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- Stocks Back To Square One. What Now?
Stocks Back To Square One. What Now?
Daily Update on SPY, QQQ, TLT, USO, BTC, COIN, Mag-7, Gold, PLTR
Yimin Xu
June 02, 2025
Hi YXI friends,
As May draws a strongly positive close, SPY is now back to flat YTD. What a trip!
The recovery from the April 7 low has been wild, with almost nobody foreseeing the speed of the market travel.
However, the market progression has seemingly stalled in the past two weeks. We are moving into a more difficult period of weak seasonalities for equities in June, with greater dispersion of outcomes in individual assets.
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.
0. YXI Daily Dashboard
Observations from today
There was a big jump in Atlanta Fed’s GDP estimate for Q2, which came out at 3.8% on May 30. The prior estimate was 2.2%. The difference was driven by a boost in net exports. This conforms to the narrative that the Q1 negative GDP was due to businesses front running tariffs.
Truflation’s inflation data turned down to 1.84%, after briefly breaching the 2% mark last week.
Risk assets remained sideways in the second half of last week.
Click here for the past YXI article explaining many of the components of the dashboard.
April PCE Gets Close To Fed Target
Headline and Core PCE
Friday’s PCE data for April tells a story of inflation moving towards the Fed goal, rather than stagflation.
The Headline PCE in April rose by just 2.1% YoY, inches away from the Fed’s 2% goal.
While Core PCE is still mid-2%, the Fed had historically argued that the Headline data are ultimately what matters. Consumers feel the impact from the overall price level movements, whether it comes from services, energy or food.
1. SPY, QQQ, SPDW
SPDW is updated every Monday.
Unfortunately, SPY remains at the critical crossroad between the bullish and bearish alternatives.
SPY’s second wave of rally (April 21 - May 19) had reached the 1.236 extension of wave i, before moving sideways for the past 2 weeks.
Now, this could just be a small correction en route to the wave (iii) target of $607.
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 reach the 1.382 extension at $607 as quickly as possible, to keep the bullish thesis intact.
I lean towards the bullish thesis due to the broader risk-on sentiment in QQQ, individual Mag-7 stocks, and Bitcoin. However, one must be prepared for both possibilities here.
QQQ tapped the 1.382 extension of wave (i) last week. However, the price action has shown a lack of follow-through into our target region.
As $520 is a heavily traded price level since December, we need some more patience for QQQ to digest the selling volume before moving towards the all-time-high.
SPDW is the Developed World ex-US ETF. It has outperformed SPY this year, continuing to make new highs in the past week.
However, it is reaching the upper resistance trend line since 2023. I would therefore be cautious at this level.
SPY/ SPDW (https://www.tradingview.com/x/UskvaeY5/)
The SPY/ SPDW ratio illustrates the relative performance of US vs ex-US. The current underperformance of SPY relative to SPDW is at the lower supporting channel trend line and close to the 200 EMA.
If expecting mean reversal, the setup is unattractive for long SPDW vs. short SPY here.
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 | 4.08 | -0.15 |
11/05/25 | 4.08 | 3.93 | -0.15 |
12/17/25 | 3.93 | 3.78 | -0.15 |
01/28/26 | 3.78 | 3.68 | -0.1 |
03/18/26 | 3.68 | 3.58 | -0.1 |
05/06/26 | 3.58 | 3.48 | -0.1 |
06/17/26 | 3.48 | 3.38 | -0.1 |
The Fed Funds futures price in 3 cuts from the Fed before June 2026, which is in line with the latest FOMC Dot Plot.
It implies that the rates market is not expecting a recession any time soon, as the Fed remains unmotivated to cut below their guidance.
For those who expect the economy or the labour market to deteriorate meaningfully in the next 12 month, being long the US 2-year bond (i.e. expecting yields to go down) could be an attractive bet.
However, this trade risks a negative carry. Should the economy stay in good shape and the Fed prolong its wait-and-see approach, the 2-year bond price would drop as the yield tends towards the current Fed Funds rate over time.
3-month SOFR Futures Yields
2. Summary Of Today’s YXI Signals
SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR
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