Daily Wrap - Billionaires Brawl, Tesla Tanks & We Reach Our Target

My call yesterday was, “the S&P is near the top of my anticipated range, but the price action in the dollar and yields suggests to me that price is likely to come down from the top of the lateral range.”

(2H) – And so it was. The S&P traded up a half-percent at its best level of the day to $5999.70, coming within 30 cents of tagging the $6k level that’s been expected as part of the lateral-tending price action expected for now. The benchmark index ended the day modestly lower, but with an ugly daily price candle at an obviously key area.

There was some trade-related optimism on headlines that Presidents Trump and Xi had a much-hyped 90-minute phone call this morning, but it yielded no real progress—just a vague plan for their teams to meet again soon. I’m calling it a “Nothing Burger,” and rightly so. Let’s face it: negotiating trade with China is the toughest, most critical negotiation, made even messier by the deep-seated geopolitical rivalry at its heart.

Things got heated this afternoon between Elon Musk and President Trump. The escalating tensions coincided with weaker market action. I’ll leave some of the nastier bits out and try to touch on the key elements of the billionaires’ spat:

Elon Musk publicly mocked Trump’s “Big, Beautiful Bill” on X, calling on lawmakers to reject the bill, which sparked a fierce reaction from President Trump. Trump vented his frustration on his own platform, hinting at cutting billions in government subsidies and contracts for Musk’s companies, saying it’s the “easiest way to save money in our Budget.” In response, Musk threatened to decommission SpaceX’s Dragon spacecraft immediately, a move that would severely disrupt U.S. space missions to the ISS and embarrass the nation as the only other alternative would be going back to paying Russia for passage on the Soyuz spacecraft. Musk also posted a poll on X, asking if it’s “time to create a new political party in America that actually represents the 80% in the middle,” with 81% of 3.4 million respondents agreeing. Musk further escalated tensions, alleging Trump’s involvement in the Epstein files, claiming that’s why they remain unreleased, and warning that Trump’s tariffs would trigger a recession in late 2025. Toward the day’s end, Trump attempted to dial back the tension, saying he wasn’t bothered by Musk’s betrayal and praising his bill’s merits.

Here’s the S&P intraday…

The red arrow at 12:08 PM ET was when President Trump first commented on Elon as the S&P came within 30 cents of $6,000. The orange arrow at 12:48 PM ET is when Elon retorted, “Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate.” And things got more heated and went downhill from there.

While the barbs being traded back and forth had their effect, 3C was already showing a negative change in character in underlying money flow as we entered the new month of June…

SPY (1m) – and not just here, but in every major average and the mega caps, all of which figured in to yesterday’s forecast that, “price is likely to come down from the top of the lateral range” today.

We can speculate about whether trade negotiations, weak jobs, anxiety ahead of tomorrow’s Payrolls, or the billionaire’s spat was to blame, but conditions (3C, Rates, HY Credit, the Dollar) were all primed and pointing to exactly what we saw in the market today. Everything else added a layer of uncertainty and markets hate uncertainty.

On the other hand, we know exactly why Tesla (TSLA -13.25%) fell on heavy volume.

That’s about a $150 billion dollar loss of market cap in a day, an expensive argument, and one that weighed heavily on the mega cap-heavy Consumer Discretionary sector.

The European Central Bank voted to cut its key interest rates by 25 basis points, as expected.
Q1 productivity decreased 1.5% (consensus -0.8%) versus the preliminary report of a 0.8% decrease. Unit labor costs, meanwhile, were revised up to 6.6% (consensus 5.7%) from the preliminary reading of 5.7%.
Initial jobless claims for the week ending May 31 increased by 8,000 to 247,000 (consensus: 235,000). Continuing jobless claims for the week ending May 24 decreased by 3,000 to 1.904 million; however, the four-week moving average of 1,895,250 is the highest level since November 27, 2021.
The trade deficit plunged in April to $61.6 billion (consensus: -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.

Averages

S&P-500 ⇩ -0.53 %
NASDAQ ⇩ -0.80 %
DOW JONES ⇩ -0.25 %
RUSSELL 2000 ⇩ -0.05 %

The S&P ended the day with a small bearish Engulfing Candle at the top of my anticipated lateral range.

And did so on heavier sell-side volume. This is about in-line with the moderate short-term negative 3C divergences in the mega-caps that have acted as a base of support for the market, as well as each and every of the major market averages.

SPY (1m) within the lateral price trend

From a broader perspective, not much has changed.

SPY (3m trend) The green arrow is the weekend of the US China tariff rollback news, and an apparent sell the news reaction that has left the market in a more fragile place, but pretty consistent over the last couple of weeks as the price trend took a right hand turn from up to sideways.

VIX’s (+4.95%) intraday wobbles shifted back and forth between relative strength and weakness… mostly relative weakness, even as the political spat intensified. It was only at 3 p.m. ET as things got uglier between Musk and Trump that VIX acted better to end the day about as I’d expect.

VVIX (+2.65%) has had a couple of patches of intraday relative strength the last couple of days, but my takeaway from volatility’s overall behaviour is that investors are complacent. If that attitude keeps up, I think it’s going to catch them off guard and wrong-footed, just as it did before the market crashed, and before the market rebounded. I’ve talked about the need to adapt to the new market’s tempo, wich is very different than the last several years. Most investors have not adapted, thus we have a hated rally that many funds missed out on and have been forced to buy in at higher levels. That’s volatility’s message thus far.

The ABI dropped more today, now at 22! This could get really interesting really fast considering it was at 43 three weeks ago. We’re close to an incredibly high probability market and volatility signal with an uncanny hit rate Don’t get complacent here. Things can change really fast from this level.

S&P sectors

10 of 11 S&P sectors closed lower. The Consumer Discretionary sector was hurt by Tesla (TSLA -14.25%), and the worst-performing sector, followed by Consumer Staples, which felt the pressure of losses in Costco (COST -3.9%) after a report showing a moderation in same-store sales for May and losses in Brown-Forman (BF.B -17.9%), which disappointed with its earnings results and FY26 outlook.

The mega cap growth index (MGK) lost -0.8% while Tesla weighed heavily on the Magnificent 7, MAGS ETF (-2.6%). Both displayed notable relative weakness versus the equal weight S&P 500 (-0.25%). This relative weakness comes on the back of 3C increasingly warning on short-term intraday charts over the last couple of days of faltering money flows in the group.

MGK (1m)

The trend 3C timeframes have not indicated distribution in the group (broadly) yet…

MAGS (3m) – However, the norm is that we see the first indications of distribution on the shortest, most sensitive time frames and then it bleeds out into the longer and stronger trend time frames.

Most stocks trend directionally with the broader market. In mega caps’ case, their weight is so insanely high that the broader market, at least the cap-weighted S&P and Nasdaq, track with them. Of all of my list indices, none move as in sync with the market as the mega caps. It’s rare to see the two diverge, but when they do, pay attention.

SPX and my Equal Weight Index of Mag-7 stocks. We know why the Mag-7 index is leading lower today given Tesla’s loss, but it is what it is. Often the underlying strength or weakness is already there and it just takes a spark or catalyst to move prices. We already know weakness was building on 3C charts in the group the last few days.

Today was the first day this week, as far as I recall, that Semis (SOX -0.45%) didn’t lead the Tech sector and market, but rather tracked in-line with the benchmark index. Price action in the SOX index has been solid, but this is a dangerous place for the Semis considering the recent breakout is not definitive.

SOX (30m)

While Semi’s 3C chart has not been warning the same way that the mega caps have been this week, it has not shown good confirmation on this breakout…

SMH (1m) – 3C did not confirm price’s higher high. And, with the broader benchmark index at 6,000, this becomes a very interesting time for the group.

Materials ⇩ -0.59 %
Energy ⇩ -0.10 %
Financials ⇩ -0.28 %
Industrial ⇩ -0.07 %
Technology ⇩ -0.28 %
Consumer Staples ⇩ -0.96 %
Utilities ⇩ -0.16 %
Health Care ⇩ -0.14 %
Consumer Discretionary ⇩ -2.52 %
Real Estate ⇩ -0.02 %
Communications ⇧ 0.14 %

Internals

One again Advancers and Decliners were about even at the NYSE, while decliners led advancers by a 13-to-9 margin at the Nasdaq. Volume at the NYSE came in at 1.06 bln shares.

There was no consistent Dominant price/volume relationship across all of the averages, but there was a bias toward and a dominant theme in the Dow of Close Down / Volume Up. there is no one day internal signal but this relationship at this level in the market smells a little bit like exhaustion.

Treasuries

Bonds were sold across the curve. The 10-yr yield rose 3 basis points to 4.39%.

Overall, high yield credit is not jumping off the chart and sending a strong signal, but it is interesting how it negatively diverged intraday today just as the S&P was running up to $6000.

SPX (1m today) and HYG. If nothing else, that gives us some more information on the validity of the S&P’s lateral range price levels.

Currencies and Commodities

The U.S. Dollar Index ended the day lower by -0.1% to $98.71 leaving a bullish Hammer candlestick on the daily price chart. This leaves the Dollar sitting right at what I characterized last week as the “yellow flag” zone should the Dollar fall much below. It’s an area that’s been tested nearly a half-dozen times so far this week.

(2H) The two areas I characterized as the yellow flag and the red flag zones. Price action is getting a bit sloppy, but the Dollar seems content to sit right here heading into tomorrow’s Payrolls report.

WTI Crude oil tested $64 again today, then backed off, but ended the day up +0.8% at $63.25.

As noted this afternoon, WTI’s price, near what I consider to be a key price level at $64 reflecting what I believe is the geopolitical eruption zone, looks like it knows something or anticipates a serious escalation in geopolitical tensions. I think it’s pretty safe to assume that oil’s price action is reflecting anxiety ahead of what is likely to be a massive shock and awe retaliation by Russia after Ukraine’s operation Spider Web this weekend struck deep inside Russian territory and reportedly destroyed about 1/3 of Russia’s strategic bombers.

WTI (2m) – bullish price action testing $64 four times since this weekend’s events with a bullish bias in price.

(30m) It looks to me like oil wants to break out above $64 and is just waiting on the catalyst. My estimated measured move for a breakout above $64 comes in around $74 to $75, which would complicate the inflation outlook and reinforce some investors’ views of a reemerging stagflationary environment.

URA (+0.25%) continues to act well in a bullish consolidation that’s an Ascending Triangle with a +17% to +19% measured move upon a breakout.

Gold futures settled -0.7% lower to $3,375.10/oz., but not before testing above $3400 again ($3427.70). Gold remains in a bullish holding pattern, supported by safe-haven demand but hesitant to surpass recent highs. I still believe that it is likely that gold breaks out to a new high around the same time the stock market starts to breakdown from this range.

The last few days I’ve made the observation that Bitcoin’s price action has seen a negative change in character. Today, price followed through on that negative change in character. Bitcoin lost -3.05%, down to $101.559.

(2H)- price action was starting to look like a small bear flag and price broke down from that today on an increase in volume. I sketched out a rough measured move and come up with a target of $99,000 as it wasn’t a huge flag. After that we’ll have to see how price acts or consolidates.

(daily) – It looks like that resistance zone was too much for buyers to overcome at this time.

Summary

We’re at an interesting a place. A place I first forecast price was heading to as early as May 1st when the S&P was sitting at $5604,

“SPX -Today’s small shooting star candle above the 50 day moving average suggest a very high probability that price takes a breather here, either to consolidate before heading higher to the $5900-$6,000 revised target areas,” – May 1st Daily Wrap

This forecast was extremely accurate, right down to the pause/consolidation and eventual price target at $6k.

And here we are. The market has been robust since the strong 3C accumulation signal on April 29, 2025, but it’s grown more fragile since May 12, when U.S.-China tariff reductions triggered some sell-the-news flows. It’s not on the brink of a crash in my opinion, but it’s at a point where I’d expect something to happen. We’re seeing signs—money flow shifts, 3C signals, and danger zones in currencies, commodities, rates, and gold. I’m unsure of the catalyst or exact nature of what’s coming and when it becomes high probability actionable, but the market is now poised to start revealing those answers.

CTA buying activity is no longer a market tailwind. Funds have been forced to buy into this hated rally. According to UBS, shorts have mostly covered. We are approaching the buyback blackout window on 6/16 and runs through ~7/25, knocking out a significant and steady source of buying. The pendulum swung from an extreme (underexposed stocks in a rally) to more neutral ground. Flow dynamics have shifted and aren’t the tailwind they were.

I’d like to have some visibility before taking any major directional positions. I expect to be lightening up on, or exiting entirely, some leveraged long S&P exposure. Just saying… Stay frosty.

Tomorrow’s focal point will be the release of the May Employment Situation Report at 8:30 a.m. ET. The first contraction in the services sector in nearly a year and the slowest private sector job growth in over two years, have heightened anticipation for the upcoming nonfarm payroll data. Other than this week’s JOLTs Job Opening report, labor market data has been coming in on the soft side. Consensus is looking for +125k jobs added, but Wall Street’s whisper number is lower at +80k.

Overnight

S&P futures are up 0.2% but have a slight bearish look, consolidating the afternoon’s losses.

ES (1m) – I doubt that the price action is going to be more meaningful than tomorrow morning’s payrolls report. It just tells us something about the tone tonight.

The US dollar index is unchanged.

WTI crude is down 0.2% but has that coiled look like it’s just waiting for an excuse to trade higher.

Gold futures are up 0.3%. Price looks like it could pull back a little bit more, perhaps to 3350 or so.

Yields are down about one basis point across the curve.