Market Insights: Thursday, February 6th, 2025
Market Overview
US stocks delivered a mixed performance on Thursday as investors braced for Amazon’s quarterly earnings and continued digesting the impact of major tech sector disappointments. The S&P 500 climbed 0.3%, while the Nasdaq Composite posted a stronger 0.5% gain, marking its third straight day of advances. The Dow Jones Industrial Average lagged behind, slipping 0.3% amid weakness in industrial and financial stocks.
Amazon was in focus ahead of its post-market earnings release, especially after Alphabet’s cloud sales miss earlier in the week cast a shadow over Big Tech. The e-commerce and cloud giant’s report was highly anticipated, given recent concerns that AI-driven demand may not be enough to offset broader economic headwinds. Meanwhile, chip stocks were under scrutiny after Microsoft and Google revealed AI cloud infrastructure constraints that led to weaker-than-expected revenue figures.
On the policy front, President Trump’s rapid regulatory moves kept markets on edge. Treasury Secretary Scott Bessent provided some relief, clarifying that the administration’s priority is to bring down 10-year Treasury yields rather than aggressively push for lower interest rates. This reassurance helped ease fears of sudden policy shifts but did little to stop the benchmark yield from holding near its lowest levels since December at 4.43%.
Economic data also played a role in market sentiment. Weekly jobless claims came in at 219,000, slightly above estimates of 213,000, raising fresh questions about the labor market’s resilience. Investors are now laser-focused on Friday’s crucial jobs report, which could have significant implications for Federal Reserve policy going forward.
SPY Performance
SPY closed at $606.32, up 0.35% for the day, after trading between a low of $602.63 and a high of $606.45. The ETF opened at $605.99 and showed steady intraday gains, holding above the key $604.25 pivot level identified in the premarket analysis. Volume was 28.41 million shares, remaining well below the daily average, suggesting that institutional investors are still in wait-and-see mode ahead of Friday’s jobs report. Key resistance remains at $610, and $615, while strong support is seen at $605, $600, and $595.
Major Indices Performance
The Nasdaq led the market with a 0.5% gain, benefiting from continued strength in Nvidia and other AI-related stocks. The S&P 500 followed with a 0.3% advance, while the Dow Jones Industrial Average fell 0.44%, weighed down by underperformance in industrial and financial stocks. The Russell 2000 also struggled, declining 0.33% as small-cap stocks failed to capitalize on lower Treasury yields.
The Magnificent Seven had a strong session, with all major tech stocks rising except Tesla, which dropped 1%. Nvidia was once again a standout, rallying 3.85% as AI enthusiasm continued to drive demand for its chips.
Notable Stock Movements
Nvidia continued its dominant run, surging another 3.85%, making it one of the best performers of the session. The AI-driven stock has been a beacon of strength amid broader uncertainty in the tech sector. Meanwhile, Tesla was the lone underperformer among the Magnificent Seven, falling 1% as concerns over slowing EV demand weighed on sentiment.
Other tech giants, including Microsoft, Apple, and Meta, posted modest gains, benefiting from stabilizing market sentiment following the sharp sell-offs earlier in the week. Amazon traded cautiously ahead of its earnings release, as investors braced for potential volatility.
Commodity and Cryptocurrency Updates
Crude oil slipped 0.75%, settling at $70.50 per barrel, as traders remained cautious about global demand amid mixed economic signals. We are buyers of Crude @ $60 and believe it will get that low in the coming months. Gold declined 0.45% to $2,880 per ounce, failing to hold onto recent gains despite lingering market uncertainty. Bitcoin also lost ground, falling 0.85% to just above $96,500 as traders locked in profits following its recent surge.
Treasury Yield Information
The 10-year Treasury yield ticked up slightly, rising 0.38% to 4.437%, but remains near its lowest levels since December. The benchmark yield remains a critical factor for equity markets, as any sharp move higher toward 4.5% could trigger fresh selling pressure. If yields breach the 5% mark, a broader market correction of 20% or more becomes increasingly likely.
Previous Day’s Forecast Analysis
Wednesday’s forecast expected a trading range between $600 and $607, with $605 identified as the key pivot level with a slight upward drift overnight. The analysis suggested that holding above $605 would favor an upward drift toward $607, while a failure to hold $600 would increase the likelihood of choppy price action with price falling to $598. The model projected relatively slow progress, with limited volatility expected throughout the day.
Market Performance vs. Forecast
SPY’s actual trading range of $602.63 to $606.45 was in line with expectations, staying within the projected $600 to $607 range and rising overnight. The key pivot at $605 acted as a solid intraday support level, and SPY’s gradual climb toward $607 reinforced the model’s slightly bullish bias. Resistance at $607 remained intact, capping further upside momentum. Traders were advised to short $605 and $607 and long above $600 to as high as $605. Traders who followed the post market analysis had several opportunities to capitalize on the slow, two way market that presented for much of the day.
Premarket Analysis Summary
Thursday’s premarket analysis, posted at 7:44 AM ET, identified $604.25 as the bias level, suggesting that holding above this mark would favor a move toward $607 and possibly $608. A failure to hold above $602.25, however, was expected to lead to consolidation just below this level, creating a more difficult trading environment.
Validation of the Analysis
The premarket analysis was once again highly accurate, with SPY respecting the $604.25 pivot level throughout the session. After a brief dip to $602.63, the ETF rebounded and steadily climbed toward the upper targets of $606-$607, aligning with the model’s projections. Traders who followed the outlined strategy were able to execute profitable trades, particularly those who positioned long above $604.25.
Looking Ahead
Friday’s highly anticipated jobs report is set to dominate market sentiment. The labor market’s strength will play a crucial role in shaping expectations for future Federal Reserve rate decisions. No major economic releases are scheduled for Monday or Tuesday, but Wednesday’s CPI report and Thursday’s PPI data will be key inflation indicators that could influence market direction.
Market Sentiment and Key Levels
SPY remains in a bullish consolidation pattern, with key support levels at $605, $600, and $595, while major resistance remains at $610, and $615. The market continues to trade within a well-defined range, and a decisive move above or below these levels will likely dictate the next major trend.
Expected Price Action
Our AI model projects a trading range of $598 to $611 for Friday. Call options continue to dominate the market, suggesting a slightly bullish tilt, but the expanding range implies the potential for stronger price action heading into the weekend. If SPY holds above $605, an attempt toward $610 is likely. A break below $600 could trigger a sharp decline toward $595. There are three likely scenarios for the jobs report which will dictate price action on Friday. A strong report above 200,000 with unemployment below 4% is likely to cause the market to sell off given the Feds will pause rate cuts. An inline report with unemployment between 4% and 4.3% with 50,000 to 200,000 jobs created is likely to support the current market which will continue to move higher. Should the unemployment rate post a number greater than 4.3% the market will sell off initially but will likely stabilize and continue to move higher, given the Feds will find some urgency in cutting rates. Watch the report closely in the premarket for clues on Friday and trade what you see, given the general guidelines above.
Trading Strategy
Absent the jobs numbers it’s difficult to model a strategy. As such for tomorrow its essential not to predict or rely on models exclusively but to follow price and react to setups as they are presented. If you are shocked by any price action on Friday, you have a personal bias that you need to rid yourself of as it will hurt you in the long run. Our general lean is to defer to the trend which is bullish. As long as price remains above $598 the bulls drive the narrative and price will move higher. Should $598 fail, the bears will take a shot at pushing price much lower. Given we are approaching the all-time high, its possible the market breaks the prior high by just a bit, only to sell off hard. Watch for this type of price action and certainly seek out failed breakouts as triggers to short entries. Long trades remain favored above $600, with potential upside targets at $607, $610, and $615. A breakout above $610 could open the door to new all-time highs. Conversely, short trades are viable below $598, with targets at $595. Shorts are also viable from the all-time high but only on failed breakouts. Given the looming jobs report, traders should expect increased volatility and position accordingly. The VIX remains relatively low, but sharp price swings could emerge if economic data surprises the market.
Model’s Projected Range
The model forecasts a maximum trading range of $596.50 to $611.50, suggesting potential for breakout price action on Friday. The Call-dominated market structure leans bullish, but resistance remains strong near $610 and $615. Below $600 there is a strong wall of support to $595 below which price will likely fall hard. SPY continues to trade within the broader bull trend channel, with room to move higher or lower depending on economic data and market sentiment.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI is currently in a Bullish Trending Market State, with price closing at resistance. There are no extended targets above. The MSI range is quite narrow after rescaling lower from a ranging state. The MSI spent much of the day in between a bullish and ranging state after rescaling higher overnight as projected. By the open price was hovering at MSI support at $605.50 but with major resistance at $607, there was little to keep price at this level as the MSI flip flopped from a bullish to ranging state. At 2 pm with price below MSI resistance, SPY fell sharply and the MSI rescaled lower to a Bearish Trending Market State. But there were no extended targets below and the range was quite narrow so price quickly found support at the lows of the day and at MSI support at $602.63 before reversing hard back to the $605 level it spent much of the day at. MSI support is currently $605.74 with resistance at $606.45.
Key Levels and Market Movements:
As we stated yesterday should “price continue to rally overnight and reach $605 and higher, we would certainly consider quick shorts on failed breakouts as long as there are no extended targets printing above price”. Today in the premarket SPY reached $606 and put in a less than textbook failed breakout just after the open, but one we decided was worth a shot at a scalp short. We took first profits just $1 below our entry and once the MSI entered a ranging state, we closed our trade knowing the odds of price continuing to fall was low. A quick scalp followed our plan and we were green out of the gate. Our next trade came later in the afternoon given price bounced back to major resistance and didn’t move much for most of the day. But a drop at 2 pm ET with the MSI rescaling to a bearish state and we entered short once again at MSI resistance at $604 knowing price had a 70% chance of reaching MSI support at $602.60. Once price reached MSI support, with a narrow MSI range and without extended targets below, and with price at a level identified in the premarket, we reversed our short and went long for the best trade of the day. We first took profits at MSI resistance, but held for a retest of $606 given our bias for the day was long. We exited at the close with a solid long to cap off a three for three day with the MSI once again showing us who controlled the market, when they took control and where, which allowed us to trade the day successfully. The MSI does this for us every single day, day in and day out. The MSI keeps users out of trouble with actionable information to ensure traders work 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 we “do not see price reaching the all-time highs on Thursday” and that price was likely to take a day to consolidate. This is precisely what occurred today so we traded both long and short and captured quick profits when we traded against the trend. Three trades on a day like today is actually quite a few. Tomorrow will be a very different day as volume should flood the market and price is likely to move in a very large range. As such trend trades are favored. Be careful not to get caught in any traps and follow the advice provided above with respect to what to expect once the jobs data is released. Absent this information, we continue to lean long and bullish but as price approaches the all-time highs, we will be looking for weakness in the form of failed breakouts. Our models are not convinced earnings have been good enough to drive prices materially higher, nor have macro threats to the economy been eliminated. We favor trading from the edges tomorrow using $598 to $600 as a back stop for longs on failed breakdowns, and $608 to $611 as major resistance for shorts on failed breakouts. In between is likely noise and not worth trading. The first move after the jobs report is often a trap which will see price reverse and rally the other way for the rest of the day. The monthly jobs report can create a complicated trading day like FOMC. So be careful and trade smaller given stops need to be large due to anticipated volatility. Should price dip to $598, while we favor longs on failed breakdowns above this level but be very careful and only enter after price reverses long. Below $598, our bias switches to bearish and as such we do not favor long trades, but instead will look for shorts on any retest of $598 or lower. Should price retest $605 and put in a failed breakdown, we may also seek longs to $610. It really depends on what transpires after the jobs report so be prepared to trade what you see. The MSI is designed to keep you safe and 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 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 $610 to $615 and higher strike Calls while buying $607 to $609 Calls implying the Dealers desire to participate in any rally tomorrow what breaks the all-time high. Dealers have moved up their strikes, which implies they believe SPY has a fairly high probability of reaching $610 and perhaps $615 tomorrow. To the downside Dealers are buying $606 to $590 and lower strike Puts in a 3:1 ratio to the Calls they are selling, implying a neutral to slightly bearish outlook for Friday. This positioning has changed from slightly bullish to slightly bearish. The biggest take away from today’s positioning is where Dealers have started selling Calls…$610 and higher telling us Dealers thinking if price rallies tomorrow, its going straight up to prior highs and possibly beyond.
Looking Ahead to Next Friday:
Dealers are selling $610 to $620 and higher strike Calls while buying $607 to $609 Calls implying Dealers desire to participate in any rally by the end of next the week, to as high as $620. To the downside, Dealers are buying $606 to $587 and lower strike Puts in a 3:1 ratio to the Calls they are selling/buying, reflecting a neutral to slightly bearish view for next week. Dealer positioning has changed significantly from heavily bearish to slightly bearish. We stated yesterday that positioning at a 10:1 ratio is rare and may have been just temporary due to concerns about Friday’s job report. It seems this was the case given today, Dealers adjusted their positioning for next week. We still 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. Dealers are still loaded with protection in case the bull market unravels. February can be a tricky month to trade so we like the idea of protecting profits as earnings season fades in case the current euphoria evaporates. We also advise reviewing Dealer positioning for clues to the market’s direction and given Dealer positioning changes daily, it’s essential to monitor these updates every day for shifts in sentiment.
Recommendation for Traders
Traders should continue monitoring the key $600 level but also add $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. Expect increased volatility due to Friday’s jobs report and be sure to review the premarket analysis before 9 AM ET for any updates.
Good luck and good trading!
