Hi YXI friends,

Market definitely took a brutal turn since our Index ETF update last Thursday.

On Friday, Michigan Consumer Expectations came in lower than expected (64 actual vs 67 expected), sparking growth concerns. Since consumer spending makes up 70% of the GDP, worsening consumer expectations often precede a recession.

Moreover, Trump has continued to impose tariffs on China without further negotiations, while the EU may also face 25% tariffs on auto imports.

Between Friday and Tuesday, SPY sold off 3.5% from peak to trough, while QQQ and IWM were both down more than 5%.

Is the bull market over? You may think that judging by the amount of fear out there. Yields are down. Bitcoin is crashing. And even Gold is pulling back.

Now let’s review SPY, QQQ, IWM, and TLT individually to see where they could be headed in near term.

Table of Contents

• 1. S&P 500: SPY

  • February Seasonality

  • SPY Valuation

  • Earnings Growth

  • Price Technicals

• 2. Nasdaq 100: QQQ

  • QQQ Valuation

  • QQQ Technical Analysis

• 3. Russell 2000: IWM

  • IWM Technical Analysis

• 4. Bonds (TLT)

  • Yield Curve Update

  • TLT Technical Analysis

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. S&P 500: SPY

February Seasonality

If we zoom out slightly from the individual episode, we observe that SPY has in fact more or less followed its seasonality trend in February.

Typically, SPY starts February on the front foot, charging higher in the first half of the month. However, in the final 10 days, it tends to see much weaker performances.

The chart above maps SPY’s performance in 2025 YTD (in gold) versus its Seasonal trend since 1993 (in white). While this January was atypical, SPY’s February moves more or less followed the script.

(Premium YX Insights members can see this chart being tracked daily on the Google Sheet)

SPY Valuation

In terms of valuation, SPY has cheapened from January's 29.8x P/E (LTM) multiple to 28.6x.

This is still historically expensive and likely means poorer returns in the next 10 years than the past 10 years (11% CAGR) using a buy-and-hold strategy.

Earnings Growth

In the current earnings season so far, 76% have reported actual EPS above estimates (source: Factset), in line with the 10-year norm. S&P 500 companies are reporting an earnings growth for Q4 of 16.9% YoY, which is the strongest growth quarter observed since 2021.

However, on the back for higher interest rates and increased global tensions around tariffs, analysts are revising down their earnings outlook for 2025 to 12.7% (source: FactSet).

This means the street is now expecting a lower year-end target for S&P 500, which also partially explains the more anxious nature of the market of recent days.

Price Technicals

SPY Daily (https://www.tradingview.com/x/erlV39hc/)

Using Elliott Waves as the main tool for technical analysis, I see the latest downturn as a wave-b pullback.

The wave-c target is $634, which is the 1.236 extension of wave-a. This expectation assumes we are in a technical pattern called “ending diagonal” in a larger degree wave v.

2. Nasdaq 100: QQQ

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