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- Momentum Fading, But Not Lost
Hi YXI friends,
The market seems to be slowing in its momentum, despite the Administration’s continuous signalling of negotiation optimism in the near term. This may not just be a sign of caution as SPY and QQQ approach their 200 day moving averages. It also signals that traders are just getting tired, after one of the most frantic starts to the year.
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. They provide an excellent daily gauge of the market risk profile, cutting through the noise of busy news headlines and talking heads.
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
Fed Liquidity is tightening due to a rise of Reverse Repo Program usage. On the margin, this can lead to higher yields.
Energy (USO) is falling fast, as OPEC+ plans to expand supply in the coming months.
AAPL fell for another session, but otherwise equities have been muted.
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 10-year Yield (https://www.tradingview.com/x/N64XdDI0/)
During the Feb-April crash, the 10-year yield led the move in equities. SPY and 10-year yield exhibited a strongly positive correlation as investors dumped stocks as well as bonds.
In the latest rebound, the 10-year yield also bottomed just before stocks. However, the daily correlations are weakening (see below).
SPY vs 10Y Yield Correlation
The current 21-day correlation between SPY and 10-year yield is now neutral and likely heading back towards a negative territory. When the correlations become negative, it means lower yields could be supportive of higher stock prices and vice versa.
SPY is stalling below its 200-day moving average in a very tight trading range. There is a lot of volume in the region just below it, which can serve as support.
QQQ is still sitting just below the 200 EMA. We are at a key region where bears are taking their fresh shots entering here. There is a lot of traded volume in $470-480 to defend the bulls.
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 % |
|---|---|---|---|
05/07/25 | 4.33 | 4.33 | 0 |
06/11/25 | 4.33 | 4.23 | -0.1 |
07/30/25 | 4.23 | 4.08 | -0.15 |
09/17/25 | 4.08 | 3.88 | -0.2 |
11/05/25 | 3.88 | 3.68 | -0.2 |
12/17/25 | 3.68 | 3.48 | -0.2 |
01/28/26 | 3.48 | 3.43 | -0.05 |
03/18/26 | 3.43 | 3.38 | -0.05 |
05/06/26 | 3.38 | 3.33 | -0.05 |
Fed Funds futures yield drifted slightly higher overnight. The market is pricing in 4 × 25bp cuts in the next 12 months.
The market sees a virtually 0 chance of the Fed cutting rates in the FOMC tomorrow.
3-month SOFR Futures Yields
YXI QQQ Model Signal
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