Market Insights: Monday, February 10th, 2025

Market Overview

US stocks rebounded on Monday, shaking off recent tariff concerns and focusing on positive corporate earnings and continued strength in AI-related stocks. The S&P 500 gained 0.6%, while the Nasdaq surged 1.17%, leading the market higher. The Dow Jones Industrial Average posted a more modest 0.38% gain as investors treaded carefully following last week’s rough close.

The rally came despite President Trump’s latest tariff threats, which included an expected announcement of new 25% tariffs on steel and aluminum imports. However, investors appeared to view these moves as part of an ongoing negotiation strategy rather than an immediate economic disruption. Steel and aluminum stocks responded positively to the news, with Cleveland-Cliffs, Nucor, and U.S. Steel seeing gains.

AI and tech stocks played a major role in Monday’s recovery, with Nvidia soaring more than 2.8%, helping to lead the Nasdaq’s charge higher. The market’s focus this week remains on economic data, particularly Wednesday’s Consumer Price Index (CPI) report, which will provide fresh insight into inflation trends. A hotter-than-expected print could put pressure on the Federal Reserve’s interest rate path and rattle investors.

Elsewhere, earnings season continues with 78 S&P 500 companies reporting this week. McDonald’s kicked things off with better-than-expected same-store sales, lifting its stock. Coca-Cola, Super Micro Computer, and Airbnb are among the key names set to release their earnings in the coming days. Despite lingering trade and inflation concerns, Monday’s market action suggested investors are still willing to buy dips, particularly in high-growth sectors.

SPY Performance

SPY bounced back on Monday, closing at $604.79, up 0.67% for the session. The ETF opened at $603.91 and quickly moved higher, hitting an intraday peak of $605.50 before pulling back slightly. The session low of $602.74 proved to be solid support as the market held its ground and drifted higher throughout the day. Trading volume was relatively low at 24.19 million shares, well below the average, suggesting a lack of strong conviction among traders despite the gains. Resistance remains at $605 and $610, while support continues to hold at $600 and $597.

Major Indices Performance

The Nasdaq Composite led the way on Monday, rising 1.17% as AI and semiconductor stocks posted strong gains, lifting the broader tech sector. The S&P 500 followed with a 0.67% gain, buoyed by strength in energy and technology stocks. The Dow Jones Industrial Average lagged slightly, advancing 0.38%, reflecting a more cautious stance among blue-chip investors. The Russell 2000 also gained 0.46%, showing resilience among small-cap stocks.

Sectors were mixed, with technology and energy stocks leading, while defensive plays such as utilities lagged. The renewed enthusiasm in AI and semiconductors helped drive risk-on sentiment, with Nvidia emerging as a clear winner. Meanwhile, energy stocks benefited from a rebound in oil prices after three weeks of declines.

Notable Stock Movements

The Magnificent Seven stocks had a solid day, with all names closing in positive territory except for Tesla, which fell over 3%. Nvidia led the group with a 2.8% gain as AI optimism continued to fuel its momentum. Meta, Apple, Amazon, Microsoft, and Google all finished higher, contributing to the Nasdaq’s outperformance. Tesla struggled, extending its recent slide as concerns over vehicle demand and margin compression continued to weigh on investor sentiment.

Commodity and Cryptocurrency Updates

Crude oil rallied 2.04% to close at $72.45 per barrel, reversing a three-week losing streak as traders reassessed supply-demand dynamics. We continue to forecast Crude prices dropping in 2025 to as low as $60. Gold surged 1.62% to settle at $2,934.50 per ounce, gaining traction as investors sought inflation protection ahead of Wednesday’s CPI report. Bitcoin edged higher by 1.06%, closing just below $97,400 as it continued its upward trajectory, despite broader market uncertainty.

Treasury Yield Information

The 10-year Treasury yield rose slightly by 0.33% to close at 4.502%, inching above the critical 4.5% level. This increase in yields has made equity investors wary, as sustained moves above this threshold typically lead to market pullbacks. If yields push toward 5%, a deeper equity correction of 20% or more could follow. For now, market participants are closely monitoring inflation data, which will determine whether yields continue their climb.

Previous Day’s Forecast Analysis

Friday’s forecast anticipated a trading range of $595 to $608 for Monday, with a bias favoring a test of $600 support. The model suggested that if SPY held above $600, an upward move toward $606 and possibly $610 was likely. A break below $600 would have increased downside risk toward $595. The forecast also noted the Put-dominated market and expanding range, indicating the potential for trending price action. Long trades were favored above $600 with $604 and $606 as targets.

Market Performance vs. Forecast

SPY’s actual range of $602.74 to $605.50 was tighter than expected but remained within the projected levels. The ETF held above the critical $600 support, confirming the forecast’s bullish bias. While the market did not reach $608 or $610, the anticipated upward drift materialized, with SPY closing near its highs and moving above $604, getting close to the next level of resistance at $606. Traders who followed the model’s guidance and focused on support at $600 had solid buying opportunities, particularly as price action remained steady throughout the session.

Premarket Analysis Summary

Monday’s premarket analysis, posted at 8:03 AM ET, identified $603 as the key bias level, expecting mixed but slightly upward consolidation. It projected a push toward $605 or $606 if SPY remained above $603, with stalling likely near $610. On the downside, the analysis warned that slipping below $603 would lead to sluggish movement within the $603-$601 range, with the possibility of testing $600 or $597.

Validation of the Analysis

The premarket analysis was largely accurate, as SPY maintained $603 as a pivotal level throughout the day. The ETF reached the $605 target but struggled to push higher, in line with the expectation of resistance above this level. Price action within the $603-$601 range was indeed sluggish, reinforcing the analysis’s cautious stance on downside movement. Traders who respected the bias level of $603 had clear trade opportunities, particularly for long entries toward $605.

Looking Ahead

The focus now shifts to Wednesday’s CPI report, which has the potential to be a major market mover. With inflation expectations ticking higher, an upside surprise could trigger renewed concerns about interest rates and lead to market volatility. Thursday’s PPI report and Friday’s retail sales data will also be closely watched for signs of consumer strength and economic resilience.

Market Sentiment and Key Levels

SPY is consolidating near $600, with major resistance at $605, $608, and $610. Support levels remain at $602, $599, and $597. The market remains bullish as long as SPY holds above $600, but a failure to maintain this level could open the door for further downside toward $595. With inflation data looming, traders should be prepared for increased volatility.

Expected Price Action

Our AI model projects a trading range of $600 to $608 for Tuesday, with a Call-dominated market suggesting consolidation with periods of trending price action. A move above $610 could set the stage for a push to new all-time highs, while a break below $600 would signal a test of stronger support at $595. We expect additional consolidation on Tuesday given the lack of economic news will keep traders at bay. That said, the administration can change this expectation with a Tweet or a comment so remain vigilant and prepared to trade what you see.

Trading Strategy

The bulls still control the narrative with the market set to grind up by default, therefore long trades remain favored above $600, with upside targets at $605 and $608, while short trades below $600 should target $599 and $597. Given the upcoming CPI report as well as the risk of a “tariff bomb”, traders should keep position sizes reasonable and avoid overexposure to sharp price swings. The VIX is hovering @ $16 and its certainly possible this pops to the mid-20s on any negative news which will introduce heightened volatility.

Model’s Projected Range

The model forecasts a maximum projected range of $599.50 to $610.75, reinforcing $600 as the key dividing line between bulls and bears. The market remains within its broader bull trend channel from the September lows, with resistance at $610 and support at $597. There is a strong wall of support below $600 to $595 so as long as this holds, while the market will turn more bearish below $600, the bulls will continue to have the upper hand and the edge. Therefore buying the dips is still favored.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a wide, Ranging Market State, with price closing in the upper range. The MSI remained in this state virtually all day with brief interludes in a trending state just after the open and after 2 pm. But without extended targets, price quickly returned to a ranging state and the MSI remained in this state for the bulk of the day. In this state participants are signaling confusion and uncertainty over the next markets’ next move. While the MSI did rescale from a bearish state to a ranging state premarket, it wasn’t able to enter a trending state for any period of time today and therefore, MSI support is currently $603.07 and resistance is $605.35.  
Key Levels and Market Movements:
As we stated Friday “$600 has been well defended all week and may continue to be so” and sure enough, while price drifted lower in the post market Friday, it found support at $600 and on Sunday, gapped higher, to MSI resistance turned support at $603.00. We also stated on Friday “our general lean is price will continue lower to perhaps $598 before finding support, working its way back toward $605” and while price only got to $600, it did work its way back to $605 as forecast. As such, by the open with SPY testing MSI support at $603 and putting in a failed breakdown at this level, we went long at $603 and held to see if price would in fact rally to $605. We hoped the MSI would rescale to a bullish trending state but it failed to accommodate us so once price reached $605, we exited our trade. The MSI tells us in a ranging state not to expect much price movement either way so if trading in this state, conservative is always advised. We could have shorted at MSI resistance given the failed breakdown at $605, but we passed the trade given we are not big fans of trading the MSI in a ranging state…especially counter trend. But price moved back toward support at $603.50 so we took another shot at a long from this level looking once again for $605. We reached that quickly, put in a one bar bullish trending MSI state and a fairly textbook failed breakdown at 2:20 pm ET. We exited our long and entered short with the goal of scalping a quick $1 profit into the close. We got this target just after 3 pm and called it a day. As you can see when the MSI is in a ranging state, we feel like we are forcing trades and are very conservative, only trading from the edges of MSI support and resistance. When we trade counter trend in this state, we literally scalp. For most sitting on your hands is a better strategy. But given we did have one solid failed breakdown and one less than perfect failed breakdown, plus one textbook failed breakout, all at the edges of the MSI, we took three trades and had a solid day. Once again the MSI informed us who controlled the market, when they took control and where, which allowed us to trade profitably. The MSI does this every single day, day in and day out. The MSI keeps users out of trouble with actionable information to ensure traders stay on the right side of the market, trading with the trend, while providing levels to take profits. We highly recommend integrating the MSI into your trading arsenal to maximize your long-term success.
Trading Strategy Based on MSI:
We stated yesterday “for Monday look for failed breakdowns at $598 to $600 for longs and shorts from $604 to $608 on failed breakouts”. While we got long a bit higher after the open, the MSI gave us enough information to make an informed decision to trade with the trend which padded our bankroll successfully. For Tuesday, with the MSI in a wide Ranging Market State, we expect more of the same as today. Absent any news from the White House, the projected range is narrowing which means more consolidation and less trending action. We are fairly certain this changes tomorrow at some point given Wednesday’s CPI will surely move the market. PPI on Thursday may do the same as well. So for tomorrow expect a market which will range between levels and act much like today. Trade from the edges, favoring longs over shorts but looking for set ups from failed patterns. Should the MSI rescale lower with price breaking below $600, we will enter short on any failed breakout. We do not see this has a high probability for Tuesday. Therefore the higher probability is to look for longs from $602 to $603.50, targeting $605 and possibly $608. At these levels however, we will also seek scalp shorts on failed breakouts. Should price break $605 and the MSI rescales to a trending state, we will hold off on any shorts until the MSI is not printing extended targets above, AND until price moves closer to MSI resistance. The MSI is designed to keep you safe, positioning you on the right side of the market, which is critical to trading success. Therefore if you utilize our model’s levels with the MSI to stalk entries and exits, trading on the right side of the market, your odds of success increase dramatically. If you do not have this invaluable tool, we highly suggest contacting your representative to secure a copy.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling $605 to $620 and higher strike Calls implying the Dealers belief there is a ceiling in the market for Tuesday at $610. To the downside Dealers are buying $604 to $590 and lower strike Puts in a 2:1 ratio to the Calls they are selling, implying a neutral outlook for Tuesday. This positioning is unchanged from today.   
Looking Ahead to Friday:
Dealers are selling $605 to $620 and higher strike Calls implying Dealers believe there may be a ceiling in the market this week at $620. To the downside, Dealers are buying $604 to $575 and lower strike Puts in a 4:1 ratio to the Calls they are selling, reflecting a bearish view for the week. Dealer positioning has changed from slightly bearish to bearish. While not overly bearish, Dealers have added to their protection in spite of the market strength and as such, we continue to “advise any long book purchase protection to the downside in the form of VIX Calls or SPY/SPX Puts or shorts in the Futures market”. This advice is unchanged from last week given Dealers remain loaded with protection in case the bull market unravels. We also continue to advise reviewing Dealer positioning daily for clues to the market’s direction and given Dealer positioning changes and it’s essential to monitor these updates for shifts in sentiment.

Recommendation for Traders

Our advice for Tuesday remains the same as Monday: “Traders should continue monitoring the key $600 level but also watch $605 as a major level. As the bulls try to break the prior highs, $605 will need to hold on any pullback to keep the bulls in complete control. Should $605 fail, as long as there is not a failed breakdown, it’s very possible SPY tests lower levels. The bulls still have control above $585 but as price falls, they give up some of this control to the bears. But until that happens, continue to favor the trend and seek spots to go long”. Be sure to review the premarket analysis before 9 AM ET for any updates.

Good luck and good trading!