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Today, we share our daily research note for free. We do this twice a month, so everyone can experience what our premium subscribers enjoy every day.
We start today’s insights with SPY’s RSI analysis. We shine a spotlight on Gold’s price behaviour to see how this type of rally typically ends.
Finally, we will do our usual technical analysis across equity indices, bonds, gold, Bitcoin, and Mag-7 stocks (plus PLTR).
Table of Contents
DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, 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.
Please check out our glossary for explaining the acronyms, financial terminology, and economic data.
1. YXI Dashboard
Risk assets enjoyed a big risk-on day on Wednesday, but unusually, Gold was up big at the same time.
Our correlation analysis suggests that gold tends to trade negatively with stocks, which was not the case on Wednesday. This appears to be an “everything rally” in progress.
Bitcoin had quite an intraday swing, but ultimately closing the NY session green, performing similarly to QQQ during the session.
AMZN and TSLA led the Mag-7 rally. GOOGL and MSFT underperformed their peers.
2. SPY Overbought?
SPY Relative Strength Index (RSI) Analysis
SPY’s RSI has flagged >70 several times in the past month. Is it still a good time to buy?
We have performed the historical “follow-through” analysis on SPY’s price behaviour, both after its RSI reaches 70 and crosses below 30.
RSI > 70, 5, 10, 21, 63 trading day forward returns since 2018
Since 2018, SPY’s RSI has crossed above 70 on 47 occasions (it counts as separate occasions if it drops below 70 and immediately reenters).
On average, the forward returns in the next 3 months have been essentially flat.
Now compare this with the occasions when RSI crossed below 30, which has only happened 18 times.
RSI < 30, 5, 10, 21, 63 trading day forward returns since 2018
The forward returns are significantly more attractive, averaging as much as 10% after 3 months. Clearly, the market is more conditioned to reward “buying the dip”. The last time this happened was in April 2025.
However, there is a considerable dispersion of returns within our 2018-2025 history.
SPY RSI>70 Specific Occasions: 2018 - 2023
Between 2018 and 2023, the forward returns after SPY enters the overbought territory is very much mixed. The COVID crash significantly dragged the average down after a strong rally in 2019.
SPY RSI>70 Specific Occasions: 2024 - 2025
From 2024 onwards, the market has been more favourable towards “overbought” conditions. Their forward 3-month returns frequently reached the 4%+ region, with only one loss out of ten instances.
Therefore, I am overall cautious in chasing returns at this moment, although I don’t necessarily think the next pullback will spell doom either.
HYG / IEF - High Yield Credit vs Treasuries
I am monitoring the HYG/IEF ratio as a proxy for risk appetite. When HYG is in high demand, credit spreads are tighter, and investors tend to prefer higher-risk, higher-yield instruments over risk-free Treasuries.
As you can see, at the beginning of 2025, HYG/IEF actually deteriorated rapidly, just before the stock market crash gained full momentum in March.
At this particular moment, the ratio is holding up sideways, but we need to be mindful when it breaches the VWAP since the April low (the black line).
Currently, HYG is holding near its highs, but a huge volume is mounting, which can signal distribution interests. If HYG rolls over from here, the enormous volume shelf will serve as a key level of resistance.
3. Spotlight: Gold GLD
Gold Monthly Returns (GLD) past 20 years
The last time GLD enjoyed consecutive August-September wins was as recent as 2024, and before that, in 2007 (just before the Financial Crisis), 2009, 2010, and 2012. Among these 5 occasions, Gold climbed higher 4 times in October.
Currently, GLD is up 5% MTD, thanks to the sheer momentum. However, except in 2010, GLD ran into trouble in November and/or December.
This has been a parabolic year for GLD, up 54% YTD, which is 20% higher than the second-best year in the past decade.
GLD Rally from 52w lows and share of days at ATHs
Its rally from the 52w low is almost matching that of the previous peaks before and after the GFC. At 20% (of the past year), GLD is also poised to surpass the highest number of days at ATHs with past peaks.
GLD Drawdowns
This means GLD is now also prone to significant drawdowns, which can range from a 20% decline to a decline of over 40% after reaching these types of rally peaks.
SPY vs GLD since 205
What concerns me is that on at least 3 occasions, Gold’s rally preceded with big market pullbacks, if not an all out crash - 2007, 2011, and 2020.
Gold tended to climb even higher as the S&P 500 rolled over, driven by safe-haven demand. But the liquidity vacuum triggered by the market crash also pulls Gold down once the initial safe-haven rush ends.
GLD Correlation with SPY and TLT
Currently, Gold trades with a positive correlation with bonds, but a negative correlation with stocks.
4. S&P 500 and Nasdaq (SPY & QQQ)
SPY
SPY enjoyed a top-quartile intraday session on Wednesday, coasting in positive territory for the majority of the day.
While there are hefty hedging activities in the options market, SPY has nudged higher into new ATHs almost every week, with no sign of an imminent collapse.
We are watching closely for the trendline to break, with the 50-day MA serving as the initial pullback target in wave (iv).
QQQ
Similarly, QQQ is moving smoothly upwards in a tight channel, making new ATHs weekly. The immediate pullback target has now shifted (higher) to the 50-day MA.
5. FOMC Projections, Treasury Yields, TLT, USO
FOMC Projections
We utilize the Fed Funds futures market to gauge market expectations for future FOMC interest rate decisions.
US Treasury Yield Curve
US 30Y Yield
The 30-year yield is likely headed towards our wave (v) target in the 4.5%s.
TLT
TLT could be moving towards $92 as our wave (v) target to the upside.
USO
USO has mean-reverted back to the 200-day MA. My overall bias remains downward, but I understand that we need a breakout for confirmation.
6. Crypto
ETH is updated every Monday. COIN is updated every Tuesday. HOOD is updated every Wednesday.
BTC
BTC did meet my expectation of $120k this week, which can be deemed sufficient to deem the pullback complete. I think $120k or below presents a buying opportunity against a wave v target of around $ 130 or higher in the near term.
HOOD
HOOD has exceeded my initial wave 5 target. However, it can challenge $160 next, which puts wave 5 at equal length to wave 1. This is a common range for wave 5.
7. Gold
GLD
I don’t think Gold can remain parabolic forever, and I believe a pullback in GLD towards $350 is due.
8. Large Cap Equities
Apple: AAPL
AAPL is inching towards our wave circle-iii target at $260. Depending on how wave iii ends, we could be eyeing a pullback towards $230s before the next leg higher.
Amazon: AMZN
For AMZN, getting above the 50-day MA will confirm the bottom. Wave (v) can target $250+.
Alphabet: GOOGL
GOOGL does appear to be progressing towards wave c, with $230 as the target.
Meta: META
For META, it is reasonable to expect the bottom to be in. Wave v can target $840+. Falling below the black line, which represents the VWAP since the April low, will indicate severe weakness and could alter my bullish thesis.
Microsoft: MSFT
My concern is that the current bounce was a wave (b) bounce, which implies there is a lower low to come.
Nvidia: NVDA
NVDA is now decisively moving in wave (iii) of circle-v. The entire five waves can take us neatly above $200.
Tesla: TSLA
The price action this week has not dispelled my concern for a wave c of (iv) to test $400.
Palantir: PLTR
PLTR is very likely progressing in wave (v), with a target above $200.
9. Selected ETFs
Semiconductor: SOXX
We are simply awaiting the first sign of a pullback in SOXX.
10. Trade Updates & Monitoring
Live Trades
Instrument | Current Price | Trigger Date | Nature | Entry | Target | Invalidation |
264.94 | Dec 17, 2024 | 1 Year + | 236 | 387 | 189 | |
42.29 | Apr 14, 2025 | Months | 31 | 45 | 27 |
12. Notable ETF Flows From Previous Day
Recent Notable Flows (% of AUM)
The flows are represented as a percentage of the AUM prior to the flow.
Ticker | AUM ($M) | Flow % AUM | Flow % AUM | Flow % AUM |
|---|---|---|---|---|
SOXS | 1451 | 7.67% | 21.58% | 93.14% |
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