Trump-Xi Optimism Tempers U.S.-China Trade Rhetoric

on June 3, 2025

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Our View

Last Friday’s 3:50 NYSE stock imbalance was $10 billion to buy. When you have huge money flows like this, it becomes very hard to fight the tape. After selling off down to 5870.50 and then making a sequence of higher lows, the ES traded up to 5938.00 at 2:25, staged a small pullback, and then rallied up to 5958.50 after the NYSE close.

The NQ made a Globex low at 21,071.50, opened the regular session at 21287.75, and jumped over 200 points. It also pulled back and rallied to a new high at 21,433.50, a jump of 362 points off the Globex low.

The markets shrugged off the renewed trade tensions after China said the U.S. had “seriously undermined” the truce, claiming Washington had introduced “discriminatory and restrictive measures,” such as export-control guidelines for artificial intelligence chips and revoking visas for Chinese students. On Sunday, Treasury Secretary Scott Bessent said he was confident Trump and Chinese leader Xi Jinping would soon talk and that problems “will be ironed out.”

In the first part of the day, the ES and NQ rallied but remained range-bound until after the NYSE imbalance showed $700 million to buy, while the NASDAQ had $750 million to sell.

After having their best month since 2023, the ES eked out a gain of 0.4%, the NQ gained 0.71%, and the YM closed up 0.20%. Treasury yields edged higher, with the 10-year note rising to 4.461%.

Bessent also said the budget deficit would gradually be reduced over the next few years as Trump looks to shore up support for his fiscal megabill. The dollar fell as the euro, the pound, and the yen all strengthened against the greenback. Gold closed up $96.82, settling at $3,289.34, and crude oil jumped 2.8% after Ukraine launched its largest attack ever on Russian military installations.

CTA Flows

The full projected CTA flow breakdown over the next 1 week:

Flat tape: Sellers $1.79B ($260M out of the US)
Up tape: Sellers $2.49B ($381M into the US)
Down tape: Sellers $17B ($5.5B out of the US)

And over the next 1 month:

Flat tape: Sellers $1.35B ($201M into the US)
Up tape: Buyers $5.27B ($5.7B into the US)
Down tape: Sellers $123.9B ($36B out of the US)

And while CTA selling will emerge, it is unlikely it will be a waterfall—at least not yet. That’s because the key pivot levels, especially the all-important medium-term pivot, will see a more aggressive position.

Our Lean

China’s manufacturing activity tumbled in May, and it looks like the tariff negotiations are not just stalling with China; Japan and Europe are weighing on the markets this morning. This morning’s economic reports include the S&P final US manufacturing PMI at 9:45, ISM and Construction spending, and Federal Reserve Chair Jerome Powell’s opening remarks at 1:00.

Our lean: I don’t know, on one side of the coin it feels like the ES and NQ are range bound, and on the other side, buying the lower opens has been working. One of the things we have seen a lot lately is the US fires new tariffs on China, it pisses everyone off, and then the US comes back and makes concessions and the markets rally again. My lean is to buy the open or the early weakness and sell the rips. We could be looking at a repeat of yesterday

MiM and Daily Recap

Intraday Recap

The S&P 500 futures (ES) opened Monday’s regular session at 5897.50, below the prior day’s settle of 5914.00. Early trading featured a deep flush, with price cascading to a session low of 5870.50 by 10:00 AM. That marked a 47.25-point drop (-0.80%) from the early high of 5917.75 set at 9:35 AM.

After bottoming, buyers stepped in aggressively, triggering a reversal back to 5916.75 by 11:10 AM, a 46.25-point recovery (+0.79%). A pullback followed, printing a higher low at 5901.25 by 11:35 AM before price resumed its ascent.

The next leg of the rally peaked at 5921.25 by 11:55 AM, where resistance held and sellers briefly took over, pushing price down to a higher low of 5910.25 at 12:25 PM. From there, ES churned sideways into early afternoon before buyers regained traction.

Momentum accelerated into the close, with the market stepping higher through 5927.00 at 1:10 PM, then 5948.00 by 3:20 PM. The final push came just ahead of the bell, printing the high of day at 5949 just before the bell at 4:00 PM, representing a full 85-point rally from the morning’s low (+1.45%).

The regular session closed at 5947.25, up 49.75 points or +0.84% from the open, and up 32.50 points (+0.55%) from Friday’s 5914.75 close. Cleanup trading saw only minor retracement, ending the day at 5949.25.

Market Tone & Notable Factors

The tone was bullish throughout the session, with the market steadily recovering from early lows and establishing a series of higher highs and higher lows. Monday’s 50.50-point full session gain (+0.86%) was driven by strong intraday buying that accelerated into the late afternoon.

Volume confirmed the rally, with the regular session trading over 914,000 contracts. Globex trade was muted by comparison at 178,000, while the cleanup hour added another 57,000.

The Market-on-Close imbalance data added to the bullish case, with a substantial $1.467B buy imbalance hitting the tape at 3:55 PM. The buy-side represented 67.8% of total dollars, breaching the notable threshold for directional bias. However, the symbol imbalance came in at 57.4%, below the key 66% marker, suggesting breadth participation was strong but not dominant. Despite this, the late-session surge to 5955.50 and sticky price action into the close underscored confident institutional buying into the bell.

With a firm close above the 5940 level, Monday’s session positions bulls with short-term control heading into Tuesday. All eyes now turn to follow-through strength and whether this rally base can hold through early economic data releases.

How to read the MIM

Technical Edge

MrTopStep Levels:

How to read MTS Levels

Fair Values for June 3, 2025:

SP: 9.22
NQ: 37.33
Dow: 57.98

Daily Market Recap 📊

For Monday, June 2, 2025

• NYSE Breadth: 46% Upside Volume

• NYSE Breadth: 50% Upside Volume
• Nasdaq Breadth: 57% Upside Volume
• Total Breadth: 56% Upside Volume
• NYSE Advance/Decline: 46% Advance
• Nasdaq Advance/Decline: 53% Advance
• Total Advance/Decline: 50% Advance
• NYSE New Highs/New Lows: 88 / 53
• Nasdaq New Highs/New Lows: 191 / 98
• NYSE TRIN: 0.74
• Nasdaq TRIN: 0.83

Weekly Breadth Data 📈

Week ending Friday, May 30, 2025

• NYSE Breadth: 54% Upside Volume
• Nasdaq Breadth: 59% Upside Volume
• Total Breadth: 57% Upside Volume
• NYSE Advance/Decline: 68% Advance
• Nasdaq Advance/Decline: 60% Advance
• Total Advance/Decline: 63% Advance
• NYSE New Highs/New Lows: 153 / 59
• Nasdaq New Highs/New Lows: 278 / 204
• NYSE TRIN: 1.73
• Nasdaq TRIN: 1.02

Trading Room Summaries

Polaris Trading Group Summary – Monday, June 2, 2025

Overview:
Cycle Day 3 offered a textbook setup that tested patience, discipline, and execution. The session centered around the critical Line in the Sand (LIS) at 5915, which served as the primary battleground between bulls and bears. The market demonstrated classic “Snaps and Traps” behavior early on, with a midday breakout validating the bullish scenario laid out in the pre-market plan.

Morning Session:

Price opened with back-and-forth action, repeatedly testing the 5915 LIS.
Early efforts to rally failed, leading to an initial rejection and a move toward the lower support target around 5880, validating the bear scenario outlined pre-market.
The tone was cautious, with several in the room noting stop-hunting behavior—“rabbit hunt” comments reflected the trickiness of early action.
The “Snaps and Traps” rhythm was well-identified, with PTGDavid highlighting early misdirection patterns and reaffirming the critical nature of 5915.

Midday Breakout:

Just before noon, the market made another run at 5915, leading to what David called the “Noon Balloon”.
The breakout above 5915 triggered a surge of buy stops, confirming the bullish thesis.
PTGDavid’s excitement (“BOOOOM!”, “There they gooooo!”) captured the energy as bulls finally conquered resistance.
This move turned the session decisively bullish and offered a clear opportunity for traders who stayed disciplined through the earlier chop.

Afternoon Strength:

The market continued to stair-step higher, ultimately fulfilling the bullish targets of 5930 and 5945 outlined in the Daily Trade Strategy (DTS).
PTGDavid framed this as a classic Mutual Fund Monday, with “full buying mode” in effect into the close.
Price action reinforced the lesson: do not short when it feels hard to buy—a critical insight shared late in the session.
Although the MOC was a “non-event,” the day ended on a strong, controlled note.

Key Takeaways:

5915 was the pivotal level and respecting it guided traders through both the morning indecision and the afternoon breakout.
Staying aligned with the DTS briefing—especially the bull scenario above 5915—delivered clean target hits and excellent trade structure.
Discipline during early “Snaps and Traps” paid off for those who waited for confirmation.
The concept of “trading heaven” and avoiding shorts in difficult long setups was a core psychological lesson.

Quote of the Day:

“Trade so that profits remain as a result of consistently following your rules and making many trades. This is the difference between a ‘win-lose game’ and a ‘game of probability.’” – @samuraipips358 (shared by PTGDavid)

Final Word:
Well played by the room—strong execution, disciplined mindset, and a great example of trusting the process.

Discovery Trading Group Room Preview – Tuesday, June 3, 2025

Trade Tensions:
- US-China trade détente is under pressure; China accuses the US of violating agreements over rare-earth access and AI chip restrictions.
- China holds leverage, with stronger AI chip capability and US dependency on rare minerals.
- Trump is seeking direct talks with President Xi.
Global Impact:
- China’s May Caixin manufacturing PMI fell to 48.3 (vs. 50.7 expected), signaling contraction and hitting its lowest level since Sept 2022.
- Tariffs are rippling through Asian supply chains.
US Consumer & Pricing Impact:
- Tariff effects just starting to hit shelves as pre-tariff inventories thin out.
- Average US tariff now 18%, with projected 10–30% price hikes on imports including clothes, medicine, cars, and toys.
- Some firms using tariff pressure to justify price increases despite political risks.
Earnings & Economic Calendar:
- Premarket: Brown-Forman (BF.B), Dollar General (DG).
- After-hours: CrowdStrike (CRWD), Hewlett-Packard Enterprise (HPE).
- Key data: JOLTS Job Openings, Factory Orders @ 10:00am ET.
- Fed speakers: Goolsbee (12:45pm ET), Logan (3:30pm ET).
Market Volatility & Technicals:
- ES 5-day ADR dropped to 87.25 points from 100+ last week; volatility still moderate.
- No clear whale bias overnight—volume bullish but light.
- ES bounced off 200-day MA (5895.75), now mid-uptrend channel.
- Key levels:
  - Resistance: 6085/90s
  - Support: 5856/59s, 5820/25s, 5343/48s, 4978/83s

ES

The bull/bear line for the ES is at 5934.25. This level marks the pivot that separates bullish from bearish intraday sentiment. Holding below this level favors sellers, while a reclaim and sustained trade above would shift control back to the bulls.

ES is currently trading around 5922.00, below the bull/bear line. This indicates bearish pressure heading into the session. If buyers can reclaim 5934.25, the first upside resistance is at 5959.50, followed by 5994.50. A break and hold above this area targets the upper range extension at 6051.00.

On the downside, initial support rests near the prior open level of 5898.75 and the 5890.75 region near the moving average. Below that, bears will target the lower range target at 5874.00, followed by 5867.50. A breakdown through this zone opens the door to a larger flush toward 5817.25.

To summarize: ES is showing weakness below the bull/bear pivot of 5934.25. Bulls need to reclaim this zone to push toward 5994.50 and ultimately 6051.00. A sustained move below 5934.25 confirms bearish control with eyes on 5874.00 and 5867.50. Intraday conviction leans bearish unless bulls can regain key territory above the pivot.

NQ – Week to Week

The bull/bear line for NQ is at 21,480.50. This level must be reclaimed and held above for bullish momentum to take shape during today’s session.

NQ is currently trading around 21,342.30, showing weakness below the bull/bear line. If it remains under this threshold, we can expect continued downside pressure. The first area of support below is at 21,303.75, followed by 21,212.00. The lower intraday range target is down at 21,212.00. A decisive breakdown below that level opens the door for a move toward 20,959.50.

If NQ recovers above 21,480.50, the upside opens up with resistance at 21,554.50 and then 21,576.25. A sustained move above those levels puts the upper intraday range target of 21,749.00 in play. Beyond that, 21,837.25 and 22,001.75 act as extended resistance targets.

The trend remains bearish below 21,480.50. Bulls must regain that line and build above 21,554.50 to flip the intraday bias.