Market Insights: Wednesday, March 12th, 2025
Market Overview
Tech stocks spearheaded a broad market rebound on Wednesday as investors reacted positively to a softer-than-expected inflation report. The Nasdaq surged 1.2%, leading all major indices higher, while the S&P 500 added 0.5%. The Dow Jones Industrial Average, after oscillating throughout the day, closed slightly lower, slipping 0.16%.
The key catalyst behind the gains was the latest Consumer Price Index (CPI) data, which showed that "core" inflation—excluding food and energy—rose 3.1% year-over-year, lower than January’s 3.3% increase. This marked the slowest annual increase in core CPI since April 2021, fueling speculation that the Federal Reserve may take a more patient approach to rate policy.
However, ongoing trade tensions remained a source of volatility. Canada responded to the White House’s aggressive tariff measures by imposing $21 billion in retaliatory duties on U.S. goods, while the European Union announced similar countermeasures totaling $28 billion. Markets initially rallied on the CPI news but later saw selling pressure as these trade uncertainties weighed on sentiment.
Among individual stocks, Nvidia and Tesla led the charge, soaring over 6% and 7.5%, respectively, as investors rotated back into beaten-down tech names. Conversely, defensive sectors such as Consumer Staples and Healthcare underperformed as traders shifted back into higher-risk assets. While the rebound was encouraging, analysts remain cautious, warning that the broader market remains in a downtrend until major resistance levels are reclaimed.
SPY Performance
SPY opened at $562.04 and climbed to a session high of $563.11 before dipping to an intraday low of $553.69. It managed to recover into the close, finishing the day at $558.81, up 0.52%. Trading volume was 62.88 million shares, slightly below the previous session’s elevated levels but still reflective of continued market volatility. SPY remains trapped between key support at $555 and overhead resistance at $565, struggling to reclaim its 200-day moving average at $570.
Major Indices Performance
The Nasdaq Composite led the way, rising 0.90%, fueled by a strong performance in large-cap tech stocks. The S&P 500 followed with a 0.5% gain, while the Dow Jones Industrial Average ended the session slightly negative, down 0.16%, weighed down by industrial stocks. The Russell 2000 managed a modest 0.17% gain, signaling some stability in small-cap equities.
Sector-wise, technology stocks surged, led by Nvidia and Tesla, while defensive sectors such as Healthcare and Consumer Staples lagged. The market rotation suggests a temporary risk-on sentiment, but broader macroeconomic concerns continue to loom.
Notable Stock Movements
The "Magnificent Seven" stocks had a strong showing on Wednesday, with most names closing in the green. Nvidia and Tesla led the rally, surging 6.4% and 7.5%, respectively. Amazon and Microsoft also posted solid gains, while Apple was the lone underperformer, dropping 1.75%. Tesla’s sharp recovery was driven by dip buyers and positive sentiment around electric vehicle demand, while Nvidia continued its momentum on optimism about AI-related growth.
Commodity and Cryptocurrency Updates
Crude oil advanced 2.16% to settle at $67.69 per barrel, though our model still forecasts a move lower toward $60. Gold climbed 0.65% to close at $2,940 per ounce, maintaining its status as a hedge against economic uncertainty.
Bitcoin inched up 0.17%, closing just below $83,000. The cryptocurrency remains in a volatile trading range, with strong support between $77,000 and $83,000. Our strategy remains the same—we favor buying dips in this range and taking profits as Bitcoin approaches resistance at $85,000.
Treasury Yield Information
The 10-year Treasury yield rose 0.75%, closing at 4.320%. While yields remain below the critical 4.5% level that tends to pressure equities, a breakout above 4.8% could trigger additional stock market selling. Investors continue to keep a close watch on bond markets, as rising yields could signal renewed inflation concerns despite the cooling CPI report.
Previous Day’s Forecast Analysis
Tuesday’s forecast projected a trading range between $550 and $570, with a bearish bias unless SPY reclaimed $570. Resistance was expected at $560, $565, and $570, while downside targets were set at $555 and $551. The recommendation favored short trades below $570 and long trades only on failed breakdowns at major support levels.
Market Performance vs. Forecast
Wednesday’s market action largely followed expectations. SPY initially attempted to hold $562 but failed to sustain upward momentum, testing the $555 support level before bouncing back to close at $558.81. The bias toward short trades below $570 played out well, with traders able to capitalize on the volatility around key support levels.
Premarket Analysis Summary
Wednesday’s premarket analysis, posted at 7:29 AM ET, identified a bias level at $560. Key resistance levels were set at $562 and $566, while downside targets included $555.75, $554, and $549. The analysis suggested a choppy but slightly upward bias, contingent on SPY holding above $560. Otherwise, a move toward $555 was expected.
Validation of the Analysis
The premarket analysis accurately anticipated SPY’s price action. After an early rally attempt toward $562, SPY struggled to maintain momentum and eventually tested the $555 region, as projected. The market bounced off $554, aligning with the expected support levels, providing profitable opportunities for traders who followed the forecasted key levels.
Looking Ahead
Thursday brings key economic reports, including the Producer Price Index (PPI) and weekly Unemployment Claims. Both data points could influence market sentiment, particularly if inflation pressures remain subdued or if labor market softness emerges.
Market Sentiment and Key Levels
SPY remains trapped in a large trading range, currently sitting at $558.81. Resistance levels are at $562, $565, and $570, while major support lies at $555, $553, and $550. Bulls need to reclaim $570 to shift momentum, while bears remain in control unless price breaks above this key level.
Expected Price Action
Our AI model projects a trading range between $550 and $570 for Thursday. The market remains Call-dominated, with a wide but narrowing range that implies consolidation with occasional trending price action. The bias remains neutral-to-bearish below $570, with downside targets at $555 and $550. A break below $550 could lead to a test of $540, while a move above $570 may trigger a push toward $575.
Trading Strategy
Short trades remain favored below $570, with downside targets at $555 and $550. Long trades should be considered only on failed breakdowns from major support levels. Given continued volatility, traders should focus on quick profit-taking and trade in smaller size. The VIX remains elevated, signaling the likelihood of large price swings.
Model’s Projected Range
The model’s maximum projected range for Thursday is $549 to $571.25. Resistance remains at $562, $565, and $570, while support is at $555, $553, and $550. Below $550, there is little to prevent SPY from testing lower levels. CPI came in lower than expected which initially rallied the market. But sellers came back in force below the 200 DMA to drive price back down toward yesterday’s lows. But price didn’t get all the way to the prior day’s lows as it found support at $554 and reversed to end the day back in the middle of the “noise” between $555 and $565. There still is little to suggest today’s bounce was anything more than a bounce. The projected range has narrowed so it’s possible the market takes a day or two to consolidate before its next major push. Of course this is subject to changing with more economically hostile news out of the White House. A failure of $550 and its likely price will fall to at least $540 as it works its way to the August low at $510, a 16.5% decline from the highs which is historically about average. Price remains below the bear trend channel from the December highs but our model has not redrawn the channel meaning it believes the probabilities of price reentering the current channel or dropping further are about equal. SPY is well below the 200 DMA at $570 which will act as resistance with the bears in complete control. The broader market remains under pressure, and the bearish trend remains intact unless key resistance levels are reclaimed.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI is currently in a Ranging Market State, with price closing near the top of the range. The MSI range is average, implying confusion for tomorrow. Overnight the MSI rescaled to a Bullish Trending Market State several times with extended targets above. When CPI data was released the market initially rallied but found sellers sitting just below the 200 DMA. Price reversed course and headed toward the prior day lows while the MSI rescaled through a ranging state to a narrow bearish state. But without any extended targets below, the herd was not participating in the morning sell off. Instead price found support at $554 and reversed hard to end up where it started the day, with the MSI once again rescaling to a ranging then very narrow bullish state. The MSI settled in the current ranging state with MSI support at $555.92 and resistance at $559.31.
Key Levels and Market Movements:
We stated Tuesday price “is trading in a large range between $555 and $565. Everything in this range is noise. SPY has not yet back tested higher levels from yesterday at $567 and $570 which needs to happen for price to have any hope of moving materially higher.” We got the back test of $567 today to the penny after CPI and it failed. We also stated, “if either a test of $567 or $570 fails, OR if price retests today’s lows at $552, probabilities favor SPY falling to $551 at a minimum”. And so once again, the model forecast what would happen if $567 failed and it was clear to see the power and accuracy of this forecast with price moving back down toward yesterday’s lows once $567 failed. With this plan in hand and with the MSI not printing extended targets above, at the open, with price at the premarket level of $562, we entered short on a double top, looking for a first target at MSI resistance turned support of $561. That came quickly and we held our runners for a second target at the next MSI support level at $558.75. We got this before 10 am and with a stop at breakeven and 10% of our position left, we held to see if price would resume higher or continue to fall. We knew the $555 to $565 range was noise so with price in the upper half of this range, we felt confident price would work toward the lower end of the range. After 10 am price continued to fall with the MSI rescaling to a wide ranging state. By 11 am the MSI rescaled to a very narrow Bearish Trending Market State and without any extended targets below and with price at the bottom of our projected “noise” range, we decided to take final profits at MSI support at $555.25. In a ranging market, the best approach to trading is to sell the top of the range and buy the bottom of the range. And sure enough with the MSI quite narrow indicating a weak bear trend, SPY set up a textbook failed breakdown at the major and premarket support level of $554 at 11:20 am so we entered long looking for a first target at MSI resistance at $555.95. That came quickly. The MSI rescaled to a ranging state so we moved our stop to breakeven and let our runners run thinking price might reach at least the middle of the range at $560, which was also MSI resistance. We took a second target at $560, closing 20% of our position and held 10% to see if price might once again move toward $567. SPY started chopping around heavily in a very narrow MSI bullish range and never printed an extended target. This told us the rally was extremely weak and had no energy to support higher prices. Just after 1 pm we closed our 10% runner on the third test of MSI resistance at $561 and called it a day, not wanting to get chopped up in the afternoon, unwilling to risk our profits. We ended the day two for two, trading both long and short, for solid gains, thanks to the MSI showing us who controls the market, when and where they took control while providing proper targets for our exits. When combined with our model’s levels and the trading plan we create each day, we more often than not end the day solidly in the green. 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:
Thursday has PPI and Unemployment Claims in the premarket, which when combined with the looming government shut down, could move the market materially. We advise reviewing price action in the premarket to trade what you see. Absent external macro data or news events that move the market, we continue to be in a market driven by news and today is likely nothing more than a minor relief rally. Price continues to trade in a large range between $555 and $565 and everything within this $10 range is noise. With $567 failing to break, the bulls need more energy to break this level to reach the 200 DMA. That said the bears also dropped the ball today trying to break below this range with a textbook failed breakdown at 11:20 am at $554. This was their chance to start a new leg lower and they failed as well. Big up + Big down = Big confusion which is the hallmark of a trading range. That implies the market is likely stuck in this range until an external catalyst pushes price one way or the other. And it can be either way. Additional tariffs and price falls further. A cease fire in Ukraine or raising the debt ceiling and the market moves higher. This is a news driven market which means traders need to trade what they see and be less reliant on quantitative models. To prove the point, look at recent news out of Bloomberg:
“Brevan Howard Asset Management is reducing the amount of risks its traders can take due to a performance slump that has erased last year's gains. The firm's flagship Master Fund has lost 5.4% this year, and its other large fund, Alpha Strategies, is down 1.5% for the year. The firm is taking defensive steps amid rising volatility and market chaos, including lowering risk limits for some traders.
Millennium sank 1.3% in February and was down about 1.4% through the first six days of March.
Balyasny, which was up 3.5% this year through last month, has given up some of those gains, the people said, asking not to be identified discussing private details.
DE Shaw & Co.’s second-biggest fund, Oculus, which mostly makes macro wagers and soared 36% last year, was down 4.4% through March 7 after losing 1.6% during the first week of the month. Its flagship Composite fund, little changed so far this month, is up about 1.4% on the year.
Marshall Wace’s flagship Eureka hedge fund lost 3% this month, according to a person familiar with its performance.“
These are some of the best performing systematic hedge funds on the planet and they are all losing money. $4T has been wiped out of the markets in just three weeks as systematic models are not designed for this type of price action given its not driven by historical patterns but by the actions of the current administration. The point is, trade these markets with caution, scaling down in size. While we have a very high degree of confidence in our models, trading what you see while using the MSI to guide you in real time is the best way to be successful in the current environment. Things that worked the last two years are unlikely to work this year or perhaps next. With that as the context for tomorrow’s forecast, our general lean is SPY may once again attempt to back test $567 to breakout to $570. If the bulls are successful, price will move toward $575. But if $553 fails, probabilities favor SPY falling to $550 at a minimum and mostly likely much lower. Our model says $550 is the level to watch so should that fail, look out below as $500 will be in play. Volatility fell today but still remains elevated at $24.23. We have not seen the VIX spike on capitulation where VIX moves to $32 to $40 on high volume. Should this occur, the bottom is likely near. For Thursday the MSI isn’t forecasting a trend overnight so price could simply continue to move in the large $10, noise filled range until PPI or another external catalyst moves price. Above $570 and the bulls will press for higher prices. Below $570 and the bears will retest $555 and lower. Therefore we favor short trades to as high as $570, but above $570 will only seek failed breakouts as triggers to entry. We also favor long trades but only on failed breakdowns and only from our models major support levels below $555. Our model continues to forecast rallies will be sold until price reclaims $585 OR until the trade wars are suspended. There are major risks facing the market this month including the risk of a government shutdown and the debt ceiling debate. Therefore rallies will likely be used as opportunities to lighten long positions. Until these macro issues are resolved, favor the bears, selling rallies to as high at $570. Continue to seek failed breakouts or other topping patterns from major levels when possible. 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. 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 $563 to $580 and higher strike Calls while buying $559 to $562 Calls indicating the Dealer’s desire to participate in any continuation of today’s relief rally. To the downside Dealers are buying $558 to $549 and lower strike Puts. Dealers are no longer selling close to the money Puts. They once again nailed the lows today by selling $551 Puts yesterday. But they have pulled those options and are now in a wait and see mode like the rest of the market. Dealers are selling Puts in a 2:1 ratio to the Calls they are selling/buying, implying a neutral posture for Thursday. This positioning has changed from slightly bullish to neutral. Dealers continue to own major downside protection and continue to add to this protection with very far out of the money options in case the market continues to unravel.
Looking Ahead to Friday:
Dealers are selling $577 to $600 and higher strike Calls while buying $559 to $576 Calls indicating the Dealers desire to participate in any rally this week to as high as $600. Dealers do not seem to believe prices will exceed $600 or even $590 by Friday, indicating a ceiling to any recovery. To the downside, Dealers are buying $558 to $540 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. 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 Wednesday is the same as yesterday: remain alert and exercise caution given the continued, economically hostile policies coming out of the White House. The market is reactive to any news, good or bad and it’s still probable rallies will continue to be sold. With PPI tomorrow we advise trading smaller, adjusting to the current climate, being prepared to trade with the trend, only contemplating counter trend trades when price is testing a major level and the MSI is not printing extended targets. Use a failed pattern as a trigger to entry and you will achieve the best results. While we continue to advise two way trading from the “edges” using our favorite failed breakout and failed breakdown patterns, do not fight the trend. If you do countertrend trade, do so in quarter size given the strength of the bear market. The bears remain in complete control and at a minimum $570 needs to be reclaimed for the bulls to have any chance of moving price higher. A break above $570 will target $575 but $585 still needs to be reclaimed for the bulls to take any control away from the bears. A failure to move above $570 and price will continue to retest lower levels. A break of $550 will likely lead to a test of the August lows at $510. Stay nimble, continuing to monitor key levels seeking to initiate entries from our model’s major levels with the controlling party, which is currently the bears. Be sure to review the premarket analysis before 9 AM ET for the day’s updates.
Good luck and good trading!
