Author: Shenchao TechFlow

This Monday was indeed a tough day:

• Dow Jones: +0.32%, closed at 49,686.12 (the only gain)
• S&P 500: -0.07%, closed at 7,403.05
• Nasdaq: -0.51%, closed at 26,090.73 (tech sector once fell 2.3% intraday)
• Bitcoin: intraday low of $76,690, closing around $77,300
• Ethereum: fell to $2,113, the lowest since April 7
• WTI crude oil: fluctuated sharply between $102 and $108, finally retreating to about $102
• 10-year U.S. Treasury yields: reached a nearly one-year high
• CME federal funds futures show a 45% chance of rate hike this year, up from 1% a month ago
• $563 million in crypto longs liquidated within 24 hours

If you only look at the index closing on Friday and Monday, you might think "it only dropped by 2%," but the devil is in the three details: Treasury yields, rate hike expectations, crypto liquidations.

To help you see where the market stands today, I will summarize the context of this week:

• May 14 (Thursday): Trump-Xi Beijing summit "good news" released, the Dow regained 50,000, BTC surged to $82,000, and Cerebras IPO skyrocketed 75% on its first day. Market sentiment shifted from panic to euphoria, all in one trading day.
• May 15 (Friday): A sharp reversal. The Dow fell 1.07% (-537 points), the S&P 500 fell 1.2%, and the Nasdaq fell 1.5%. Cerebras fell 4% in one day, a "one-day tour". Trump returned to the U.S. but did not bring back any substantive progress on Iran peace.
• May 16-17 (Weekend): The situation in Iran continued to worsen. Pakistan handed a new peace proposal from Iran to the U.S. side, but the White House deemed it "insufficient". Trump threatened on Truth Social: "For Iran, the clock is ticking, they better act quickly or they will have nothing. Time is of the essence!"
• May 18: Crypto had already been smashed over the weekend, with BTC hitting $76,690 intraday. After the U.S. market opened, the Nasdaq continued to be dragged down by tech stocks, while the S&P closed flat, and the Dow barely turned positive thanks to defensive sectors.

Looking at these four days together, you will find one thing: The rebound last Thursday was not a new bull market, but an extremely over-leveraged political impulse. When politics fails to deliver substantive content, the market quickly refunds all "gamble positions".

U.S. Stocks: Dow Holds Strong, Tech Stocks Lead the Decline

Today's market closely resembles that of a week ago, on the day of the May 12 CPI explosion, where the Dow turned positive against the trend, while the S&P and Nasdaq declined, supported by defensive stocks like Walmart, UnitedHealth, and JPMorgan; whereas today’s script is almost a complete replica.

Intraday, the S&P 500 tech sector fell 2.3% at one point, ultimately closing with a slight narrowing to a 1.1% drop, indicating that both those buying and selling were anxious before the close. Chip stocks are heavily affected: Nvidia continued last Friday's weakness (Friday's 4.4% drop was the biggest loser in the Dow), while AMD, Micron, and Intel all faced pressure.

However, what is most noteworthy today is not how much any particular stock fell, but these two indicators:

First, the 10-year U.S. Treasury yield reached a near one-year high. Looking back at history, this number reached this level last in the third quarter of 2024. This means that the market is re-pricing for a "prolonged period of high interest rates", and the most immediate victims of high rates are tech stocks whose valuations depend on future cash flow discounts.

Second, CME federal funds futures show the probability of a rate hike this year skyrocketing to 45%. A month ago, this number was still 1%.

From 1% to 45%, it only took one month.

This indicates a directional shift in market expectations for the Fed: from "is there a need to cut rates this year" to "is there a need to raise rates this year". The difference between raising and cutting rates is just one verb, but the pricing framework for all risk assets is opposite.

Even more painfully, according to Schwab's statistics, the PHLX Semiconductor Index (SOX) has risen 143% over the past year, while the S&P 500 Equal Weight Index (SPXEW) has only risen 15%. SOX is currently 32% above the 50-day moving average, historically, this level of divergence usually indicates "a period of forced digestion is about to occur".

In other words, even without Iran, the semiconductor sector has technically reached a position where it needs to take a breather. Iran is just the one pushing it down the stairs.

Crypto: $563 Million Liquidated, Leverage-Driven Rebound Harvested in Reverse

The crypto story today is simple yet tragic.

Bitcoin slid from last Thursday's peak of $82,000 down to the $77,000 range today, hitting an intraday low of $76,690. Ethereum dropped to $2,113, the lowest level since April 7. $563 million in crypto longs liquidated across the market within 24 hours, with Bitcoin and Ethereum being the major casualties.

The catalyst for this wave of decline was actually just one: Trump's Truth Social post on Sunday, "For Iran, the Clock is Ticking". Crypto began to be smashed during the Asian morning session because crypto operates in a 7x24 hour market, making it the first responder to geopolitical risks.

But the deeper reason, which we warned about in last week's report, is: the surge in BTC to $82,000 last Thursday was mainly driven by derivative positions rather than spot demand, with Wintermute data showing Bitcoin perpetual contracts open interest (OI) soaring from $48 billion to $58 billion in a month. Of the additional $10 billion, the vast majority was new long leverage added.

Leverage is a double-edged sword. It never takes sides; it amplifies gains when good news comes out and amplifies losses when bad news comes out. One Truth Social post from Trump sent almost all the bullish leverage that "capitalized on good news" last Thursday into liquidation.

Several noteworthy details:

• The total open interest in WTI perpetual contracts and Brent perpetual contracts on Hyperliquid exceeded $481 million this weekend. This is an interesting phenomenon in the crypto circle as of 2026: traditional oil price futures only quote during exchange hours, but conflicts in the Middle East occur 24/7, so an increasing number of traders are turning to on-chain 7x24 oil price perp contracts to hedge risk exposure. Hyperliquid's own token $HYPE rose 8.36% in the face of the overall crypto downturn, illustrating a real-case scenario where infrastructure benefits in geopolitical turbulence.
• Ethereum's weakness is even more severe than Bitcoin's. When BTC dropped from 82K to 77K (-6%), ETH fell from $2,300 to $2,113 (-8%). This is the weakest ETH/BTC ratio in the past month.
• Forecasts released by crypto analyst Aralez for Q2-Q4 are beginning to circulate: he believes BTC may fall to $58,000 in Q2-Q3, while ETH may drop to $1,700, before rebounding to $90,000-$109,000 in Q4. I personally do not fully agree with the specific number of 58K, but the timeline judgment that "panic selling will peak in Q3" that he emphasizes is worth noting for reference.

Oil Prices: Volatile, Market Stuck Between "Peace Illusion" and "Military Escalation"

WTI crude oil fluctuated sharply between two extremes today:

• Intraday high close to $108.70 (highest since April 30)
• Intraday low fell back to near $102
• Finally closed at about $102, with a daily volatility of about 6%

This volatility has been the norm in the oil price market over the past month. Today's fluctuations were mainly driven by two contrasting pieces of news:

Bullish catalyst: The Barakah Nuclear Power Plant was attacked by drones over the weekend (the first nuclear facility to be attacked), while the UAE and Saudi Arabia were simultaneously attacked. The geopolitical risk premium was instantly opened.

Bearish catalyst: The semi-official Iranian news agency Tasnim reported that the U.S. "accepted temporary exemptions from Iranian oil sanctions in the latest text during negotiations." This news caused oil prices to plummet from around $108 to $102 instantly. But note that U.S. officials have not confirmed this report.

In other words, today's sharp fluctuations in oil prices essentially reflect the market trading on "rumors" rather than facts.

IEA Director Birol warned again today: Global commercial crude oil inventories are being rapidly depleted, with only weeks of supply left. This is a judgment that cannot be more pessimistic, meaning even if Hormuz opens tomorrow, the market will still have to wait until Q4 for supply-demand balance to potentially restore.

The real sword of Damocles: According to Axios reports, Trump will hold a National Security Council meeting on Tuesday (May 19, which is today in Eastern Time) to discuss military strike options against Iran.

The importance of this matter cannot be overstated. The outcome of Trump's National Security Council meeting today may determine whether oil prices will rebound to $90 or surge to $120 in the next two weeks.

Gold and Silver: Panic Remains Unvalidated

Logically, with escalating geopolitical risks + stock market decline + crypto bloodbath, gold should be the biggest winner. But the fact is that gold fell slightly today, while silver continued to weaken.

Why?

Because both the dollar and the 10-year U.S. Treasury yields are rising. When real interest rates reach a near one-year high, the hedging advantage of non-yielding assets like gold is suppressed. This is the textbook "risk aversion paradox"; when inflation anxiety and geopolitical anxiety coexist, the market first rushes for dollars and short-term Treasury bonds rather than gold.

Silver continues to be under technical selling pressure today, with no buying rebound after last Thursday's single-day drop of 4.1%. Stories related to industrial attributes (AI data centers, solar panel demand) are currently suppressed by the overall retreat in risk appetite.

Today's Summary: Wednesday is the "Double Trigger Day" of this week

On May 18, the market told us in a restrained but firm way: The rebound from last Thursday has ended.

U.S. stocks: The Dow barely turned positive at +0.32% supported by defensive stocks, while the S&P 500 and Nasdaq continued to decline. The semiconductor sector SOX is in a historical bubble area, the 10-year U.S. Treasury yields reached a near one-year high, and the probability of rate hikes for the year jumped from 1% to 45%.

Crypto: Bitcoin dropped from $82,000 to $76,690, Ethereum fell to the lowest since April 7, and $563 million longs liquidated. The "leverage-driven rebound" from last Thursday was harvested in reverse.

Oil prices: WTI experienced a 6% intraday fluctuation between $102 and $108, with the market oscillating violently between the rumor of "potential U.S. exemptions for Iranian sanctions" and the reality of "attack on Barakah Nuclear Power Plant".

Precious metals: Gold had little ups and downs, while silver continued to weaken. When real interest rates hit a new high, risk-averse assets prioritize securing dollars first.

The market is currently focused on one thing: two major events will occur on Wednesday (May 20 in Eastern Time), Trump’s National Security Council meeting will decide military action, and Nvidia will announce its Q1 financial report.

Any one of these triggers igniting would be enough to determine the market direction this week:

• If Trump chooses military escalation → oil prices surge to $120, the S&P 500 returns to 7,200 points, BTC tests $72,000;
• If Trump chooses to give Iran an ultimatum but doesn’t act immediately → the current position may stabilize, but a rebound would need to await Nvidia’s earnings report as a catalyst;
• If Nvidia’s earnings report exceeds expectations → the semiconductor sector's bubble may be temporarily rationalized by "performance realization", extending the AI narrative for another quarter;
• If Nvidia's earnings report indicates weakness → the 32% divergence of SOX will converge in the most uncomfortable way, and rate hike expectations for the year will rise another notch.

This is a market waiting for a "verdict." Any bets should realize that they are wagering on political and corporate guidance, not fundamentals.

When Trump says "the clock is ticking," he may not realize that this statement applies equally to all traders.