Follow @MrTopStep on Twitter and please share if you find our work valuable!

Our View

How does the S&P resolve the highest yields since 2007? The markets do a one-day sell-off and then back-and-fill, open lower and rally. It’s exactly like I said — the S&P has been making good out of bad news.

It doesn’t really matter what you or I think, because U.S. investors are shoving money back into the stock market at a record pace. In the last three weeks, U.S. stock buyers have bought $48 billion in stock, and we saw some of that recently when the NYSE 3:50 imbalance meter bought over $16 billion over just a few days. When you have this type of non-stop money flow and low volume, it’s hard to fight — even after an over 20% rally.

For the week ending May 16, 2025: ETFs had $31.29 billion in net issuance, offsetting $2.69 billion in mutual fund outflows, leading to $28.60 billion in combined inflows. Leading the ETF inflows list once again was the Vanguard S&P 500 ETF (VOO), which pulled in $4.8 billion. The fund has now amassed a staggering $62.5 billion in inflows for the year, by far the most of any ETF.

In second place was the Invesco QQQ Trust (QQQ), with $4.6 billion of inflows. The Nasdaq-100 has mirrored the broader market’s rebound and is now up 2% year to date, after being down 18.5% at its trough last month.

Year-to-date inflows have now topped $400 billion, putting 2025 on track to be one of the biggest years ever for ETF demand, attracting $146 billion, more than double the combined inflows to Europe, Japan, China, and India. An estimated $50 billion to $100 billion moved from the U.S. stock market to European equities in 2025, based on reported outflows ($42.7 billion confirmed through May 9).

Like historical stats, following the stock market inflows and outflows has always been helpful in determining direction — and clearly, the numbers above prove that.

Late in the day, the ES and NQ chopped in a narrow range, traded up to a new high at 5895 as NVDA and a few other tech stocks fell, and the ES sold off 40 points. I think the above flows are a countersink to the falling bond and note prices, but what if they continue to fall, and yields continue to rise?

@CMEGroup Memorial Day Holiday Schedule

Great Goldman Sachs article on Gold below:

Gold prices have broken a series of records over the past year, and the rally is expected to continue. Goldman Sachs Research forecasts that gold will climb to $3,700 per troy ounce by the end of 2025, up from $3,326 on May 23.

The surge in 2025 has been fueled by renewed investor appetite and a long-term structural shift in central bank demand.

Additional momentum has come from uncertainty surrounding the Trump administration’s tariffs on major trading partners. Since March, investors have increasingly turned to gold, citing economic concerns and market volatility.

“Whenever there’s a lot of uncertainty, traders temporarily park their money in gold. When there’s clarity, gold prices tend to drop again because traders know what to do with their money,” says Lina Thomas, a commodities strategist at Goldman Sachs Research.

Emerging market central banks are increasing their gold holdings

Over the longer term, Thomas expects central banks—especially in emerging markets—to continue supporting gold prices. Russia’s invasion of Ukraine and the subsequent freezing of Russia’s foreign assets by Western nations marked a significant shift. Since 2022, these central banks have increased their gold purchases fivefold, according to Goldman Sachs Research.

Developed market central banks tend to have larger gold holdings,
partly as a legacy of the gold standard era when sovereign money supplies were linked to the commodity, leaving them with a higher proportion of their reserve assets in gold.

For example, China holds less than 10% of its reserves in gold, compared with about 70% or more for the US, Germany, France, and Italy. Foreign currencies make up a larger share of emerging market central bank holdings.

“The global average is roughly 20%, which we view as a plausible medium-term target for large emerging central banks,” says Lina Thomas.

The growing role of gold ETFs

While central bank purchases have been the main force behind rising gold prices in recent years, exchange-traded fund (ETF) holdings are increasingly contributing to demand. ETF holdings typically track interest rates—rising when rates fall—but they tend to overshoot when recession fears increase.

A recession now appears less likely, with signs of progress on trade-policy negotiations. Goldman Sachs economists estimate a 35% chance of a US recession in the next 12 months, down from 45% earlier. Still, in the event of a downturn, gold prices could climb to $3,880 per troy ounce.

“While the key factor since 2022 used to be central bank buying alone, ETF investors are now joining the gold rally,” Thomas notes. “As both compete for the same bullion, we are expecting gold prices to rise even further.”

MiM and Daily Recap

The Thursday ES session began on a weak note, with overnight Globex pressure dragging prices to a premarket low of 5828.75 at 8:15 AM. This marked a 46.25-point decline (-0.79%) from the previous day’s settlement of 5875.00. Buyers stepped in early, driving a sharp recovery into the 9:00 AM hour, where the first significant lower high formed at 5866.25, up 37.50 points (+0.64%) from the low.

However, the cash session open at 5855.50 brought some hesitation. A quick retreat to 5842.75 at 9:33 AM resulted in a 23.50-point pullback (-0.40%), but the market regained footing and rallied toward a new morning high of 5880.50 at 10:06 AM—another 37.75-point surge (+0.65%).

A deeper decline followed as sellers pushed price back to 5843.50 by 10:57 AM, a 37.00-point loss (-0.63%). From there, a more sustained bullish impulse took hold, pushing ES to a fresh intraday high of 5885.00 at 12:15 PM, a 41.50-point move (+0.71%).

That rally lost steam shortly after, giving way to a minor retracement to 5854.75 at 1:09 PM before bulls pressed onward again. A new high of 5892.25 was tagged at 2:24 PM, marking a 34.50-point rally (+0.59%). A slight dip into 2:39 PM saw price ease to 5877.75 (-11.50 pts, -0.20%) before one last burst took ES to the session high of 5895.00 at 3:27 PM. This final advance added 17.25 points (+0.29%).

But the strength didn’t hold. Into the final half-hour, a wave of selling pressure emerged, dragging ES sharply down to a session low of 5853.75 at 3:57 PM, down 41.25 points (-0.70%) from the high. The regular session closed at 5855.50, a modest 3.00-point gain from the open (+0.05%), while the full session finished at 5868.00, representing a net change of +10.00 points (+0.17%) from Wednesday’s close.

Market Tone & Notable Factors

The overall tone was mixed with a bullish tilt through much of the session before a clear shift to selling into the close. While buyers consistently stepped in at higher lows throughout the day, the late breakdown from the 3:27 PM peak of 5895.00 into the 3:57 PM low of 5853.75 showed exhaustion and liquidation.

Volume during the regular session was solid at 1,075,735 contracts, with the full session totaling 1,356,015. This suggests strong participation, especially in the final hour.

MOC imbalance data showed a notable buy bias with 67.7% of dollar flow on the buy side, reaching a $2.04B imbalance at 3:51 PM. While the percentage of symbols on the buy side only reached 55.8%, the dollar imbalance exceeded the ±66% threshold, signaling strong institutional buy pressure. However, this flow failed to hold prices up, likely because much of the buying occurred before the final wave of selling hit.

In conclusion, despite positive net changes for the day, the failure to hold gains above 5890 and the sharp drop into the close temper the bullish narrative. With Friday heading into Memorial Day weekend, attention will likely focus on whether buyers can reassert control or if the closing weakness signals further pressure ahead.

How to read the MIM

Technical Edge

Fair Values for May 23, 2025

Daily Breadth Data 📊

For Thursday, May 22, 2025

Weekly Breadth Data 📈

Week Ending Friday, May 16, 2025

Guest Posts:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

Futures are -30bps ahead of the 3-day weekend. Things were quiet until Trump threatened tariffs on AAPL – when that happened ES lost 20 handles in seconds. Liquidity holes.

No major data is on top for today – and we think traders will still default to wanting to be short vol over the long weekend which should be supportive of stocks – this idea is a bit less strong now given the Trump tweets which sent ES to 10-day lows.

The SPX levels for today look exactly like yesterday: 5,900 area resistance and no major support until 5,775. The 0DTE straddle is also near the same price: $38/65bps. This underpricing of vol (in our opinion) presents risk in an of itself – if the market does not have major support/resistance for 50-60 handles and the SPX thinks the max move is 40, it could lead to a vol short cover which adds some market momentum.

We noted that straddle felt to cheap yesterday, and the SPX rallied to +65bps (the 0DTE straddle price) to intraday highs of 5,877 before collapsing 35 handles in 30 minutes. That ultimately left the SPX exactly unchanged on the day. Two things on this: we don’t think its ironic the market pivoted at the 0DTE straddle price – that seems to happen often – and 2) losing 35 handles in a heartbeat reiterates the liquidity issue (just like this AM futures drop).

One thing catching our eye is the cooling of call skews, as seen in Compass. In early April we went from very heavy put skews & high IV’s, to low IV’s and high call skews – and now call skews have flattened for many top names. This call skew has come off just from stocks going into OPEX at 3 month highs – and quite frankly many of them are just a whisker away from those highs. This should be welcome news for bulls, as it suggests that re-entering upside exposure is cheaper now vs last week. It does suggest that traders are now less aggressively long, which syncs with the general upside stall-out that came earlier this week.

Much of the world is focused on next weeks NVDA earnings which is Wed night. The SPX term structure does seem to have a bit of a kink to it related to the earnings, with ultra low 12% implied vols marked for Tuesday. We will continue to believe these vols are too cheap – be it the pre-NVDA marks or post. This does not mean we want to carry a full short position – but we do want to carry some downside protection. Quite frankly, that downside protection does not have much carry cost (in our opinion), and the cheaper equity calls give better fixed risk ways of playing upside for those that remain bullish. For us – we want to see the SPX regain 5,900 before flipping to a bullish stance.

Last thing – bitcoin. We’ve been tracking the IBIT vols for a few months now, and as bitcoin is breaking to new ATH’s we see the IV rank start to lift. We think this is a bullish construct, as we think that short term highs will come when BTC/IBIT goes “stock up, vol up” resulting in a high IV rank and high call/risk reversal rank. We started to see some of that crypto FOMO percolate yesterday, with many speculative stocks like “Cantor Crypto Ventures” (CEP) rising +10%.

For playing IBIT we like >=1-month call spreads (as per Tuesday), which help to isolate the high call skew cost, but still gets exposure at relative low IV levels.

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Trading Room News:

Polaris Trading Group Summary – Thursday, May 22, 2025

Yesterday’s session was a textbook example of a Cycle Day 2 (CD2) trading environment with rhythmic two-way action, offering traders both opportunities and valuable lessons across the session.

Morning Session Highlights:

Midday Session:

Afternoon & Power Hour:

Key Lessons & Tools:

Looking Ahead:

Overall, the room navigated a classic range-trade day with multiple actionable setups. The real strength came in sticking to structure and letting the day unfold without forcing trades—a hallmark of PTG’s disciplined approach.

DTG Room Preview – Friday, May 23, 2025

Calendars

Economic Calendar Today

This Week’s High Importance

Earnings:

Full Calendars

Affiliate Disclosure: This newsletter may contain affiliate links, which means we may earn a commission if you click through and make a purchase. This comes at no additional cost to you and helps us continue providing valuable content. We only recommend products or services we genuinely believe in. Thank you for your support!

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!!

Follow @MrTopStep on Twitter and please share if you find our work valuable!