• ...markets across the board were hit by a sharp selloff amid fragile market structures...
• ...the decline began with an interest-rate shock, which spread to crowded positions...
• ...this is not a recession trade...
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A squeeze trade amid fragile market structures
After the payrolls report, expectations for Fed tightening were revised higher and the dollar strengthened in tandem. This was compounded by an overnight continuation of AVGO, which triggered a chip selloff, and news that S&P Dow Jones would not change its inclusion rules ahead of three expected mega-IPO. Tech-heavy sectors were first broken by positioning and technical factors, despite no deterioration in fundamentals.
The most telling evidence is the intraday trading imbalance in NQM6 and ESM6, which were in completely different leagues.NQ futures quickly turned to net selling from the U.S. cash-market open, with cumulative net sales reaching -118 hundred million dollars in notional value by the U.S. close, equivalent to -4.3z on a 1000-day rolling basis—an extreme level of tech de-grossing. ES futures were also weak, but net selling for the full day was only -53 hundred million dollars, equivalent to -1z, and they briefly found support after the open.
Figure 1: Cross-asset selloff initially driven by repricing of tightening expectations, the dollar and Treasuries
Dollar Index, US2Y & 10Y, CMX silver, NQ, BTC
The market structures that had previously amplified upside momentum work in reverse on down days, accelerating deleveraging.Leveraged ETF saw selling of around 600 hundred million dollars shortly before the close, with more than 90% directed at tech-related exposures such as NDX, SOX and XLK. The futures imbalance likely reflected arbitrageurs positioning in advance for this rebalance flow, then completing the reverse unwind late in the session—effectively bringing forward into the trading day the rebalancing impact that would otherwise have been concentrated at the close.
Figure 2: Pressure was highly concentrated in the Nasdaq / AI / momentum baskets
The different structures of ESM6 and NQM6
The Korean index gapped down through our long/short reversal point in Friday's Asian session, marking the official end of another round of longs on Planet since 5.21. Nikkei futures also broke below their daily reversal point on the same day, Since then, aside from mainland China, which had already turned from bullish to bearish earlier, all major Asian markets have entered bearish territory. For now, a confirmed return to bullish territory appears to require a break above the previous highs.
Figure 3: KOSPI gaps down below Planet's reversal point
Original post link View note
Figure 4: Closing out longs
KOSPI (daily chart, as of 260607): We have made three rounds of bullish trades on Planet since 26 year 2 month https://www.meridianresearch.app/home?product=cross-market-strategies
Figure 5: Nikkei also breaks below its daily long/short reversal point
Nikkei futures (daily chart, as of 260607): For now, a confirmed return to bullish territory appears to require a break above the previous highs
As the core trading proxy for Korean equities and global technology, EWY has pulled back about 20% since Wednesday, making it the purest global reflection of this momentum unwind.
The reason is simple: EWY is essentially a highly leveraged AI memory / hardware trade. SK Hynix and Samsung together account for nearly half the index, which itself concentrates the world’s most crowded AI hardware risk exposure.
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After an extremely feverish long trade, a liquidation waiting to happen was inevitable.
Figure 6: EWY, the purest reflection of this Momentum Unwind
EWY (intraday chart, through 260607) has pulled back 20% from its high
In addition to the index, the two technology representatives held by Planet, SOXX and AMD, also fell through their profit-taking levels in this sell-off, and were exited as planned.
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... Note that this exit came after the shift from long to short in SPX that we flagged....
... This warning came before any of the selling began...
... It even came before the data was released...
Figure 7: Intraday Wednesday, Planet’s model confirmed that SPX had entered bearish territory
Another reminder before the market opened on Thursday,View noteIn fact, during Thursday’s session, the bulls tried to reclaim their ground, but did not break above Wednesday’s high
Figure 8: On the first day after the shift to bearish, the bulls tried and failed to reclaim their ground; the following day, Friday, a sharp decline began after the data was released
SPX (daily chart, through 260607); for now, a shift back to bullish would require the index to reclaim 7600
Figure 9: Hedging trades after the shift to bearish
SQQQ (hourly chart, through 260607); the potential bottom reversal here is currently near 41.38; a break below it would be a signal to take profits and exit
Be sure to read the daily posts promptly. This sharp sell-off is a case in point: while the entire market was caught up in a frenzied bullish rally, Planet was among the few to issue a genuinely early and clear warning of the risk of a shift to bearish.
This is just as it was in late March, when oil hit a new high and pessimism about equities was at its peak across the market: at the most pessimistic point, we closed our short positions in global equity indices, shifted from long to short, and clearly pointed out that technology was the real so-called fundamentals trade, while everything else was speculation.
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It comes back to the same things Planet has repeated time and again:
1/ News, data and headlines are merely the results of price movements, and price movements are in turn the result of more fundamental structures. We bet only on those more fundamental structures. That is why you will see us repeatedly get ahead of the market.
2/ It is insecurity that keeps us constantly alert and ready to correct our mistakes at any time...
3/ “As I have emphasized repeatedly, I always look for the flaws in every investment thesis. Once I find them, I actually feel reassured. If I could see only the positive side, that is when I would truly be worried. This does not mean that I would reject an investment thesis simply because I cannot see any negative factors; I just remain vigilant. Conversely, I tend to value especially those investment theses that the market is reluctant to accept, because they are usually the most powerful. Remember the saying: ‘The market climbs on a wall of worry.’”
4/ Respecting the market means dancing along with it: getting excited when it gets excited and resting when it rests. Have a clear basis for both entering and exiting.
5/ Metals are for the dead.
Figure 10: Be the first to act when conditions are favorable, and the first to retreat when circumstances turn against you.
The premise: have a clear basis for both entering and exiting.
The next question is: what happens next?
Note that as market participants, the only thing we can answer is what we expect the path to be—not make predictions or take a bullish or bearish stance.The market is inherently unpredictable, and whether it turns bullish or bearish is not up to us. The market tells us when it turns bullish; if prices continue to confirm that bullish turn, we stay bullish. If prices turn bearish, we turn bearish.
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Overall, this time the liquidation amid increased volatility was due, on the one hand, to insufficient bullish momentum in the market—a common occurrence at high levels. The cost basis of positions held by incoming funds keeps rising, and these participants are not so-called conviction capital; they are mostly retail momentum traders. Holders continue to take profits. This is all part of a dynamic equilibrium. A break below the key bull-bear line, followed by a decline, is the most direct and fundamental logical outcome.
On the other hand, even where downside protection existed, most funds were still inadequately prepared for a decline. Only after the sell-off began did they hurriedly start adding downside hedges. The long-neglected put skew resurfaced. In other words, the second wave of volatility came from the passive increase in hedging demand, Once funds start repricing tail risks, negative feedback at the options level becomes an ongoing backdrop to market action.
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This naturally gives rise to four possible paths:
1) If prices move straight back above the bull-bear line next week, we can expect an advance with a shallower slope than before, since funds cannot continue to make large, one-way bullish bets; this remains an ongoing constraint. The possibility of a failed breakout cannot be ruled out.
2) If prices form higher lows below the line, they will consolidate here in a wedge or rectangle until a new cross-asset volatility trend emerges, or a new catalyst triggers a breakout in either direction. An upside breakout would follow the bullish path; a downside breakout would continue the bearish path.
3) If prices decline in a pattern of lower highs and lower lows, that would be the simplest path. A smooth decline would require only keeping a close eye on the key bull-bear price. Support may form at the 50 DMA, shown as the orange line.
4) If support at the orange line fails, the market will turn fully bearish.
Figure 11: Four possible paths
The fourth scenario is less likely.Remember the most important point:As long as prices are above the annual moving average, this is a bull market.
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Appendix: An update on micro-cap technology proxies outside the indices
Appendix 1: Micro-cap technology proxy update
AMD (daily chart, as of 260607) The plan was followed strictly and the exit took place as expected; as of now, prices would need to reclaim at least the red-dot level before turning bullish again.
SOXX (daily chart, as of 260607) The plan was followed strictly and the exit took place as expected; as of now, prices would need to reclaim at least the red-dot level before turning bullish again.
MDB (daily chart, as of 260607) The stop was moved from 292, as stated in last week’s weekly report, to above 303
HPQ (daily chart, as of 260607) Stop moved from 24.5 in last week's weekly newsletter to above 24.9
CDNS (daily chart, as of 260607) Stop moved from 358 in last week's weekly newsletter to above 374
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Every outcome is the result of trading: one year of trading silver
Industrial demand for silver is indeed improving, but it is still not the marginal pricing driver; what truly determines price elasticity is investment demand.This fundamental picture actually contradicts the claim made earlier by a group of die-hard silver bulls that silver had completely shifted to an industrial-metals narrative. To some extent, silver will continue to be more susceptible than gold and copper to the influence of fund flows and positioning.
Figure 12: Silver found support at the annual moving average, exactly one year after it last touched it
CMX silver (daily chart, as of 260607)
At the beginning of the year, several forces converged to drive the silver short squeeze:1) Concerns that the United States would impose tariffs on silver led to large quantities of physical silver being transferred from London to New York vaults; 2) Indian import orders, together with Chinese retail buying, came at a time when London inventories were low, further intensifying the squeeze in the spot market; 3) Retail investors chased the rally using three-times- and two-times-leveraged silver ETF and intraday call options, turning an already tight market into a leveraged squeeze.
The sharp fall in silver after its strong rally year to date was also driven by trading structure, but that structure had shifted from being a tailwind to a headwind. Leveraged funds continued to become forced sellers during the decline, further magnifying the fall while also acting as a powerful headwind to a bullish rebound.
Overall, the upper and lower bounds of silver's fluctuations over nearly the past year were not determined entirely by fundamentals: the earlier phase relied on a short squeeze and leverage-driven gains arising from trading structure, while the later phase relied on deleveraging and forced selling arising from trading structure, Every trading outcome is the result of trading.
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The annual moving average is a very important price level,
I discussed this in detail in the article about moving averages in the introductory manual on Xingqiu:
Figure 13: What you should see is not the moving average itself, but the positioning structure behind it
See:“An Introductory Manual to Technical Analysis for Readers (Three): Please Use Moving Averages More Often”
Returning to the annual moving average means that a previous trading structure in silver has been completely wiped clean. This marks the end of one chapter of history and the beginning of another; the memory of past prices remains, but it is no longer as important.
As market participants, we need to keep a close eye on which direction this new phase will take at the outset: up or down:
Figure 14: Key levels for bulls and bears continue to move lower
CMX silver (daily chart, as of 260607), stalled after finding precise support at the blue line
After silver's upward move ended, it attempted to rise twice at 5.19 and 5.26, but both attempts were precisely blocked by the key price level 79.5 previously given on Xingqiu.What cannot go up will come down; what cannot go down will go up.The structures invisible to the naked eye are clearly visible here.
Some new friends on Planet aren't quite sure where the key long and short prices come from. These prices are actually the underlying asset's daily stop prices, calculated using Planet's sixteen-state model (Previously discussed 1）（Previously discussed 2) based on state identification. At present, CMX silver's key price has moved up from 79.5 to above 75.3, and the position remains short.
If the annual line (the blue line on the chart) breaks down decisively, silver will enter a region genuinely dominated by bears. For bulls, the best-case scenario would be a failed breakout; the true bottom here will most likely need to be one brought about by a failed breakout.
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To reiterate, only an unexpected bottom is a true bottom, and only an unexpected top is a true top.
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If the price finds support at the annual line, then the annual line and the previous gold-colored downtrend line will form the lower boundary. In any case, turning long again requires silver to at least reclaim the daily key price.
Chart 15: Most true bottoms and tops are formed by Failed Breakouts
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Other commodities: gold, copper, aluminum
According to Goldman Sachs' trading desk monitoring, after March, gold was effectively forced into liquidation mode to raise cash, continuing to serve as a liquidity ATM. Excluding central banks and family offices, institutional investors sold approximately 400 hundred million to 500 hundred million dollars' worth of gold positions net.
In《When Gold Returns to a Pricing Framework Based on Money and Interest Rates》we explained the trading framework gold follows, which so far remains valid across asset classes. Capex on AI data centers is inherently inflationary, and the market has also begun pricing in rate hikes, higher nominal interest rates, and higher real interest rates.
Chart 16: As yields broke upward, gold broke below the annual line
CMX gold overlaid with US02Y and US10Y (daily chart, as of 260607)
The price action, with yields breaking upward at the same time as gold broke below the annual line, was consistent in terms of market microstructure with the path previously marked out by Planet, and the market chose the downside-breakout path.
Chart 17: Last week's weekly path map; the market chose the downside breakout
Here, 1) the price has broken below the annual line; 2) fund positioning is deleveraging; 3) the trend structure has been in a sustained daily downtrend for 14; 4) the model is in short territory...
With no price level readily visible to the naked eye, in this situation the model's calculations are the only reliable basis for navigating entry and exit. The key price has now moved up from 4595 to above 4543; to turn long again, the price must at least return to this level.
Chart 18: Updated gold positioning chart
CMX Gold (daily chart, as of 260607)
Copper’s story combines two bullish narratives, and these have been the main drivers of its attempt to push toward the highs of the current phase. The first is AI: since the 2024 year AI boom began, many Wall Street institutions have treated copper as a commodity proxy for the AI trade, whose central themes are demand from data centers, electricity, and related infrastructure. The second is tariff optionality: the market is concerned that the United States could announce copper tariffs at some point in the future. Even if they are not implemented immediately, they would alter trade flows and near-term pricing.
Figure 19: An in-depth discussion of copper’s fundamentals and tradability, and why things actually got worse after PPI turned positive
Old friends will know that after PPI turned positive, our interest in copper had basically ended. That is also why we have not been writing about it: there was not much to discuss.
As of now, it remains difficult to have particularly high conviction on copper. On the one hand, the current price already incorporates a considerable narrative premium; on the other, the path for tariffs remains highly uncertain. They may be announced later, policy flexibility may be retained, or tariffs may ultimately not be imposed. Copper therefore looks more like an asset with structural bullish arguments whose short-term price action has been amplified by thematic and options-driven trading, rather than one whose current price can simply be equated with linear fundamentals.
Aluminum is somewhat different...
Figure 20: Updated positioning chart for aluminum
CMX Aluminum (daily chart, as of 260607)
For aluminum, we highlighted entries to go long at the three green arrows. The first two arrows marked the market’s most pessimistic moments, when Planet went long at the lowest point in the price structure; the third arrow marked the expected breakout above the horizontal line.The long position’s exit level remains above 3560 and has not been moved.
Aluminum has relatively greater certainty than copper because its spot market remains in an immediate deficit, and the physical market will tighten further into the summer. Even if the strait reopens, damaged smelting capacity will not recover immediately; the best-case scenario is by year-end, while some expect it to take 12 months. In other words, aluminum’s tightness cannot be resolved simply by logistics returning to normal: the physical repair of supply will take longer than the market expects normalization to take.
Aluminum is more of a long position driven by a near-term spot deficit, with strong support in the short to medium term. But if the market starts pricing in new capacity coming online, the far end of the curve and the duration of elevated prices will come under pressure, This is why there is no rush to move the overall stop line, and why it is not appropriate to keep adding to the position, but only to take profits passively.
Figure 21: Updated aluminum-copper ratio and trading proxies for several related baskets
Aluminum-copper ratio(daily chart, as of 260607)
Huafon (daily chart, as of 260607): moved the stop from above last week’s weekly 18.2 to a take-profit level near 20.15
AA (daily chart, as of 260607) Stop triggered; position exited
CENX (daily chart, as of 260607) Stop triggered; position exited
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Alternative assets: the power of price structure
Alternative assets were the first to enter a bear market; what cannot move higher will come down.Where there is no link to a physical asset, the power of price structure is on full display.
Figure 22: Keep a close eye on the master data table
Figure 23: Alternative Asset Positioning Update
Xiaohuang (daily chart, as of 260607)
Review these circles on the chart carefully; my assessment of Xiaohuang’s structure has been archived on the Planet throughout. Price perfection lies in the fact that the things that need to happen will inevitably happen. The calculated T1 and T2 target price indicate where the price is headed—it was already set when it first started moving. All you need to do is watch and see whether it gets there, and make decisions about entering or exiting based on the evidence.
The T2 target price has now been reached.
The leverage cycle lasted 39 days, with the price at +17.74%; attempts to break upward all took place in this area.
The deleveraging cycle has lasted 24 days; as of now, the price is -21.33%...
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Make sure to keep a close eye on it every day.Overall data table, make your own decisions. Rely on yourself, not others (me); relying on others is unreliable.
Note: Please abide by the laws and regulations of your region and allocate your personal assets within the scope of compliance. This content is intended only for users in certain overseas regions.
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Mainland and Asian markets
There’s nothing much to say: dance when it’s time to dance, rest when it’s time to rest, and make decisions about entering or exiting based on the evidence.
It’s all archived on the Planet; review it yourself.
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Figure 24: Dance along when it’s time to dance; don’t work yourself up.
After the market closed on May thirteenth, the Planet’s overall data showed that the mainland market’s uptrend had ended, see《26-05-31 WEEKLY WRAP》
Figure 25: Major indices peaked at the open on 5.14 and have been declining ever since
CSI 500 (daily chart, as of 260607): the bull-bear line moved from 8598 last week to 8399, finding support at the orange line
Shanghai Composite Index (daily chart, as of 260607): the bull-bear line moved from 4113 last week to 5084
Shenzhen Component Index (daily chart, as of 260607) is attempting to form a purple rectangle, so the bull-bear line should not move; leave it unchanged
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Appendix: Some other Asian market trading examples (MLCC, tungsten hexafluoride...)
Appendix 2: MLCC basket (see26-04-25 “About MCLL and other passive component price hikes”and previous weekly updates）
Basket constituents (daily chart, as of 260607) Since Notes was published, +100%; take-profit stop moved to the blue dot
Basket constituents (daily chart, as of 260607) Since Notes was published, +170%; take-profit stop moved to the blue dot
Basket constituents (daily chart, as of 260607) Since Notes was published, +110%; take-profit stop moved to the blue dot
Basket constituents (daily chart, as of 260607) Since Notes was published, +100%; take-profit stop moved to the blue dot
Basket constituents (daily chart, as of 260607) Since Notes was published, +95%; take-profit stop moved to the blue dot
Appendix 3: Tungsten hexafluoride basket (see26-04-04“Tungsten Hexafluoride”）
Basket constituents (daily chart, as of 260607) Since Notes was published, +350%; take-profit stop moved to the blue dot
Basket constituents (daily chart, as of 260607) Since Notes was published, +45%; take-profit stop moved to the blue dot
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Finally, a couple of miscellaneous remarks about responsibility and self-reflection.
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(End of text)
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