Market Insights: Friday, February 28th, 2025

Market Overview

Stocks rebounded sharply on Friday to close out a volatile week and a losing month, as all major indices rallied despite lingering concerns over tariffs and geopolitical tensions. The S&P 500 gained 1.6%, the Nasdaq Composite rose 1.5%, and the Dow Jones Industrial Average added 1.3%. The recovery came after a tumultuous session on Thursday, when Nvidia’s disappointing gross margin outlook sent tech stocks tumbling.

The day’s gains were driven in part by economic data showing that the Federal Reserve’s preferred inflation gauge, the core PCE index, cooled to 2.6% year-over-year in January, easing some fears of aggressive Fed tightening. However, consumer spending fell 0.2%, raising fresh concerns about the health of the economy. This mixed data kept investors cautious, but it was enough to fuel a relief rally after six consecutive down days.

Geopolitical tensions also remained front and center. A heated exchange between President Trump, Vice President JD Vance, and Ukrainian President Volodymyr Zelensky made headlines after Trump scolded Zelensky for not expressing enough gratitude for U.S. military aid. Meanwhile, China vowed to retaliate with "all necessary measures" after Trump confirmed that a 10% tariff on Chinese goods would take effect next week, alongside new duties on Mexico and Canada. Bitcoin also staged a modest bounce after a steep sell-off, but it remains well below recent highs, reflecting the broader uncertainty in risk assets.

SPY Performance

SPY rebounded 1.51% on Friday, closing at $593.70 after a strong rally off the lows of $582.44. SPY opened at $585.39 and surged to an intraday high of $594.71 before settling just below resistance at $595. Trading volume surged to 75.49 million shares, well above average, confirming strong participation in the relief rally. While SPY reclaimed the critical $590 level, traders remain cautious heading into March with macro risks still looming large.

Major Indices Performance

The Dow Jones Industrial Average led the charge on Friday with a 1.3% gain, benefiting from strength in defensive names and a modest bounce in cyclicals. The S&P 500 followed with a 1.6% advance, while the Nasdaq Composite climbed 1.07%, recovering from Thursday’s tech rout. The Russell 2000 matched the Nasdaq’s performance with a 1.07% gain, as small caps joined the broader relief rally.

Friday’s gains capped a rough February, with the Nasdaq down nearly 5% for the month, while the S&P 500 and Dow each lost around 2%. Sector performance was broadly positive, with technology, consumer discretionary, and financials leading the way. Defensive sectors like utilities lagged, as investors temporarily rotated back into growth names.

Notable Stock Movements

The Magnificent Seven all posted gains on Friday, led by strong rebounds in Tesla and Nvidia, both rising close to 4%. Apple, Microsoft, Amazon, Alphabet, and Meta also finished the day higher, adding more than 1% each. Nvidia’s snapback came after its brutal 8% sell-off on Thursday, as bargain hunters stepped in despite lingering concerns about AI demand. The group’s strong performance signaled that investors were eager to buy the dip, but with the broader macro backdrop still uncertain, conviction remains fragile.

Commodity and Cryptocurrency Updates

Crude oil slipped 0.36% to close at $70.10 per barrel, extending its choppy trading range. Our model still anticipates further downside toward $60 as slowing global growth weighs on demand. Gold also lost ground, dropping 1.07% to settle at $2,865 per ounce, as risk appetite returned to equities, reducing safe-haven demand.

Bitcoin eked out a small 0.30% gain, closing just above $84,000. Despite the modest bounce, Bitcoin remains in a precarious position. Our model still favors buying Bitcoin between $83,000 and $77,000, but conviction is fading given deteriorating macro conditions and rising regulatory risks. Traders should remain cautious, treating Bitcoin more as a trading vehicle than a long-term hold in the current environment.

Treasury Yield Information

The 10-year Treasury yield dropped 1.80%, closing at 4.210%. This pullback in yields helped fuel Friday’s equity rally, as investors interpreted it as a sign of moderating inflation expectations. However, yields remain in a danger zone — a sustained move above 4.5% would pressure equities, and a break above 5% could trigger a more severe correction. Bond traders are increasingly factoring in recession risks, but for now, the focus remains on next week’s economic data and evolving inflation signals.

Previous Day’s Forecast Analysis

Thursday’s forecast projected a trading range between $578 and $590, with a bearish bias unless SPY could reclaim $590. Resistance was identified at $588 and $590, while support stood at $585, $583, and $580. The strategy favored selling failed rallies into resistance and looking for lower support tests for longs.

Market Performance vs. Forecast

SPY’s actual performance exceeded expectations on Friday, opening at $585.39 and rallying to $594.71. This broke above the projected resistance at $590, confirming the importance of that level. Once $590 was reclaimed, short-covering accelerated, fueling the relief rally into the close. Traders who followed the plan to fade rallies near resistance had success early, but the bullish reversal above $590 flipped the script, rewarding those who pivoted to long trades from major support at $583. The close near $594 positions SPY at the upper end of the forecasted range, hinting at further potential upside if momentum continues.

Premarket Analysis Summary

In Friday’s premarket analysis, posted at 8:21 AM ET, the model identified $588 as the key bias level. A move above $588 was expected to target $590.50 and potentially $592.50. Conversely, a rejection at $588 would have opened the door to a test of $585 and possibly $580.50. The bias leaned slightly bearish unless $588 could be reclaimed and held.

Validation of the Analysis

The premarket analysis was highly accurate in identifying $588 as the critical pivot. SPY opened below $588 but quickly reclaimed it, triggering a surge to $590.50, then $592.50, and ultimately $594.71. This confirmed the model’s read that a break above $588 would unlock upside momentum. Traders who followed the guidance had clear long opportunities, especially once SPY cleared $590, flipping prior resistance into support. The model’s precise levels once again provided traders with actionable intelligence that played out almost perfectly intraday.

Looking Ahead

Next week brings a heavy calendar of economic data, starting with ISM Manufacturing PMI on Monday. Wednesday follows with Services PMI, while Thursday’s unemployment claims report will be closely watched after this week’s uptick in jobless claims. The biggest event comes Friday, with the monthly jobs report set to dominate market sentiment and drive volatility into the weekend. Expect choppy trading ahead of these releases, with every data point scrutinized for clues about the Fed’s next move.

Market Sentiment and Key Levels

With SPY closing at $593.70, sentiment has shifted cautiously bullish, at least for the moment. Reclaiming $590 was a key win for the bulls, but the battle isn’t over. Resistance now stands at $595,$ 598, and $600 while support sits at $590, $585, and $580. Bulls need to hold above $590 to keep the rally alive, with a potential move to $600 if momentum persists. Below $590, bears will attempt to regain control, targeting a retest of $585 and possibly $580 if selling pressure returns.

Expected Price Action

Actionable intelligence from our AI model forecasts a trading range between $585 and $600 for Monday. This range suggests potential trending price action, though with periods of consolidation. The bias leans cautiously bullish, with upside targets at $595 and $598 if SPY holds above $590. However, a break back below $590 would flip the bias bearish, opening the door to $585 and $580. A break of today’s lows and its highly probable the market breaks toward the 200 DMA at $570. Key drivers will include Monday’s ISM data and any fresh tariff headlines.

Trading Strategy

Long trades are favored above $590, targeting $595 and $598, with stops just below $590 to manage risk. Below $590, shorts become attractive, targeting $588 and $585. Should SPY fall below $583, look for further downside toward $580 and lower. A retracement on Monday would not be unusual which may see SPY trade in a range between $585 and $595 before attempting to move one way or the other. The VIX remains elevated, reinforcing the need for quick profit-taking and smaller position sizes in this choppy environment.

Model’s Projected Range

The model projects a maximum range between $585.50 and $600.25 for Monday, with a Call-dominated structure indicating potential for further upside. SPY is flirting with re-entering the bull trend channel from the September lows, but only barely. Resistance sits at $595, $598, and $600 with support at $590, $585, and $580. Above $598, a test of $600 is likely; below $585, look for a retest of today’s lows which if broken will allow the bears to press price toward $575.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Bullish Trending Market State, with price closing above resistance turned support. The MSI range is wide with extended targets above implying a fairly strong bull trend. The MSI opened the day in a wide bearish state but just after the open, price broke below MSI support with extended targets below. Price quickly reversed however as extended targets ceased printing which saw the MSI rescale to a bullish state. The MSI flip flopped between a bullish state and ranging state until just before 1 pm ET. Price broke MSI support with the MSI rescaling lower to a bearish state several times. While extended targets below printed sporadically until 1:20 pm, SPY found support at our model’s major $583 level and reversed, with the MSI rescaling to a wide ranging state. The MSI stayed in this state until late in the day when the MSI began a series of rescalings higher. The bullish range was average but with the occasional extended target, price reached and exceeded another major level at $590 into the close. MSI support is currently $593.60 and lower at $590.88.  
Key Levels and Market Movements:
We stated Thursday “$585 is the dividing line above which bulls will attempt to move prices higher, below which bears will push for the August lows”. We also said after “six red days, the market is due for a bounce” and above “$590 be more cautious shorting”. Let’s break down the message and see how we traded it today. At the open with price falling to $583 which was a major level for our model, we decided to trade the failed breakdown long once extended targets stopped printing. We took first profits at MSI resistance at $588 and held our runners to see if $590 was achievable. Price chopped around quite a bit and with the MSI rescaling to a very narrow bullish state, we decided the first test of $588 would likely hold, given we knew $588 and $590 were major hurdles for the bulls to overcome. We closed our trade at MSI resistance at $589 and on a not so perfect failed breakout, shorted once extended targets stopped printing above. We took first profits at MSI support at $588 and held our runners to see if SPY would retest the day’s lows. The MSI rescaled to a ranging state which is our cue to get flat given we do not have an edge in this state. We exited our trade at $586.20 and waited to see what might develop. SPY continued to chop around with the MSI in a ranging state so we did nothing until 12:42 pm when the MSI rescaled to a bearish state and printed extended targets below. We entered short at MSI resistance just below $586 and held for a retest of the day’s lows given the MSI was printing extended targets below. The MSI range was narrow so we didn’t expect to get much further than $583. The MSI rescaled lower so we took first profits at $583.70 and on a failed breakdown at 1:20 pm we exited our short. As soon as extended targets stopped printing were long from $583. We took first profits at MSI resistance at $584.15 and held our runners to see if SPY would attempt a retest of the day’s highs. While price came back to our first target, our stop was at breakeven so we held onto our long runners to see where price would go. The MSI rescaled to a bullish state so we took 20% of our position off at MSI resistance at $589, thinking $590 would hold and provide a good short opportunity. But the MSI started rescaling higher and printing extended targets above so even though we had a plan to short into the close, instead we held our remaining 10% runner into the close and exited with another massive winner, but from the long side in a bear market. Remember we said relief rallies can be violent and fast and with the Dealers forecasting a relief rally for two days, today the market finally delivered. While our bias was bearish and we favored shorts over longs, we knew from the edges and major support, the potential for a big move higher was present. When it came we were prepared for it and ended the day four for four for a killer week and a monster month. This is thanks to our model’s levels, the trading plan we create each day, and the MSI showing us who controls 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, combining it with our trading plan, to maximize your long-term success.
Trading Strategy Based on MSI:
Monday has ISM Manufacturing PMI premarket which could move the market. The Friday sell off routine took a break today given after six red days the market was due for a green day. Price successful broke above $590, which was no easy feat. The bulls successfully wrestled some control from the bears in the process and now the question remains can they hold onto it? Our general sense is that the bulls might have another positive day or two before the bears attempt to push price lower. Certainly the bears want to keep price below $600 while the bulls clearly want to move above this level to get firmly back into the bull trend channel from the September lows. After this monster end of day squeeze, our model needs to see more price discovery before signaling the all clear. It’s probable Monday price retraces some of today’s rally but if price retests today’s lows and it fails to hold, there is a very high probability price will fall to $575. Therefore our model wants to see what happens Sunday night and Monday in order to provide a clearer picture for next week. Absent this price discovery, with price above $585 but below $595 we favor two-way trading, both long and short from these major levels. This is a large range and one which may contain price for some time. On any test of today’s lows, we will only enter long on failed breakdowns below $585. Should $583 fail we will look for short entries to ride the bear trend to lower levels. Above $595 we advise doing the opposite. Do not short above $595 given $600 is a viable target for the bulls. But on any failed breakout between $593 and $595 we are certainly open to a short for any possible retrace of today’s gains. These moves may come during the overnight session on Sunday but its still worth noting in case price does not move materially before the open on Monday. Keep an eye on the MSI for clues and be sure not to fight extended targets given they indicate the herd is participating in any move, higher or lower. And we reiterate March is setting up to be a challenging month with tariffs kicking in, a government shutdown looming, a debt ceiling debate, and unemployment rising. While PCE was in line with expectations today, there are plenty of other economic indicators pointing to a slowing economy. With the market at historically expensive levels, any hiccup could cause a good sized correction. Bond yields continue to fall, which implies an increased risk of a recession and as such, it’s probable any rally will be short lived as long as these macro factors are present. In this environment with a wide projected range and VIX above 20, both long and short trades should be taken from failed breakdowns and failed breakouts. 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 $598 to $610 and higher strike Calls while buying $595 and $597 Calls. This implies Dealers wish to participate in any rally Monday to $600. To the downside Dealers are buying $593 to $575 and lower strike Puts in a 2:1 ratio to the Calls they are selling/buying, implying a neutral posture for Monday. This positioning has changed from slightly bullish to neutral. Dealers caught the relief rally today even they were wrong the last two days, they surely made bank today. They still have major downside protection in case the rally is unsustainable.  
Looking Ahead to Next Friday:
Dealers are selling $606 to $620 and higher strike Calls while buying $595 to $605 Calls indicating the Dealers desire to participate in any rally next week to as high as $610. To the downside, Dealers are buying $593 to $570 and lower strike Puts in a 2:1 ratio to the Calls they are selling/buying, reflecting a neutral view for next week. Dealer positioning has changed from slightly bullish to neutral. Dealers continue to hold significant downside protection well below current levels. And as we stated yesterday, “Dealers still seem to think a relief rally is in store” and they nailed it today. For next week Dealers are overall neutral which implies more range bound, consolidative trading. 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 Monday is to stay cognizant of news coming out of the White House, continuing to seek failed breakout and failed breakdown patterns from our model’s major levels. Given the large $10 range between major support and major resistance, we favor two way trading from the edges using our favorite patterns. The bulls have taken some control from the bears and as long as today’s lows hold on any retest, the market can make its way higher. Stay nimble and continue to monitor key levels seeking trades from our model’s major levels. And be sure to review the premarket analysis before 9 AM ET for the day’s updates.

Good luck and good trading!