Green Light on TSM: Expert AI Analysis
A Spray of Caution: Hidden Costs and Market Lessons from the Garden
This past weekend, I found myself at Home Depot, on an unremarkable errand: rid the stubborn weeds overtaking my lawn. Like many of us do in moments of domestic purpose, I reached for what was familiar: Roundup. But as my hand closed around the bottle, I paused. Days earlier, my book club had taken a detour into a chilling topic, glyphosate, the main ingredient in Roundup, and its potential links to cancer. The book's title was lost in our back-and-forth, but the unease it stirred lingered. We discussed studies suggesting glyphosate may increase the risk of non-Hodgkin lymphoma by 41%, and its unsettling associations with liver disease and hormonal disruption.
In that garden aisle, I stood suspended in thought. What had been a simple purchase now felt morally fraught. And yet, like so many decisions in life, I moved forward—deliberately, but not without caution. I sprayed sparingly. I scrubbed my hands afterward like a ritual, not out of paranoia, but out of respect for what I now knew.
It reminded me of something books do better than most things in life: they reveal the invisible. They take what we assume to be benign and force us to hold it to the light. They demand that we consider the subtext—what lies beneath the surface, what consequences may follow. It’s not always convenient knowledge, but it’s always clarifying. And that same kind of reading-between-the-lines is essential right now in the market.
On the surface, the first week of June had all the markings of a healthy rally. The S&P 500 closed out its best May in years, Nvidia soared to new highs, and even the dreaded tariffs seemed to soften with President Trump delaying EU import hikes. But just beneath this polished narrative, the footnotes tell a more sobering story. Economic growth is slowing. Job creation, while headline-strong, is heavily concentrated in low-wage service sectors. Retailers are warning of margin compression. And the GDP backdrop—contracting in Q1 and artificially boosted by pre-tariff inventory build-up—is increasingly difficult to gloss over.
Like my encounter with Roundup, the market offers its own version of glyphosate: powerful, effective, but not without unseen cost. AI-fueled optimism may be driving today’s returns, but it is doing so atop an economic floor that is cracking in slow motion. Investors chasing the latest trend or the next breakout stock might be wise to ask the same question I did in the garden aisle—what risk am I absorbing in exchange for a short-term fix?
Because the market, like a good book, doesn’t always declare its intentions upfront. You have to read beyond the packaging. You have to question the footnotes, examine the trade-offs, and sometimes resist the pull of the obvious answer. And in both literature and finance, the most enduring truths are often found in the margins.
RECENT TRADE REVIEW
One of our recent trades that stood out was in Zscaler Inc. (ZS), a leading provider of cloud security and zero-trust networking services.
Last Wednesday, during our Live Trading Room session (watch the recording here), the DPT (Dynamic Power Trader) model identified ZS as a strong long opportunity. The setup aligned with our criteria for momentum breakout plays—ZS had been consolidating above support while sentiment in the cybersecurity sector was beginning to turn bullish. Once the entry signal triggered, we moved quickly to take advantage.
If you're using only the free tools, you may have caught the idea after the fact. But for DPT members, the major advantage is timing. Paid subscribers receive real-time SMS alerts with clear entry and exit signals—helping you act when the opportunity is strongest, not when it's already passed. This trade in ZS was a perfect example of how crucial precise execution can be.
In a market where volatility continues to challenge traditional setups, our models remain focused on identifying high-probability trades in real time. And when it comes to trade performance, execution timing can often make all the difference.
Want to review the trade in action? Watch the full recording of the Live Trading Room here:
👉 Live Trading Room Recordings
CURRENT TRADING LANDSCAPE
The first full week of June offered a classic case of market divergence—stocks climbed, led by resilient tech names and easing trade rhetoric, but beneath the surface, warning signs accumulated. While the S&P 500 wrapped up its strongest week since 2023 and major indices posted weekly gains, the economic foundation showed increasing signs of wear. Slowing job growth, weakening services activity, and a resurgence in tariff-related inflation risks left traders walking a tightrope between optimism and realism.
As we head into mid-June, investors are left weighing two competing narratives: one fueled by artificial intelligence and diplomacy, and the other shaped by economic fatigue and policy uncertainty. The SPY continues to trade in a well-defined short-term support zone around $540 to $550. If market conditions remain favorable, particularly if upcoming inflation data eases concerns, there remains potential for a rally toward $600 to $620. But that ceiling will likely hold unless the macro picture improves or the Fed pivots more decisively. For reference, the SPY Seasonal Chart is shown below:
The week began on a tentative note. Monday’s session opened lower as geopolitical tensions flared, with the U.S. and China exchanging accusations of violating their tariff truce. That renewed hostility came just as a federal court ruled large portions of former President Trump’s previous tariff regime unlawful, raising fresh questions about the legality and longevity of current trade policy. Adding to the sense of unease, bond yields surged. The 30-year Treasury briefly broke above 5% before settling at 4.993%, while the 10-year held at 4.43%. These moves underscored investor anxiety around both long-term inflation and Federal Reserve indecision.
Yet by the end of the day, the mood shifted. Big tech once again came to the rescue. Nvidia led the charge with a 1.7% gain, and Meta Platforms reversed early losses to close up 3.6%. That strength helped pull the broader market into positive territory. The Dow inched up 0.1%, the S&P 500 added 0.4%, and the Nasdaq gained 0.7%. Despite the late-day rally, Monday’s data continued to paint a picture of economic strain. The ISM Manufacturing PMI for May dropped to 48.5, marking a third consecutive month of contraction. Respondents cited tariff uncertainty, rising input costs, and lingering supply chain disruptions—familiar headwinds that continue to weigh on industrial activity.
By midweek, the focus turned sharply toward trade and tariffs. On June 4, President Trump announced a doubling of tariffs on imported steel and aluminum, raising them from 25% to 50%. The announcement sent fresh waves of concern through the markets, particularly as the administration accused China of once again violating the terms of previous trade agreements. The mood, however, softened slightly after Trump delayed the implementation of similar 50% tariffs on European Union imports until July 9. That pause was framed as an opportunity for fast-tracked negotiations and helped cool fears of an immediate global trade war. Investors responded positively, with the S&P 500 and Nasdaq rallying on the news, buoyed by renewed hopes that a diplomatic breakthrough could avert further economic disruption.
At the same time, corporate earnings painted a picture of widening divergence within the tech sector. Broadcom reported robust second-quarter results, with AI networking revenue surging 46% from a year ago. That momentum reinforced investor confidence in the AI theme that has powered much of the market’s upside in 2025. Nvidia also continued its upward climb, reaching its highest levels since January. But not all tech names shared in the strength. MongoDB, despite solid results, sold off on cautious forward guidance, while Hewlett-Packard Enterprise flagged weaker enterprise IT spending in the second half of the year. These results underscored a deepening split between AI-driven infrastructure winners and cyclical or discretionary tech firms struggling to maintain momentum.
Market volatility remained muted but watchful. The VIX hovered near 17, suggesting that while traders weren’t panicking, the market’s sensitivity to headlines, especially around trade and inflation, was increasing. Under the surface, cracks were widening, particularly in the labor market.
That became even more evident by Thursday, when the ADP employment report showed just 37,000 private-sector jobs added in May—the weakest reading in over two years and well below expectations. At the same time, the ISM Services PMI fell to 49.9, slipping into contraction territory for the first time since June 2024. This followed Monday’s weak manufacturing print and marked the first time since the early pandemic recovery that both sectors of the economy—the consumer-facing and industrial—were simultaneously in decline. The slowdown in hiring and services painted a clear picture of cooling demand, even as tariffs and input costs threatened to keep inflation elevated.
Then came Friday, which delivered a sharp reversal in both sentiment and price action. The official nonfarm payrolls report came in stronger than expected, triggering a risk-on rally across asset classes. While much of the job growth remained concentrated in lower-wage sectors such as hospitality and healthcare, investors took the headline number as a sign that the labor market hadn’t yet cracked. The Dow jumped more than 550 points at the open, the S&P 500 gained 1.2%, and the Nasdaq rose 1.4%, reclaiming most of the ground lost in the prior session.
Contributing to the rebound was a cooling of tensions between Elon Musk and President Trump. After a highly publicized spat over tax policy led to a sharp 14% drop in Tesla shares on Thursday, markets breathed a sigh of relief as the rhetoric softened. Tesla rebounded nearly 6% on Friday, helping fuel gains across growth stocks and restoring some confidence in politically sensitive sectors. Trump’s Friday morning tweet referring to a “very good” phone call with China’s President Xi Jinping added to the sense of diplomatic thaw, pushing markets further into the green by the close.
Bond markets responded in kind. Treasury yields climbed on Friday’s optimism, with the 2-year rising back above 4% and the 10-year finishing near 4.47%. These moves signaled that traders may be walking back expectations of imminent Fed rate cuts, even as growth continues to slow.
Looking ahead, the market finds itself at a critical crossroads. AI optimism remains the key driver of equity strength, but it’s increasingly narrow and disconnected from the broader economic reality. Manufacturing is in decline. Services are contracting. Hiring is weakening. Consumer spending is becoming bifurcated, with wealthier households continuing to spend on experiences and luxury while middle- and lower-income consumers pull back.
At the same time, the Federal Reserve has shown no urgency to intervene. Governor Adriana Kugler remarked this week that while growth is clearly slowing, inflation remains the primary concern, especially with tariffs threatening to push prices higher through 2026. The Fed continues to project two rate cuts in 2025, but with economic data softening and geopolitical risks rising, the timing and impact of those cuts remain highly uncertain.
For now, we remain market-neutral. The short-term setup in SPY remains constructive as long as the $540 to $550 support range holds. A sustained move above $600 would require either an inflation surprise to the downside or a more accommodative tone from the Fed—neither of which is currently priced in. Next week’s CPI and PPI reports could tip the scales. Until then, this is a market that demands discipline, selective positioning, and a willingness to look beyond headline rallies. The path higher is still there, but it’s increasingly narrow and surrounded by noise.
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SECTOR SPOTLIGHT
While much of the market continues to move sideways, leadership is quietly consolidating around a few key areas. With both services and manufacturing data pointing toward contraction, and hiring beginning to slow, investors are growing more selective, flocking to the sectors that not only show growth today but are expected to drive structural gains for years to come. One such area has stood out repeatedly in recent trading sessions. It’s outperforming broader indices, absorbing tariff-related volatility with relative ease, and is uniquely positioned to benefit from both the near-term rally and long-term digital transformation.
In a market increasingly powered by artificial intelligence, cloud infrastructure, and data-intensive computing, semiconductors remain the indispensable backbone. Despite the broader macro fatigue, chipmakers continue to defy gravity. Nvidia’s rise to fresh 2025 highs this week was only part of the story—Broadcom’s earnings reinforced the theme, reporting a 46% year-over-year increase in AI-driven revenue and projecting even stronger growth into Q3. These aren’t isolated wins; they represent a durable demand cycle that extends across the semiconductor ecosystem.
Our A.I.-driven forecasting models have taken notice. The VanEck Semiconductor ETF (SMH), which tracks a basket of the most influential chipmakers, is showing renewed strength on both a technical and predictive level. SMH has held above key support levels even as broader indices have churned, and our latest model outputs project continued upside momentum in the near term. With the SPY holding support in the $540–$550 zone and sector rotation favoring innovation-led industries, semiconductors remain a tactical—and strategic—buy.
In a market where breadth is narrowing and defensive posturing is increasing, SMH stands out not only as a leader but as one of the few areas where growth and resilience are converging.
TRADE OF THE WEEK
In a market increasingly driven by innovation and defensive positioning, Taiwan Semiconductor Manufacturing Company (TSM) is emerging as a high-conviction name for the week ahead. As the world’s largest dedicated semiconductor foundry, TSMC doesn’t just benefit from demand—it enables it. From Nvidia’s AI acceleration to Apple’s chip customization to Broadcom’s infrastructure expansion, TSMC stands at the core of nearly every major growth engine in the tech ecosystem.
This past week, we saw fresh confirmation of the strength of that ecosystem. Broadcom reported a 46% year-over-year increase in AI chip revenue, surpassing $4.4 billion, and forecasted continued growth into Q3. Nvidia reached new 2025 highs, and Micron, Palantir, and Super Micro Computer also posted strong gains, signaling broad-based momentum across AI infrastructure and advanced computing. While these headlines often spotlight downstream beneficiaries, they also point directly to TSM, which provides the foundational fabrication behind much of this innovation.
TSM has also proven to be unusually well-insulated from broader market volatility. Even as macroeconomic data pointed to a slowing U.S. economy, with both ISM Manufacturing and Services PMIs slipping into contraction territory and private-sector job creation hitting a two-year low, TSM held its ground. Investors rotated out of cyclicals and into structural growth, and semiconductors led that rotation.
At the same time, geopolitical risks that might normally pressure TSM exposure—namely U.S.-China trade tensions—appeared to ease slightly by week’s end. President Trump’s delay of the 50% tariff hike on EU goods until July and a softer tone toward China helped relieve some of the near-term pressure facing global supply chain-sensitive stocks. That political breathing room gives TSM a short window to run, particularly as sector sentiment remains bullish and investor flows continue to concentrate in high-quality, high-visibility names.
Our A.I.-powered Dynamic Position Trader (DPT) model has issued a bullish signal for TSM for the upcoming week. Forecast inputs include strong relative strength versus both the Nasdaq-100 and SMH, favorable short-term earnings momentum, and positive sentiment flow from recent sector-leading reports. Technical models also support a continued move higher, with the stock consolidating just below resistance and supported by increasing volume.
From a market structure standpoint, the SPY remains in a holding pattern between $540 and $550, with upside capped at $600–$620. In this environment, selectivity is critical. TSM offers traders exposure to a market-leading sector, fundamental strength, A.I.-backed technical support, and short-term catalysts, all without overexposing to headline risk.
Whether you’re trading the short-term breakout or positioning for a longer-duration play into the AI supercycle, TSM represents one of the clearest opportunities in the market right now.
This week, I’ll add Taiwan Semiconductor Manufacturing Company (TSM) to my portfolio!
And one more thing! Our track record speaks for itself from the standpoint of a Winning Trades Percentage, Average Return Per Trade, and Net Gain. Just take a look:
The consistent performance of our services is just incredible. My historical stellar performance is made possible by being right on 82.92% of all trades that I made, with an average profit of 38.38% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind and stands alone in the marketplace for superior trading advice where our numbers and results speak for themselves.
As we move into the final weeks of Q2, now is the perfect time to reassess your trading strategy and take your portfolio to the next level. Visit our website at www.yellowtunnel.com to explore our range of services and select one as your default trading system. With the power of our AI-driven platform, YellowTunnel is designed to help you navigate the complexities of the market, refine your strategy, and drive profitability in 2025.
Whether you’re focused on real-time trade opportunities, advanced analysis, or developing a disciplined trading mindset, we’ve got the tools and insights to guide you. As the year unfolds, let's work together to make 2025 the most profitable year for your portfolio. But remember—successful investing starts with informed decisions. Always conduct thorough research and assess your risk tolerance before executing any trades.
Let’s make this year a transformative one for your financial growth!
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Wishing you a week filled with resilience, growth, and prosperous opportunities!