The BOJ Chief Ueda’s latest comments suggests they are holding onto the hawkish stance, because Japan can withstand the hit from US tariffs. The bigger challenge is the “cycle of rising inflation accompanied by wage growth”.
Moreover, given Trump’s series of “tariff-on, tariff-off” pivots, the BOJ senses that the global trade situation has a high chance of improvement.
“If trade negotiations between countries proceed and uncertainty over trade policies diminish, overseas economies will resume a moderate growth path. That, in turn, will accelerate Japan's economic growth”.
If the BOJ raises rates again in the summer, the high valuation tech sector remains the biggest targets for sell offs.
QQQ trades at a P/E of 28x and XLK at 27x. These valuations are vulnerable to air pockets should a sell off begin.
QQQ closed Tuesday at the 1.382 extension of wave (i), confirming the overall bullish path to a new all time high.
While technically, QQQ has reached our initial wave (iii) target of $527, it can stretch towards $546, the 1.618 extension, before the wave (iv) pullback. The major obstacle is the trend line resistance (drawn in black) that used to be a major support in October - February.
3. FOMC Projections & Rates Futures
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 |
The market expect the first cut to occur in September 2025, with 3 cuts priced in before June 2025.
3-month SOFR Futures Yields
4. Summary Of Today’s YXI Signals
SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR
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