Daily market review May 30 2025 ( Momentum and breadth waning as Trump stop being a Mr Nice guy To China )
Navigating Market Uncertainty: A Tug-of-War Between Policy, Rotation, and Dial down of Recession Fears
The market is caught in a whirlwind of crosscurrents—from tariff negotiations post-Liberation Day to recession alarms and sector rotations. This turbulence has left investors, both retail and institutional, hesitant and lingering on the sidelines. While peak uncertainty surrounding trade policy may be in the rearview mirror, the next wave of instability could strike at any moment. And let’s be honest—it’s probably coming from a Trump tweet while you’re fast asleep.
Foreign Fund Flows: Are they behind the Selling ?
A notable trend has emerged: foreign institutional investors are pulling funds from U.S. equity markets, repatriating capital back home, and diversifying into other continents’ asset markets. Is this a calculated shift in global asset allocation, driven by quantitative funds? Or could it be, as Trump suggests, the work of so-called "globalists"?
Ironically, despite the polarized opinions about Trump, he’s not entirely wrong. Foreign investors with global exposure are indeed adjusting their portfolios—redirecting some funds out of the U.S. and into domestic or alternative markets. The proof? Stock, bond, and gold market movements reveal that losses in equities and fixed income often occur outside U.S. trading hours, a strong signal of foreign-driven selling pressure.
Trading in a Headline-Driven Market
Whether we like it or not, today’s market is dictated by headlines. While relying on fleeting news stories for investment decisions isn't ideal, survival demands adaptability. The key? Sticking to internal trendlines, critical levels, and well-defined risk parameters.
I’ve overhauled my approach entirely—embracing a structured routine that involves scrutinizing charts, tracking institutional money flows, monitoring options dynamics, and analyzing policy cues. Every day is a juggling act: decoding policymaker statements, mapping out market reactions, and gaming out potential scenarios—all while managing household chores and entertaining a hyperactive 2-year-old. Sleep? Who needs it! At long last, I’ve surrendered to my wife’s insistence on hiring a maid. Without that, I’d have to clone myself.
The Next Market Battleground
In my view, these five key questions will shape the market’s near- to medium-term trajectory:
1. Soft Data vs. Hard Data: Will economic survey sentiment catch up to reality, or will actual data deteriorate to meet expectations halfway?
2. Tariff Front-Running Fallout: How much of a retracement will follow trade-driven growth distortions? With muddied data, getting a clean read will be challenging.
3. U.S. Bond Yields vs. Global Rates: Can domestic long-term yields stay subdued even as global rates rise?
4. Labor Market Trends: Will long-term unemployment continue creeping upward?
5. The Fed’s Response: How reluctant will the central bank be in cutting rates to preserve its independence from Trump political pressure amid potential economic weakness?
In the nearest term, how market react to the following trendline is all that matters for both SPX and NDX,
To this end, let dive into the market review section,
Broad market overview
Overall, market has been meandering in the small range post Trump-Middle east tour inspired pop. With housing market and stock trying their darn best to stay above the recent swing low.
S&P 500 11 sectors overview : a Tale of two Laggards
Markets have been treading water post-Trump Middle East tour, with stocks and housing doing their best to hold recent lows. Among S&P 500 sectors, the broad market remains relatively flat—but here’s the key takeaway: all sectors are above their 20-day moving averages except for Energy and Healthcare, the two industries investors seem determined to avoid at all costs.
MOVE index
Move index is currently at 92.11, bond price implied volatility is expected to be around 9.21% per annum.
Lower MOVE points to (implied) lower bond market volatility going forward. Bond volatility moving lower translates into less haircut to bond, in which more liquidity can be extracted from the collateral pool.
Summary of Market situation
Trend and Momentum Section
SPX
NDX
Market breadth section
% of SPX stocks above 20D 50D 200D moving average
S&P 500 index and breadth retrace, Long term Breadth is getting back to decent level, while Medium and Short term breadth is consolidating, which seem to be at risk of falling further
Crucial to watch breadth level as it break down below to retest Gap @ 5700 & 50D MA at 5600 or break above the recent high of 5968.61
% of SPX stock above 20D MA : 60.4%
% of SPX stock above 50Day MA : 70.4%
% of SPX stock above 200Day MA : 51%
NYSE & Nasdaq market internals
There are more Decliner than Advancer, and at higher volume for NYSE, but a tad lower for Nasdaq
In May 30 2025 session,
1.28 to 1 NYSE Decliner to Advancer ratio (1557/1216 )
1.48 to 1 Nasdaq Decliner to Advancer ratio (2661/1801 )
Positioning and Sentiment
According to Barclays data
Both retail and Institution are under allocated in their equity holding. There are conflicting signal from various sources for both Retail and Institution, but net-net,
Retail is leaning towards overweight ( based on Leverage ETF and options data )
Institution is leaning towards lighter positioning. ( based on systematic data )
Why are they leaning light ? perhaps in anticipation of next bout of new volatility ?
Bitcoin
Bitcoin is having a fail breakout moment of sorts, which is a buzzkill to the crypto cheerleading team at the moment.
It’s falling below 20D MA, but is still above 50D MA, the sooner it cross above 20D MA, the better. Else it’s at risk of falling below 50D MA.
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions on all time frame ( short, mid & long term )
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