Markets enter the new week with a clear macro divergence: corporate earnings continue to surprise to the upside, largely driven by AI-related spending, while rising global yields and sticky inflation keep financial conditions tight. At the same time, crypto markets are under significant pressure, with sentiment collapsing into extreme fear and institutional flows remaining persistently weak.

This report breaks down the key dynamics shaping markets this week: strong but rate-constrained equity performance, rapidly deteriorating crypto sentiment and ETF demand, and Bitcoin attempting to stabilize after a sharp multi-week correction.

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Corporate earnings are the bright spot. S&P 500 EPS estimates have climbed to $340 this year, far above what macro strategists expected, with AI infrastructure spending driving roughly half of that profit growth. Corporate America is simply making more money than almost anyone predicted.

The problem is rates. Two-year Treasury yields are at their highest in over a year, and the Fed is going nowhere fast. April inflation hit 3.8% year-over-year, the highest since 2023, fueled by the Iran-driven energy spike, leaving virtually no room for rate cuts this year. Rising yields compress valuations, which is why strong earnings haven't translated into stronger markets.

That yield pain is global. EM bond markets in Brazil, South Korea, South Africa, and Mexico have seen yields jump 45–65 basis points since late February, as energy-driven inflation forces central banks to abandon easing plans. Commodity-importing economies have been hit hardest, with financial conditions tightening precisely when they needed relief.

On the equity side, the Iran war left a clear mark. The S&P 500 fell roughly 9% after hostilities broke out on February 28, triggering weeks of net analyst price target cuts. Raises have returned since the ceasefire, but remain modest, analysts are cautious, not euphoric.

The setup is straightforward: strong earnings, but rates and geopolitics are capping the upside. Watch the May CPI print on June 10, it's the most important number of the month.

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Sentiment has deteriorated dramatically, with the Fear & Greed Index collapsing to just 9, firmly placing the market in extreme fear territory. For perspective, the index was still sitting at 51 on May 5th, highlighting how quickly market confidence has evaporated as Bitcoin’s correction intensified. The sharp decline reflects a market that has shifted from cautious optimism back toward outright risk aversion, with participants continuing to react aggressively to downside price action.

Bitcoin ETF flows paint an equally bearish picture. Not a single trading session in June has recorded positive net inflows so far, extending the persistent outflow trend that began in mid-May. Friday alone saw roughly $330M leave the products, contributing to a steady decline in total Bitcoin ETF assets under management, which have now fallen to approximately $102B.

While extreme fear conditions can historically precede periods of stabilization, the ongoing deterioration in ETF demand suggests capital remains on the sidelines for now. A meaningful recovery in market conditions will likely require both sentiment and institutional flows to show clear signs of stabilization before confidence can begin rebuilding.

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The week ahead remains focused on inflation and consumer data, which will continue shaping expectations around Fed policy and broader market direction. The week begins with May Existing Home Sales data on Tuesday, providing another update on housing market conditions amid elevated interest rates.

Attention then shifts to inflation, with May CPI on Wednesday followed by May PPI on Thursday. These remain the key macro events of the week, as markets continue assessing whether inflationary pressures are easing or becoming more persistent.

Thursday also brings the latest OPEC Monthly Report, while Friday rounds out the week with University of Michigan Inflation Expectations and Consumer Sentiment data, offering fresh insight into consumer confidence and inflation expectations.

Taken together, inflation trends and consumer sentiment will likely remain the primary drivers of short-term direction across equities, bonds, and crypto markets this week.

After initially failing to hold above $60,700, Bitcoin reclaimed and successfully retested the level over the weekend before starting to move higher from there. BTC is currently trading around $63,100 and continues to approach the next major technical resistance level at $65,500.

The two-week liquidation heatmap shows that most remaining leveraged liquidation clusters are positioned above current price, with the largest concentration sitting around $75,000 near the previous highs. To the downside, smaller clusters have started building around $58,800, although they remain relatively limited in size.

Bullish Scenario: Bitcoin needs to reclaim $65,500 with conviction, offering long opportunities targeting the $72,000 technical resistance level, with invalidation on a move back below the reclaim level. Should price first retest $60,700, long opportunities may also emerge there targeting a move back toward $65,500.

Bearish Scenario: Bitcoin fails to reclaim $65,500, with short entries becoming valid on a confirmed bearish retest of that level, targeting $60,700 and invalidated on a reclaim above resistance. A decisive break below $60,700 would then open further downside toward $58,300, similarly invalidated on a reclaim back above the broken support level.

Looking at the bigger picture, TOTAL3 continues following Bitcoin and rebounded over the weekend, although without fully retesting its next lower technical support level. TOTAL3 is currently sitting at $682B and closing in on the $695B technical level. Notably, the $645B technical level on the downside serves as the last line of defense before TOTAL3 would fall back into previous bear market levels, highlighting the scale of the recent market selloff.

ETH/BTC also continued moving lower, retesting the 0.026 technical support level over the weekend, marking a new low in the ongoing bearish trend and signaling further relative Ethereum and broader altcoin weakness in the current market environment.

Taken together, the current structure suggests that broader altcoin momentum continues deteriorating alongside the market pullback. With Bitcoin also weakening, altcoins remain unfavorable to hold, and we are not looking to buy here, instead favoring either BTC or cash positioning until the broader market structure recovers.

We hope this report provided you with valuable insights into the latest market developments and geopolitical shifts.

As always, stay informed, stay prepared, and have a fantastic week ahead! 🚀

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