Hi YXI friends,

The market sold everything except for Gold and Bitcoin on Monday. Investors are highly anxious of the recessionary risks in the new trade environment. SPY and QQQ may find some footing in the near term, but the risk remains on the downside.

We have launched the Daily TSLA Mode Signals today - you can find it in our dedicated morning note for daily model signals on TSLA (free), AAPL, BTC, and TLT, or in the main content below.

Let’s dive in!

Table of Contents

• 1. YXI Daily Dashboard

  • Observations from today

  • SPY and QQQ Charts

• 2. TLT

  • FOMC Projections

  • YXI TLT Model Strategy Signal

  • TLT Technical Analysis

• 3. Bitcoin

  • YXI BTC Daily Signal

  • BTC Technical Analysis

• 4. Magnificent 7

  • Apple

  • YXI AAPL Daily Signal

  • Amazon

  • Alphabet

  • Meta

  • Microsoft

  • Nvidia

  • Tesla

  • YXI TSLA Daily Signal (New)

• 5. Trade Updates & Monitoring

• 7. Notable ETF Flows

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. Gold (GLD) and Bitcoin (IBIT) both went up by 3% yesterday. On volatility adjusted terms (z-score), Gold outperformed every other asset.

2. SPY and QQQ continued moving down as we expected, in a direct fashion.

3. On a volatility adjusted basis, all of the Mag-7 names outperformed SPY and QQQ, with AAPL dropping the least.

SPY and QQQ Charts

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

SPY moved according to our expectation towards the first target region of $497-508 (green box). This is the 0.618 - 0.786 retrace of the wave iv bounce, where bulls should start trying their hand for picking the bottom.

A quick bounce here does not clear the downside risk, where a deeper target of $470 or below awaits (red box). Getting above the 200 EMA would invalidate this bearish view.

QQQ (https://www.tradingview.com/x/D2j5oFJM/)

QQQ also touched the upper end of our initial target of $416-427 (green box) yesterday. Bulls may start thinking of an entry here in case the April 7 low was the true low. There is also an increase in volume around the prices in the green box for support.

To me, risk still tilts towards the downside. We could get a quick bounce near term, but unless it clears above $490, there is still a strong possibility of a new low.

2. TLT

Will Trump Fire Powell?

This is NOT a political newsletter - I am thinking out loud from a Game Theory perspective on the situation.

The President cannot remove the Fed Chair due to policy disagreement. The setup of the Fed is exactly so it’s independent from the White House. In the US history, no President has been able to remove the Fed Chair.

The Fed Chair could be impeached by the House of Representatives for “high crimes and misdemeanours”. It would require a majority vote in the House and a two-thirds majority in the Senate.

However, the Trump can do two things. He can constantly berate Powell and make Powell’s life very difficult, prompting Powell to resign before the end of the tenor.

A more underhanded way would be to investigate Powell’s personal dealings and close relatives. This may result in finding something and making Powell resign or simply making Powell’s personal life also very difficult.

If Powell decides to power through to the end of his tenor - and he is very motivated to leave a lasting legacy - Powell needs some explicit reason to lower rates that’s in line with the Fed’s twin goals (maximum employment and price stability).

If Powell resigns, I think we could see a COVID-size shock to the financial system as investors lose faith in the Fed’s independence and therefore the credibility of bonds and the US Dollar.

FOMC Projections

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

The FOMC expectations remain unchanged overnight, with 4.5 rate cuts (i.e. 4 × 25bp with about a 50% chance of a fifth cut) in the next 12 months.

Interestingly, the Rates market does not really expect a recession with this pricing. Why?

3-month SOFR Futures Yields

In the event of a recession, like 2008 or 2020, the Fed would slash the Fed Funds rate close to 0. The market is pricing a more “preemptive” and shallow move by the Fed to cut rates like in 2019. The market is also assuming that inflation would more or less reach the Fed target - the 5-year breakeven / inflation expectation is at 2.25%.

One could argue that recessionary risks are underpriced by the market right now, both in bonds and stocks.

YXI TLT Model Strategy Signal

For greater explanations on how the model strategies work, please see my separate morning note dedicated to the Daily Model Signals (TSLA signals are free).

We employ individual proprietary quantitative models for each name we cover to outperform the Buy-and-Hold strategy. The model examines the various macro drivers and asset specific factors against an asset’s historical performances, taking positions when the conditions are favourable and moving to cash when they aren’t. It is a long-only strategy without leverage.

In interpreting the signal, there is no “minimum” holding period when the signal shows 1 (“position on”). The model strategy simply holds the asset until the signal turns to 0. This could be after 1 day, 1 week, or longer.

Claim Your 7-Day Free Access To YXI Premium