Hi YXI friends,

On Friday, SPY saw its biggest single day decline, -1.64%, since May 21, 2025. The market has become anxious of the Fed's rate being behind the curve again in a weakening jobs market (even if not through its own fault). We will dive into the Nonfarm Payrolls details in Section 1.

However, SPY still enjoys a positive YTD return due to a very strong run in May (+6.3%), June (+4.8%), and July (+2.3%).

Where will risk assets move next?

Today, I present a very long-term view on S&P 500 in Section 2 to put the market in context, before diving into the near-term technicals.

Table of Contents

• 1. Nonfarm Payrolls Dramatically Revised Down

• 2. S&P Long-term View, SPY & QQQ Near Term

  • What Could Extend The Cycle Wave V?

• 3. FOMC Projections & Rates Futures

• 4. Summary Of Today’s 4-3-2-1 Ratings

• 5. USO

• 6. 30-Year Treasury Yield & TLT

• 7. Bitcoin (BTC) & Coinbase (COIN)

• 8. Gold (GLD, GDX)

• 9. Magnificent 7 Stocks

  • Apple

  • Amazon

  • Alphabet

  • Meta

  • Microsoft

  • Nvidia

  • Tesla

• 10. Other

  • SOXX

  • PLTR

• 11. Trade Updates & Monitoring

• 12. 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. Nonfarm Payrolls Dramatically Revised Down

US Nonfarm Payrolls in July saw 73k net new jobs added, missing the 106k Wall Street expectation. Unemployment Tate also ticked up by 0.1% to 4.2%, although this was in line with the consensus.

One should note that Nonfarm Payrolls and Unemployment Rate are generated from two separate surveys. Nonfarm Payrolls are the "Establishment Surveys" sent to businesses, whose first-time response rate is notoriously low and is subject to frequently wild revisions. Unemployment Rate is calculated on the back of Household Surveys, which are deemed even less reliably than the Establishment Surveys.

The unreliability of the jobs data do make the Fed's job much harder on arriving at timely interest rate decisions. The problem was highlighted in the enormous revisions of May and June data on Friday.

On Friday, the previously reported 147k and 144k net new jobs added in June and May respectively were revised down to just 14k and 19k.

The data revision prompted Trump to immediately fire the head of BLS, Erika McEntarfer. The market will likely question the political bias of whomever Trump appoints next.

Paradoxically, if Trump wants to see consistently strong labour market data, it would lower the odds of a near term Fed cut. One of the Fed's mandate is to maintain maximum employment, and they are motivated by weaknesses in the labour market, not strength.

YXI Dashboard

There was a broad-based sell-offs in risk assets, across the equity indices, Mag-7s, oil, and Bitcoin.

In contrast, bonds and gold received strong bid as safe-havens.

However, with the exception of AMZN, which fell harder due to earnings, our risk assets all stayed within the 2-standard-deviation range from their average volatility.

I expect a bounce today as investors buy the dips here. However, there could be further pullbacks further into August.

Click here for the past YXI article explaining many of the components of the dashboard.

2. S&P Long-term View, SPY & QQQ Near Term

I have been asked about my views on the blow-off top vs. an impending 1929 style crash that some have been predicting since 2024.

I will share my long-term S&P 500 (SPX) chart analysis based on technicals today. I must warn that very high-level (E.g. multi-decade) analysis has a lot of room for “error”.

It is simply not possible for anybody to say with great certainty the timing or the extent of a major market crash.

Today, we have a potent mix of Fed QE and fiscal spending that have elevated stock market valuations for years. The hangover from COVID era stimulus has pushed inflation persistently high and asset prices dramatically higher. This is why plenty of “experienced” investors fail to grasp how stretched asset moves can extend in a bull market.

SPX Multi-decade View

SPX Monthly (https://www.tradingview.com/x/pBPKOqy5/)

We could reasonably regard the booming 20s (i.e. the 1920s into the Great Depression) as the Cycle Wave I, with the Great Depression being the Cycle Wave II.

Cycle Wave III is an 7 decade stretch into the Dotcom Bubble of 2000. We completed an expanded flat of Cycle Wave IV between Dotcom and the Great Financial Crisis.

There has been a fundamental change since the GFC. This could mark the start of a Cycle Wave V.

The Fed balance sheet has become a great deal more expansionary, setting off continued liquidity injections into a market that is accustomed to money printing and bailouts. At the same time, the US national debt has more than tripled since 2018, with big fiscal stimulus thrown at every problem.

SPX Weekly (https://www.tradingview.com/x/kWb5aUJS/)

Zooming into the Cycle Wave V, I put the COVID crash as an Intermediate Wave (3) of the Primary Wave circle-3. The post-COVID run into 4700 was a wave (5) of circle-3 top, that was followed by a painful bear market in 2022.

Fast forward to this year, the 20% peak-to-trough drop could be a wave (4) decline in the larger degree wave circle-5.

Well, that could mean we just have 1 more wave higher, which is the region we are in now.

What Could Extend The Cycle Wave V?

Answer part 1) is the infinite stimulus that could push out the Cycle Wave V, making the current run part of an extended Wave Circle-3.

The part 2) is large tech earnings could accelerate in the AI cycle, further supporting valuation and wealth creation in the coming decade. Many of the large cap names do not look done yet.

I would also caution that any chart reading framework, including the Elliott Waves Theory that was invented almost hundred years ago, is just a framework after all. It is simply a tool of helping us understanding the market cycles and the greater context. One should not be married to a specific set of counts, but must adapt to the market development as it happens.

As aforementioned, the Fed is not shy of expanding its balance sheet to support the market weakness, not to mention at a 4.33% effective Fed Funds rate, the Fed could slash interest rates down to zero should a large-scale recession occur.

At the same time, the One Big Beautiful Bill has granted a higher debt ceiling, allowing big fiscal spending into Trump’s second term.

The combination of a Fed backstop plus White House spending could keep the market much more elevated than the bears expect.

SPY (https://www.tradingview.com/x/oX26lZxv/)

I have readjusted the the wave annotations to match the SPX degrees (i.e. “circle-i”moves to “1”).

The current pullback could be the start of a wave 4, which is a 3-wave structure (a-b-c). Wave 4 here could end between $586 and $606 as the 0.236-0.382 retrace of wave 3.

This is also a region of confluence above the 200-day MA with a heavy volume profile.

QQQ (https://www.tradingview.com/x/sb9PE28B/)

For QQQ, a similar logic applies. The pullback in wave 4 can test the $513-536 region, just above the 200-day MA, with a heavy volume profile in the region.

Given the overall risk-on sentiment since April and the fairly neutral market positioning, we could see a lot of money on the sidelines buying up this dip.

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.

Fed Funds Future yields moved down a remarkable 30bp on Friday in the 1-year region.

The market now sees 100% chance of a rate cut in the September meeting. There are also very likely two consecutive rate cuts in November and December.

Bearing in mind, the Fed only just played down the September rate cut chances ("we need to see more data") on Wednesday. This is a dramatic shift in market sentiment after the poor jobs data.

One should be reminded that a 4.2% unemployment rate is hardly a disaster, yet. The Fed had inked an expectation of 4.5% unemployment rate in the June FOMC and projected 2 cuts this year on the back of this.

Therefore, the Fed could still push back on the aggressive market expectation for the next 3 meetings, likely at the Jackson Hole.

3-month SOFR Futures Yields

4. Summary Of Today’s 4-3-2-1 Ratings

SPY, QQQ, BTC, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR, TLT

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