Market Insights: Wednesday, February 26th, 2025

Market Overview

Stocks ended a volatile session with mixed results on Wednesday as investors parsed President Trump’s latest tariff plans and positioned themselves ahead of Nvidia’s crucial earnings report. The Nasdaq Composite managed to claw back early losses, closing up about 0.3% after initially rising as much as 1% in the morning. The S&P 500 barely finished in the green, while the Dow Jones Industrial Average struggled, declining around 0.4% as economic concerns and trade policy uncertainty weighed on sentiment.

Bitcoin extended its recent pullback, dropping over 4% to trade below $85,000, hitting its lowest level since November. The decline in risk assets intensified following Trump’s announcement that European auto imports would face a 25% tariff, with additional levies on various goods. The administration also confirmed that tariffs on Mexico and Canada will take effect starting April 2.

Despite the trade concerns, Nvidia led the tech sector higher ahead of its much-anticipated earnings release after the bell. The AI chipmaker has been a market leader but has underperformed the broader S&P 500 in recent weeks amid fears that tariff threats and potential export restrictions could impact future growth. Nvidia shares rebounded nearly 4% after a weak performance on Tuesday. Traders are now watching its earnings reaction closely to gauge the next move for the broader market.

SPY Performance

SPY barely moved on Wednesday, eking out a 0.05% gain to close at $594.56. The ETF traded in a wide range between $591.86 and $599.58 but was unable to reclaim the crucial $600 level. Volume came in below average at 38.74 million shares, reflecting indecisive market sentiment. As SPY continues to hover near key resistance, traders are watching for either a breakout or renewed selling pressure in the coming sessions.

Major Indices Performance

The Nasdaq led the market with a 0.22% gain as a rebound in tech stocks helped offset broader market weakness. The S&P 500 barely edged into positive territory, while the Dow lagged behind, losing 0.40% as investors rotated out of blue-chip names. The Russell 2000 climbed 0.13%, signaling some strength in small-cap stocks despite ongoing macroeconomic concerns.

Sector-wise, technology was the standout performer, buoyed by Nvidia’s recovery and broad buying in semiconductor stocks. Defensive sectors, such as utilities and healthcare, saw muted action as investors remained cautious ahead of upcoming economic data and geopolitical developments.

Notable Stock Movements

Among the Magnificent Seven, Nvidia stole the show, rising over 3.6% in anticipation of its earnings report. Tesla, however, continued to struggle, shedding nearly 4% as concerns over EV demand persisted. Apple and Alphabet also underperformed, losing 2.7% and 1.53%, respectively, amid renewed trade worries. The rest of the group saw modest gains, reflecting the market’s cautious stance ahead of major catalysts.

Commodity and Cryptocurrency Updates

Crude oil slipped 0.20% to settle at $68.80 per barrel as demand concerns continued to weigh on energy markets. Our model still expects further downside, with a move toward $60 remaining the most likely scenario in the coming months.

Gold edged up 0.43% to close at $2,910 per ounce, maintaining its safe-haven appeal as investors weighed inflation risks and geopolitical uncertainties.

Bitcoin extended its selloff, tumbling 4.96% to finish just above $84,300. The cryptocurrency remains in a fragile uptrend, and our model’s conviction in the buy zone between $83,000 and $77,000 is weakening. While we are still buyers at these levels, our model’s confidence in a strong rebound is diminishing as such we will nibble at these levels.

Treasury Yield Information

The 10-year Treasury yield fell 1.05% to close at 4.256%, maintaining its downward trajectory as traders positioned for potential Federal Reserve action. Yields remain in a delicate balance—if they rise back above 4.5%, stocks could come under renewed pressure. Any move above 5% would likely trigger a more pronounced market correction. Falling yields are not necessarily a positive for the market. Bond investors may be signaling an increased risk of a recession.

Previous Day’s Forecast Analysis

Tuesday’s forecast projected a wide trading range between $588 and $600, with a bearish bias if SPY remained below $600. Resistance was expected at $595, $597, and $600, while support was seen at $590. The market was expected to move higher overnight favoring shorts from our model’s resistance levels. The model also forecast a test of lower levels before any significant relief rally could materialize.

Market Performance vs. Forecast

SPY’s actual range of $591.86 to $599.58 closely aligned with the projected levels, confirming the model’s bearish bias. While the ETF briefly tested the $600 level, it failed to sustain gains, reinforcing the importance of the identified resistance. The market showed signs of buying interest near $592, validating the support level outlined in the forecast. Traders who followed the strategy of shorting failed rallies saw profitable opportunities as the market struggled to maintain upside momentum.

Premarket Analysis Summary

Wednesday’s premarket analysis, posted at 7:21 AM ET, called for a potential recovery following three consecutive days of selling. The key level to watch was $597, with a preference for long trades if SPY held above this level. The report also warned that moves below $597 could lead to a test of $592.50, advising traders to be cautious with short positions given the potential for choppy, rangebound action.

Validation of the Analysis

The premarket analysis proved highly accurate, as SPY’s early attempt to rally above $597 was met with resistance reaching $599.50. The subsequent dip toward $592 confirmed the downside targets and bounce that ensued. Traders who followed the guidance of buying into a relief rally after a dip saw solid opportunities as SPY rebounded off intraday lows. The call to avoid aggressive shorting until $597 failed was also validated, as the market initially showed resilience before succumbing to selling pressure.

Looking Ahead

Thursday brings the release of weekly Unemployment Claims, which could provide fresh insight into labor market conditions and influence interest rate expectations. Friday’s PCE inflation report remains the most significant data release of the week and is likely to dictate near-term market direction. Investors should also keep an eye on Nvidia’s post-earnings reaction, as it could set the tone for broader tech sector performance.

Market Sentiment and Key Levels

SPY continues to face strong resistance at $596, $598, and $600, while support remains at $592, $590, and $588. The bears are holding onto control below $600, with further downside risk if lower support levels fail. A sustained move above $600 would be needed to shift momentum in favor of the bulls but the bulls would still need to reclaim $605 and then $608 to take full control from the bears.

Expected Price Action

Our AI model forecasts a trading range between $585 and $600 for Thursday, suggesting continued volatility. The market remains in a Put-dominated structure, with downside risks prevailing. While a relief rally is possible at any time, it is unlikely to gain traction unless SPY can reclaim $600 and push toward $605. If downside pressure continues, a retest and failure of $590 will lead to materially lower prices, pushing SPY into a the bear trend channel from the December highs.

Trading Strategy

Short setups remain favored on failed rallies between $595 and $600, targeting moves back toward $592. Traders should be cautious with long positions unless SPY successfully reclaims $600. A break below $590 could trigger a sharp decline toward $585. The market traded in a listless, two way fashion today in a large range, basically ending the day unchanged. This type of price action (big up big down = big confusion) indicates confusion and fear. This is a result of the uncertainty over the administration’s policies regarding tariffs and layoffs. While it’s only been five weeks since the new administration took office, favorability ratings for the new President and his sidekick is falling fast. American’s will change their tune very quickly if inflation or unemployment continue to rise. This will foster fear of the unknown and while this is impossible to program into a model, traders should be aware that the market is now a “trader’s” market which can move in any direction and change on a dime. Trading what you see is critical going forward given the number of unknowns. The likelihood of choppy, wide ranging price action is high therefore traders should remain nimble and look for failed breakouts and breakdowns around major support and resistance levels, trading level to level in small size when countertrend.

Model’s Projected Range

The model projects a maximum range of $583.50 to $603.50 for Thursday, indicating continued two-way, trending price action with a bearish bias. The market remains Put-dominated with the bears controlling momentum below $600. While support at $590 held, the risk of a deeper correction remains if this key level fails. The bears retested the lower trend channel today, putting in a higher low. This supports the notion that a more sustained relief rally could be in store this week. Below $590 the bears will press to push price into the bear trend channel from the December highs. Below $590 support is building but still not comparable to resistance above $600. Above $600 the bulls will attempt to reestablish the momentum. But until the bulls reclaim $605 and then $608, the bears have complete control of the market.

Bottom of Form

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Ranging Market State, with price closing mid-range. The MSI range is wide implying consolidation and confusion. The MSI opened the day in the narrow bullish state from Tuesday. Shortly after the open extended targets began printing above indicating the herd was participating in pushing prices higher. Once price reached major resistance at $600, several tests of this level failed to break higher and extended targets stopped printing. Price fell and by the afternoon the MSI had rescaled lower to a Bearish Trending Market State. The MSI continued to rescale lower three more times while printing extended targets below. SPY reached our models major support level of $592 and extended targets stopped printing, which saw price rally with the MSI spending the rest of the day between a ranging state and bearish state into the close. MSI support is currently $593.75 and resistance is at $596.20.  
Key Levels and Market Movements:
We stated Tuesday “we continue to favor selling relief rallies to $600”. We also stated, “we continue to favor shorts as long as the MSI is not printing extended targets above”. And finally we stated we “do not favor longs until price retests today’s lows AND it holds”. Three simple pieces of advice any trader should be able to understand. We followed our advice to the letter and held off on a short after the open until extended targets stopped printing. A not so perfect failed breakout at 11 am was our signal to enter but with the MSI printing extended targets, we waited until noon to go short from $599. Given this trade was at a major level, one also identified in the premarket analysis, with our model’s bias and with a failed breakout, we loaded the boat because conditions like this are simply too good to pass up. Our trade took zero heat as price quickly moved in our favor. We took first profits at MSI support at $595.50, another major level, but held our runners to see if a test of yesterday’s lows or our trend channel was in store. Sure enough the MSI started to rescale lower and with extended targets below, we held our runners until MSI support was reached at $592.50, another level identified in the premarket. We continued to hold 10% of our position to see how far this trade would go but at 2 pm ET, price put in a textbook failed breakdown at major support so we exited our trade and looked for an opportunity to go long. We didn’t have to wait long, just until extended targets stopped printing, getting us long at $592.75, taking first profits at MSI resistance at $593.75. We didn’t love the price action that followed so as price came back to our entry we went flat with our stop at breakeven and decided we didn’t want to tempt fate and risk the profits we had made on our two winning trades. Certainly we could have tried again at 3 pm with a long from MSI support, but again, we went into profit protection mode and decided two for two, with one monster winner and one scalp was plenty for the day. One or two trades a day is all anyone needs to make a substantial living and once again the MSI showed us who controlled the market and when and where they took control. The MSI does this every single day, day in and day out keeping 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:
Thursday Unemployment Claims will be released but the market will also be digesting Nvidia’s earnings. Therefore it’s possible we see a bit of calm return to the market. But calm doesn’t mean stagnation. In the current environment we continue to expect large, two way price swings. We continue to favor selling relief rallies to $600 given the bulls need to reclaim $600 for any hope of taking control away from the bears. That won’t happen in earnest until SPY moves above $608. The hurdles remain for the bulls from $596 to $600 and the MSI is showing us the market is currently confused and could move either way. As such we continue to trade with the controlling party which is the bears, until $600 is reclaimed. We are also aware that a break of $590 will lead to a substantial drop to $585 or lower. The lower channel held today but it may not on a third test. A retest and failure of this level will likely lead to prices retreating to the 150 DMA. For Thursday, with the MSI in a wide ranging state look for the MSI to rescale to a trending state and then look for set ups from major levels, favoring shorts over longs to as high as $600. Above $600 take caution shorting. Longs are starting to become more attractive since the $590 level held today. But we also know March is likely to be a difficult month for the market so any longs we take will be from failed breakdowns and will be scalps with quick targets and stops quickly moving to breakeven. Use the MSI to keep you safe, positioning you on the right side of the market, which is critical to trading success. If you utilize our model’s levels with the MSI to stalk entries and exits, trading with the controlling party, your odds of success increase dramatically. If you do not have this valuable tool, we highly suggest contacting your representative to secure a copy.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling $600 to $610 and higher strike Calls while buying $599 and $602 Calls. Dealers are no longer selling close to the money Puts. This implies Dealers wish to participate in any rally tomorrow beyond $600. The hard floor today at $590 held so Dealer’s bets paid off, even though the relief rally did not materialize. Perhaps the rally will develop on Thursday once price moves above $600. To the downside Dealers are buying $594 to $580 and lower strike Puts in a 3:2 ratio to the Calls they are selling/buying, implying a neutral to slightly bullish posture for Thursday. This positioning has changed from strongly bullish to slightly bullish.  
Looking Ahead to Friday:
Dealers are selling $607 to $620 and higher strike Calls while buying $595 to $606 Calls indicating the Dealers desire to participate in any rally this week to as high as $610. To the downside, Dealers are buying $594 to $570 and lower strike Puts in a 2:1 ratio to the Calls they are selling/buying, reflecting a neutral view for the week. Dealer positioning has changed from slightly bullish to neutral. Dealers seem to have little fear the lows of the week will be broken. They remain loaded with protection just in case they are wrong but their positioning is somewhat bullish for the market. We advise reviewing Dealer positioning daily for clues to the market’s direction given Dealer positioning changes and it’s essential to monitor these updates for shifts in sentiment.

Recommendation for Traders

Our advice for Thursday is to stay cognizant of any news coming out of the White House, continuing to seek failed breakout and failed breakdown patterns from our model’s major levels. We favor shorts over longs but at the same time are maintaining an open mind given a relief rally can come any time and be quite strong. Dealers are convinced the relief rally is coming yet our model still advises selling rallies at major levels until $600 is reclaimed. Stay nimble and continue to monitor key levels seeking trades from our major levels. Be sure to review the premarket analysis before 9 AM ET for the day’s updates.

Good luck and good trading!