Hi YXI friends,

Tuesday’s CPI had two twists (or none, if one has been paying closer attention to the broader macro). First, both the Headline and Core CPI MoM readings came in lower than the Wall Street estimates, at 0.2% instead of 0.3%. We successfully predicted both of these undershoots in yesterday’s note, thanks to our machine-learning model.

The second twist was that yields did pretty much nothing on the back of softer inflation data. Lower CPI is typically associated with yields falling, as it provides room for Fed cuts. In fact, as you will see later, the market is pricing in less cuts by the Fed overnight. However, this was not a surprise to us either. Our systematic signals have been warning us to stay out of buying bonds in the past two weeks (you can check our morning YXI Signal notes).

For those who believe markets just trade on news and economic data, this is an excellent example of why that belief may be limiting. News does matter - when Trump announces Liberation Day tariffs, that clearly makes nervous investors press sell buttons as fast as they could. However, outside of these corner-turning events, the undercurrent of global macro, liquidity, flow, and risk sentiment can override the short-term news. For both investors and traders, the most profitable path is most often to just swim with the macro current.

Trump’s visit to Saudi Arabia is also an interesting one, for the US tech companies. Musk has already agreed Starlink deals there. Nvidia is ready to supply its best AI chips to Saudi Arabia, which it hopes to make up for the China loss. AMD managed to join the party too. Amazon, Cisco, OpenAI (Microsoft for our purpose of analysis), Alphabet are all getting some kind of collaboration deal out of the visit. (More details from this Bloomberg article)

Keep in mind that Saudi Arabia is the biggest oil producer in OPEC and has agreed to ramp up supply, even though this might cause energy prices to drop further. Trump is signalling to the rest of the world that, yes we want to be a tough negotiator, but if you work with us, you can get our best technology too (if you can afford it that is).

For those looking for our Systematic Signals and their backtesting results directly, you can find them in our dedicated morning note on SPY, QQQ, BTC, TSLA (free), PLTR (free), AAPL, AMZN, MSFT, META and TLT. We also show them as a summary in the main content below.

Let’s dive in!

Table of Contents

• 1. YXI Daily Dashboard

  • Observations from today

  • April CPI

  • SPY and QQQ Charts

• 2. Summary Of Today’s YXI Signals

• 3. TLT

• 4. Bitcoin (BTC)

• 5. Magnificent 7 Stocks

  • Apple

  • Amazon

  • Alphabet

  • Meta

  • Microsoft

  • Nvidia

  • Tesla

• 6. Trade Updates & Monitoring

• 7. 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. Headline CPI continued to fall on a YOY basis. At 2.3% it is not far from the Fed’s goal.

2. Market remained moderately risk on, with stocks all moving higher (except for MSFT), and bonds lower.

3. Bitcoin managed to rally back from Monday’s fall, but continued finding resistance below $105k.

April CPI

On Tuesday, April’s CPI came in at 0.2% MoM for both the Headline and Core (ex-Food and Energy) readings. This helped the Headline CPI continue falling, now at just 2.3%. This is the lowest reading since March 2021. It’s been more than 4 years!

There are two things to note here. The Fed uses PCE as its official inflation target, so the lower CPI readings need to translate into PCE. The difference between the two data is that CPI only covers the urban price levels, while the PCE includes suburban too. They have different component weightings within them, which is why their levels differ so much. However, the Fed does care about CPI a lot, especially given the CPI is released 2 weeks ahead of the PCE. This makes the CPI readings often more important than the PCE for markets.

Secondly, the Fed’s target is a “Headline” one. While the Fed looks at the Core measures, or even “Super Core” measures (excluding housing as well), the target is ultimately based on the overall level. If food and energy prices falling more than offsets the services inflation, the Fed is okay with that.

CPI YoY Breakdown

On a YoY level, Energy prices are 3.7% lower than a year ago, helping the Headline CPI to come lower by 0.2%. Shelter remains a sticky component, with 4% increases YoY in the past 2 months still. Medical care services are also sticky at 3%+. Transportation services have come down a lot from last year, especially the motor vehicle insurance. Airline Fares have crashed.

SPY and QQQ Charts

The primary expectations are inked in black. The alternative expectations are inked in red where applicable.

SPY (https://www.tradingview.com/x/IE6eQU9t/)

SPY continued to push higher yesterday, which was impressive given the big gap up on Monday. The wave (iii). target of $608+ is well within reach.

QQQ (https://www.tradingview.com/x/IuCYS8Zn/)

QQQ has been moving up a lot more quickly than SPY. It has now reached the 1.236 extension of wave (i). I see it reaching the wave (iii) target of $527+ imminently, before the wave (iv) retrace.

Note that hitting the $527 target is key. This is because if QQQ starts to reverse from here towards the black trend line, we are in a likely B-wave only.

FOMC Projections

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

There was very little change overnight. Instead of expecting more cuts from lower inflation reading, CPI helped investors stay more positive about the economy, which may be avoiding “stagflation”.

3-month SOFR Futures Yields

2. Summary Of Today’s YXI Signals

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

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