Hi YXI friends,

Only a few days ago, Goldman Sachs saw a potential 20% drop in stocks. In a podcast last Thursday, Goldman’s Chief Economist Jan Hatzius reiterated that he saw a 45% chance of a recession in the next 12 months for the US. Meanwhile, Goldman’s Chief Global Equity Strategist Peter Oppenheimer highlighted that a 10% fall in earnings in a typical recession could take S&P 500 down to 4,600 accounting for the valuation multiple contraction.

However, last night, Goldman Sachs strategists including David Kostin revised the S&P 500 Index target higher to 6,500 in the next 12 months, 10%+ higher than today.

These are probably the smartest guys in the room and they either don’t agree with each other or they just flipflop according to the market movements. In the former case, we should ignore both. In the latter case, we should…ignore both and just follow the market.

I will talk more about the case for the downside and why Wall Street was / is pessimistic in the SPY/ QQQ section below.

For those looking for our machine learning Model Signals directly, you can find them in our dedicated morning note on SPY, QQQ, BTC, TSLA (free), PLTR (free), AAPL, AMZN, MSFT, 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

  • CPI Predictions

  • SPY and QQQ

  • YXI SPY 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. Equites enjoyed a party yesterday, with SPY, QQQ, IWM all scoring higher than a 2-standard-deviation move on the upside.

2. Stocks rose at the expense of Gold / GLD, which suffered the equivalent fall.

3. Bonds continue getting dumped by investors, a trend that signals the market regime of “risk on” but also investors concerns over the long-end bonds.

CPI Predictions

I use a proprietary model to estimate the CPI. For April, my estimates are that both the Headline and Core CPI MoM will come in lower than expectations.

The models won’t be 100% accurate - no models will be, but serve as an interesting observation.

SPY and QQQ

The case for downside (a lower low) is simple - the current market pricing does not (and had not) account for a full recession that the news headlines had been suggesting.

Even before the US-China agreement, the Fed Funds futures priced in just a maximum of 4-5 cuts over the next 12 months, nowhere near the zero-interest-rate floor we saw in past recessions.

Stocks were still trading near the average valuation of the past 10 years and above average of the past 20 years, before the latest rally.

It is understandable that, with all the growth in Fed Balance Sheet and money supply since COVID, stocks could remain at elevated levels of valuation for a long time.

However, the market is now again approaching the highs of 2021 and late 2024, which will concern the Warren Buffetts of this world. The Intelligent Investor / Benjamin Graham class of investors would advocate for raising more cash or buying bonds again at these elevated valuation levels. They may appear silly in the short term, but will survive long enough (by taking less risks) to say “I told ya” in the next crash.

For the short-term traders, the focus is to ride the rally for as long as they can. Changing direction and being “right too early” is same as being wrong. This means focusing on the road right in front of us, not several blocks ahead.

For now, my FSD says the road is still straight on. So we are not steering away just yet.

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

SPY pushed decisively above the 200-day moving average, now into an area of thin volume since the February fall.

This means there is less supply from those stuck in a drawdown.

While today, SPY can take a breather from Monday’s big rally, it should move quickly towards our wave iii target of $608+ in the next two weeks. That will send us right back to the all-time-high region ($613).

QQQ (https://www.tradingview.com/x/uD1S0xHG/)

QQQ gapped significantly above the 200EMA on Monday, with a close right at the intraday high.

QQQ may take a second to breathe today, as investors reassess the optimism surrounding the latest trade deals. However, the near-term path of least resistance remains up. I can see QQQ reach $527+ in the coming 2 weeks.

FOMC Projections

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

Near end yields were largely unchanged overnight. The market continues to see 3 × 25bp cuts in the next 12 months.

It is pricing that 1) the Fed is not rushed to cut, and 2) we won’t see a recession in Q2.

3-month SOFR Futures Yields

YXI SPY Model Signal

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