This program is for macro market quantitative analysis and is provided for informational and educational purposes only and does not constitute investment advice, an offer to buy or sell any security, or a solicitation. The direction of the ETFs mentioned is output from a system quant model and is not personalized investment advice, nor does it take into account individual risk tolerance or financial condition. Investments involve risks, and any decisions should be made after consulting with a licensed investment advisor.

The most noteworthy development today is not a single news item, but rather the clearer market trend. On one side, AI computing power investment continues to gain momentum. In plain terms, this means large companies are still aggressively purchasing chips and building up computational capacity. On the other side, there remains low hope for short-term interest rate cuts from the Fed. Simply put, borrowing costs are not coming down. Therefore, the market is showing a clear divergence. Semiconductors are stronger, while small caps and real estate are struggling more. Although the S&P 500 (SPY) still has an optimistic outlook, it is no longer in a state of easy upward momentum.

Today shows three clearly distinct changes compared to yesterday.

First, SPY has shifted from bearish to slightly bullish. But not aggressively so. The system remains cautiously positive on SPY and requires further observation. Why the change? Due to a slight easing of geopolitical uncertainties, the market's biggest fear of sudden risks is less alarming. However, the issue lies in the fact that there was some upward movement before, and new dovish interest rate news did not follow up. Therefore, this bullish sentiment more resembles 'it can hold for now' rather than 'a significant further advance is imminent.'

Second, XLE has turned slightly bearish. The system leans bearish on XLE but with limited conviction. The reason is straightforward. If the conflict in the Middle East moves towards resolution, the risk premium embedded in oil prices would decline. In plain terms, this means that as people become less fearful of disruptions, they are willing to pay extra for safety. With this component reducing, energy stocks lose some support. Additionally, XLE has been weaker than SPY recently, so today's assessment is slightly cooler.

Third, CHPS and EWT have moved slightly more positive. The system remains cautiously optimistic about CHPS but is still observing. The outlook for EWT is generally positive, though with moderate confidence. Behind it all is the same fundamental trend: AI chip spending is still expanding. In plain terms, capital expenditure means companies are investing real money in equipment and capacity building. This will directly benefit semiconductors and their supply chains. However, as there has been a prior rally, much of the positive impact may already be priced in. So while opportunities do exist, they now depend on new evidence to support further gains.

Here are today's three most important storylines.

Story One: AI PCs Are Not Just Hype; the Chip Chain Still Benefiting from Tailwinds

First, what happened: On June 1 at the Computex in Taipei, NVIDIA CEO Jensen Huang mentioned N1X, bringing AI PCs to the forefront. In plain terms, while people previously thought that large models mainly ran on clouds, now even personal computers are aiming for stronger AI capabilities. What does this mean? It means that it's not just data centers that need chips; terminal devices also want upgrades. At the same time, the system observed an increase in AUM of SOXX, or fund size, from 29.6 billion dollars previously to 38.4 billion dollars. In simple terms, more funds are flowing into this direction.

Why does this affect ETFs? The transmission chain is straightforward. AI and PC expanding application scenarios increases the for semiconductor demand. With greater demand, manufacturers are more willing to invest in expansion. This expansion will drive equipment, foundries, packaging, and materials. So, it's not just one company that benefits, but the entire semiconductor supply chain. Imagine it this way: previously, only a few cloud vendors were buying 'super engines', now even more end products are switching to high-performance versions. As a result, engine manufacturers, component suppliers, and other providers will all see increased activity.

In terms of ETFs, the core remains SOXX. The system is quite confident about SOXX. This trend isn't just about price increases; there's also a flow of capital supporting it. Data shows that since the window, SOXX has risen by 15.56%, while SPY only gained 2.02%, meaning it outperformed the broader market by 13.54%. Moreover, in the last five days, it has further increased by 8.66%. This indicates that the trend hasn't dissipated. In simple terms, everyone is still pulling in the same direction.

Related is EWT. The system tends to be positive towards EWT but with moderate confidence. Because the Taiwan market has a deep connection to the semiconductor supply chain, EWT could also benefit if the AI computing arms race continues. However, its signals are not as solid as those of SOXX. Similarly affected is CHPS. The system leans positively towards CHPS but still needs observation. The reason is the same, just that it has a more limited size and trading depth, in plain terms, narrower lanes which mean faster rises and potentially bigger swings.

Story Two: Rate Cuts Won’t Come Easily; Small Caps and Real Estate Are Still Under Pressure

The second line is the Federal Reserve. The FOMC interest rate decision has remained at 3.75% for several recent days. Additionally, the probability of a 25 basis point cut as predicted by the market is only 0.02. In plain terms, 25 basis points equate to 0.25 percentage points. This means that the market almost does not believe there will be an immediate rate cut in the short term. Combined with the minutes of the meeting on May 20th, which repeatedly mentioned a more 'hawkish' stance. Hawkish signals mean that the Fed wants to keep interest rates at a high level and is not。

Why is this important? Because interest rates serve as the floor for the entire market. With a high floor, many industries find it difficult to rise. Especially small-cap stocks and real estate. The transmission mechanism can be understood as follows: if inflation is high, the Fed is less likely to cut rates. Without rate cuts, borrowing costs remain high. High borrowing costs first affect companies that rely heavily on financing. Small companies typically have thinner cash flows, so IWM faces greater pressure. Real estate is even more pronounced. Mortgage rates, development financing, and commercial real estate valuations are all highly sensitive to interest rates. Therefore, IYR is also likely to be under pressure.

Regarding ETFs, the system is quite bearish on IWM. 'Bearish' in plain terms means that the system does not have a positive outlook for its performance relative to the broader market over the next period. Data-wise, IWM currently shows high confidence with negative sentiment. The reasons are high interest rates and risk aversion, which do not favor small companies. On the same line of reasoning, the system has a negative view on IYR, albeit with some conviction. Although today's conviction for IYR is slightly weaker than yesterday’s, the direction remains unchanged because the high-interest-rate situation has yet to show any signs of easing.

What about SPY? The system is slightly positive on SPY but still needs to observe. It might sound contradictory, but it’s not. Because large-cap companies with strong cash flows typically have better resilience to high interest rates compared to small caps. Additionally, with a slight easing of geo-political uncertainties, SPY can remain bullish. However, the issue is that from May 4 to June 4, SPY has already gained 5.44%. In plain terms, much of the optimism may have been priced in ahead of time. Without new catalysts for rate cuts, it will be more challenging to continue rising.

Story Three: Tensions in the Middle East Are Not as Explosive, So Energy Prices May Cool Down First

The third line is related to news from the Middle East. The system mentions that the latest developments in the U.S.-Iran situation are leaning towards ceasefire and risk mitigation. In plain terms, this means the market is less concerned about a sudden escalation of the conflict. Another crucial point is: 'Trump Makes U.S. Troop Deaths Iran Red Line.' Market participants will be cautious about this red line but also interpret it as an attempt to define boundaries. In other words, there is tension, but it has not reached a point of uncontrollable escalation.

[未翻译/untranslated] 这对 ETF 的影响， 要分开看油和天然气。 先看 XLE。 能源股很多时候跟油价预期绑定。 如果冲突缓和， 油价里那部分“怕出事先加的钱”会退。 这就是前面说的风险溢价回落。 所以系统倾向看空 XLE，但把握有限。 不是说能源突然就很差， 而是之前最能托住它的那根线， 现在没那么硬了。

Now let's look at natural gas. The judgment on UNG has not weakened completely yet. The system is generally optimistic about UNG, but with moderate confidence. Why does the same Middle East theme still have a bullish bias for natural gas? Because from May 8 to June 4, UNG had already risen by 14.66%, which is 12.02% more than SPY. This indicates that the market has indeed reassessed and given higher pricing to supply and transportation risks. However, new events have brought up the possibility of a conflict resolution, weakening this bullish bias. If we look at BOIL, the system currently holds a neutral stance because BOIL is a double-leveraged product. In simple terms, leverage means that volatility will be magnified. Until the direction becomes clearer, it acts more like a highly sensitive thermometer rather than the most stable barometer.

As a side note, EWG, EEM, EWJ, and EWY are all slightly neutral today. This is not to say they lack stories; rather, the stories are not yet cohesive enough. For example, whether Europe will be dragged down by energy and supply chains, or if Japan will be affected by changes in the yen, or if emerging markets will be constrained by the Fed's path—these threads are still being pulled in different directions. With divergent systemic views, we should not rush to assign strong directional bets.

Wrapping up finally.

The AI computing chain remains the strongest trend, high interest rates continue to pressure small caps and real estate, while reduced Middle East risks have cooled energy stocks slightly.

Over the next 1 to 3 days, there are three things worth watching. First, look for any new capital expenditure news in AI-related sectors. If there are new orders, expansions, or cash flow indications, the logic behind SOXX, EWT, and CHPS will be more compelling. Second, watch for any new dovish signals from the Fed's statements. In layman's terms, this means a willingness to cut rates earlier and ease up a bit. Without such signals, the pressure on IWM and IYR will be hard to significantly alleviate. Third, monitor whether Middle East news continues to cool down or if there are new sanctions and supply disruptions that could impact XLE and UNG. Today's market is not seeing broad-based gains; instead, the main themes are becoming more concentrated. Understanding these transmission chains is more important than。