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Macro Uncertainties Put Equities At Crossroads
Daily Update on SPY, QQQ, TLT, USO, BTC, COIN, Mag-7, Gold, PLTR
Yimin Xu
May 27, 2025
Hi YXI friends,
Since February, we have witnessed so many times how Trump announces a big tariff only to pause a few hours later. This is now a well followed script that investors are familiar with. Why did they still nervously sell stocks on Friday only to buy them back today?
I think there are two answers to this - an economist’s answer and a market technician’s answer.
Firstly, neither the market nor businesses like uncertainties. As the tariff policy whipsaws, market participants become more timid in risk-taking and require more downside protection. There is a rising risk-premium to justify owning risk assets. Businesses incur real costs in having to put in place a “Plan B” or even “Plan C” to reduce the supply chain risks. Consumers become more unwilling to spend in an uncertain economic environment, where rates are still high.
Secondly, since the April 7 bottom, the S&P 500 has rallied back 20%, faster than most people had expected. This means investors do become more wary of “the next pullback” as the market fundamentals still feel shaky. Investors may only feel relieved if a retest of the 200-day moving average holds.
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
Truflation’s latest inflation data have been moving up rapidly. Tariff impact may have started to kick in. This would help fuel “stagflation” concerns.
Gold is displaying unusual volatility, with large daily moves every other day.
Risk assets hit another brake on Friday, but still within their usual daily volatilities (Z-scores less than 1 except for AAPL).
Truflation Reading, May 27 2025
SPY, QQQ, SPDW
SPDW is updated every Monday.
SPY is at a critical crossroad right now. Its second wave of rally (April 21 - May 19) had reached the 1.236 extension of wave i, before turning down last week.
Now, this could just be a small correction en route to the wave (iii) target of $608.
Alternatively, if the market continues down from here, we may have had a bearish wave (c) correctively rally (highlighted in red). This would mean the larger degree trend remains down from the February top. It would also imply a larger degree new low for 2025.
It is therefore very important we get past the 1.236 extension at $596 next, to keep the bullish thesis intact. One must be prepared for both possibilities here.
SPY Seasonality (30 years)
Source: Seasonality AI
Looking at the past 30-year seasonality of SPY, end of May to early June tends to be bullish, but June as a month is generally pretty bad.
This gives the bulls the final chance to consolidate its winning position before the non-farm payrolls on Friday June 6. It may be wise to start adding hedges going into the NFP.
QQQ had turned down just before reaching the 1.382 extension of wave (i).
This means the bearish alternative (highlighted in red) remains a strong possibility right now. Getting past $527 would help keep the bullish case in place.
QQQ Seasonality (26 years)
QQQ tends to be bullish in late May, into the first week of June. June is typically very weak.
Again investors must be cautious going into the next non-farm payrolls, as any weakening in employment data could re-ignite recessionary fears.
SPDW is relentlessly marching higher, towards the upper bound of its resistance trend line. I am neutral at this level.
SPDW vs DXY (https://www.tradingview.com/x/Y6EtmJY2/)
SPDW and DXY tend to trade in an inverse fashion, because the investment outflow from US has a negative impact on the US Dollar. Moreover, DXY’s turning points tend to slightly lead SPDW (the FX market is generally faster moving than equities).
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 expectation of future FOMC actions is unchanged overnight. The market sees 3 cuts by May next year.
3-month SOFR Futures Yields
Yields are flatter (long end yields dropped more than short end) overnight.
2. Summary Of Today’s YXI Signals
SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR
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