Market Insights: Tuesday, March 18th, 2025
Market Overview
Stocks reversed their recent gains on Tuesday, with the Nasdaq leading the market lower as the tech sector sold off ahead of the Federal Reserve’s policy decision. The Nasdaq Composite fell 1.7%, dragged down by Nvidia’s 3.3% decline after its highly anticipated GTC event failed to excite investors. The broader S&P 500 dropped 1.1%, while the Dow Jones Industrial Average declined 0.6%, as traders positioned themselves cautiously ahead of the Fed's interest rate guidance.
Uncertainty over the Federal Reserve's next steps continues to weigh on investor sentiment, with many debating whether the recent market correction has run its course. While policymakers are expected to keep rates unchanged at Wednesday’s FOMC meeting, traders are looking for any signals on future monetary policy shifts and potential economic risks.
Nvidia’s GTC event was a major focus on Tuesday, with CEO Jensen Huang unveiling new AI hardware, including the Blackwell Ultra AI chip and the GB300 superchip. Despite these announcements, Nvidia’s stock struggled as analysts questioned the competitive pricing of its new chips relative to alternatives. Additionally, General Motors’ partnership with Nvidia for self-driving cars failed to impress investors, sending GM shares down 1%.
With the market under pressure and tech stocks struggling, all eyes remain on the Fed's statement for guidance on inflation, interest rates, and broader economic conditions.
SPY Performance
SPY declined 1.10% on Tuesday, closing at $560.93 after opening at $564.75. The ETF traded within a range of $559.06 to $565, with trading volume at 49.59 million shares, slightly above average. The selling pressure pushed SPY below key support levels, testing the lower bounds of its recent trading range. The inability to reclaim higher levels suggests the market remains cautious ahead of the FOMC decision, with traders closely watching whether SPY can hold above $560 or if further downside is in store.
Major Indices Performance
The Nasdaq Composite led the market lower on Tuesday, falling 1.71% as megacap tech stocks continued their sharp declines. The S&P 500 followed with a 1.1% drop, driven by broad weakness in growth sectors. The Dow Jones Industrial Average posted a more moderate loss of 0.62%, supported by relatively stronger performance in defensive sectors. Meanwhile, the Russell 2000 dropped 0.83%, reflecting ongoing challenges for small-cap stocks.
Market sentiment remains fragile as traders assess economic risks and prepare for the Federal Reserve’s rate announcement. While some sectors, such as energy and materials, saw modest resilience, tech stocks remained the focal point of selling pressure.
Notable Stock Movements
The "Magnificent Seven" stocks had another difficult session, with losses across the board. Tesla led the declines, tumbling over 5% as investor sentiment toward high-growth names weakened. Nvidia dropped more than 3.3% as traders reacted negatively to its GTC announcements. Meta also fell sharply, adding to the overall weakness in the tech sector.
The selling in these key names contributed to the broader market decline, as traders continued to rotate out of high-valuation stocks and into more defensive areas of the market. The sector-wide pressure suggests that investors remain wary of macroeconomic headwinds and the impact of Federal Reserve policy.
Commodity and Cryptocurrency Updates
Crude oil gained 0.43%, settling at $67.48 per barrel. Despite the short-term strength, our model continues to forecast a move lower toward $60 as economic conditions soften. Gold climbed 1.21%, closing at $3,042 per ounce, benefiting from safe-haven demand as investors sought protection ahead of the Fed’s rate decision.
Bitcoin declined 2.03%, closing just above $82,200. We remain buyers of Bitcoin in the $83,000 to $77,000 range as a trading vehicle, with profit targets around $85,000. The pullback in crypto reflects broader risk-off sentiment in the market.
Treasury Yield Information
The 10-year Treasury yield dipped slightly, closing at 4.289%, down 0.39%. The yield remains below the critical 4.5% threshold, which would put additional pressure on equities. However, any sharp rise above 4.8% could trigger a deeper sell-off. With the Fed’s policy announcement looming, traders are closely watching bond markets for signals on future interest rate expectations.
Previous Day’s Forecast Analysis
Monday’s forecast projected a trading range between $560 and $575 for SPY, with resistance at $570 and $575, while support was expected at $560 and $555. The analysis highlighted that SPY needed to hold above $560 for any continued rebound, while failure at this level would expose downside risk. The forecast anticipated choppy trading ahead of the FOMC meeting, with potential resistance at the 200-day moving average.
Market Performance vs. Forecast
Tuesday’s market action largely aligned with our model’s expectations. SPY struggled to reclaim key resistance levels and instead moved lower, testing the anticipated support around $560. The rejection at $565 confirmed the difficulty in breaking above major resistance, leading to a continuation of the pullback. Traders who followed the model’s guidance were able to capitalize on the downside move, particularly as SPY failed to sustain any rally attempts.
Premarket Analysis Summary
Tuesday’s premarket analysis, posted at 7:14 AM ET, identified $566.50 as a key bias level, with upside targets at $570.50 and $572. Downside support was noted at $565, $563, and $559. The analysis suggested that holding above $566.50 could allow SPY to drift higher, while a failure at this level would open the door for a move toward lower support levels.
Validation of the Analysis
SPY adhered closely to the premarket projections, rejecting the bias level at $566.50 early in the session and moving lower toward the $560 region. The downside targets of $565 and $563 were tested, with the final low coming in at $559.06. The forecast correctly anticipated choppy price action with a bias toward the downside, reinforcing the accuracy of our model’s projections.
Looking Ahead
The Federal Reserve’s FOMC statement on Wednesday is the primary market-moving event of the week. With no major economic data scheduled for Tuesday, markets remained range-bound ahead of the announcement. On Thursday, Unemployment Claims data will provide additional insights into the labor market.
Market Sentiment and Key Levels
SPY closed at $560.93, trading just above key support at $560. Resistance remains at $565, $570, and $575, while downside levels to watch include $560, $556, and $550. Bulls need to reclaim $570 to shift momentum higher, while bears will continue to dominate as long as SPY remains below the 200-day moving average.
Expected Price Action
Our AI model projects a trading range between $555 and $570 for Wednesday. The market remains in a consolidation phase, with traders awaiting the Fed’s guidance before making significant moves. If SPY holds above $560, a test of $565 and potentially $570 is likely. However, a break below $560 could send prices toward $555, with $550 acting as critical support.
Trading Strategy
Long trades should be considered if SPY holds above $560, with upside targets at $565 and $570. However, if SPY fails to break above resistance at $565, short trades could be initiated, targeting $560 and $555. The VIX remains elevated, signaling continued market volatility, so traders should maintain disciplined stop-loss levels and adjust their risk accordingly.
Model’s Projected Range
The model’s maximum projected range for Wednesday is $549 to $577, indicating an expansion in volatility following the FOMC announcement. SPY remains Put dominated, implying bearish pressure, but a break above $570 could shift sentiment toward a more neutral or bullish outlook. Currently $565, $570, and $575 are major resistance with $560, $556, and $550 as major support. There is little below $560 to keep price from falling further to $550. There was no news today and all eyes are on FOMC tomorrow. There is major resistance at $570 so expect a battle as price attempt to move beyond the 200 DMA. $550 remains a critical level of support which needs to hold on any retest. Overnight expect the bulls to back test $565 as the market heads into FOMC, remaining in a large noise filled range from $550 to $570. The bears are firmly in control of the market but if the bulls can move SPY beyond $570, SPY will inch its way to $575. If SPY breaks $560, price will retrace to $550 which must hold, otherwise price will fall materially lower. SPY remains at the lower end of the bear trend channel from the December highs with room both higher and lower. This is a broad channel which will likely contain price for at least a few weeks. SPY remains below the 200 DMA at $570 which will act as significant resistance and until that is reclaimed, the bears remain in complete control.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI is currently in a very narrow Bearish Trending Market State, with price closing well below support turned resistance, below the 200 DMA. Extended targets printed for most of the day implying the herd participated in today’s 1.08% decline. The MSI is implying a moderately strong bear trend but for price to continue lower, the MSI needs to rescale lower and widen to indicate a strengthening trend. Overnight the MSI rescaled from a wide bullish trend to a ranging and then narrow bearish state which saw price test the $565 level. By the open extended targets began printing below and price fell while the MSI remained in its current narrow bearish state. MSI resistance is currently $565.01 and higher at $565.87.
Key Levels and Market Movements:
We stated Monday, for today we expect SPY to “trade more sideways, retesting both $570 and perhaps $560. We expect both to hold initially”. We further stated for today “our general lean is SPY will attempt to back test $560”. And finally we stated, “we continue to favor two way trading, favoring shorts to as high as $570”. With our plan in hand, as the MSI rescaled to a bearish state in the premarket, we were inclined to seek short set ups out of the gate. With extended targets printing below and price testing MSI resistance at $565, we entered short after the open with the goal of reaching a final target at $560. With price already below MSI support we relied on the premarket levels to seek our first target at $563. This came quickly and with extended targets below the MSI, we held 30% of our position for our next major level at $560. By 11 am we had our second target and took off 20% of our position, holding a 10% runner to see if this important level would fail. Our plan called for $560 to hold on any initial test so we looked for an excuse to close this trade and reverse long. And at 11:54 am SPY set up a failed breakdown to another premarket level at $559 so we exited our remaining 10% short position. We did not reverse long given extended targets were printing. A couple more tests of this $559 level and while we thought about taking a long, by 1:30 pm we decided to call it a day given leading up to FOMC the market is usually nothing more than noise and chop. The MSI once again, kept us from entering a long that wouldn’t have materialized into a very profitable trade…not for the risk involved. One and done on the day following our plan which once again was spot on. We ended the day solidly green 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 profitable. 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:
Wednesday has the FOMC statement at 2 pm which could provide a major catalyst for the market either way. The market didn’t do much after 11 am which is typical of the day before the FOMC. Therefore tomorrow morning expect the same type of price action unless there are other external macro events that move the market. Both sides of the $560 to $570 range contained price overnight and today and its likely one of these breaks after FOMC. A failure of $560 and much lower levels come into play with a retest of $550 and perhaps much lower. A break of $570 and price will attempt to reach $575. But it will be more of a slog than a huge rush to that level. On an FOMC day anything can happen, therefore we highly recommend you trade what you see once this information is released to the market. Absent this information, our general lean for tomorrow is SPY will attempt to back test a bit higher to $565 and if this fails to contain price, SPY will move toward $570 and the 200 DMA once again. Should price move above $570, the squeeze will be on and price will eventually work its way to $575. Watch the MSI closely and be careful to trade with the trend on a break above $570. FOMC days can be quite volatile and often the first move after the report is a trap which should be faded. We won’t know what the market will do after FOMC so we plan to seek trades using the MSI as our guide from our major levels. Failed breakouts and failed breakdowns are reliable triggers to entry from major levels. Our model continues to forecast rallies will be sold until price reclaims $585 OR until the trade wars are suspended. Therefore until these macro issues are resolved, favor the bears, selling rallies to as high at $570. But 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 $568 to $580 and higher strike Calls while buying $562 and to $567 Calls indicating the Dealer’s desire to participate in any rally post FOMC. Dealers are no longer selling close to the money Puts and as we said yesterday, “there are so few Puts being sold it is somewhat immaterial to today’s positioning.” Sure enough it did not make any difference today. In fact interpreting Dealer information correctly is key to using this information correctly. We told you yesterday “Instead seeing the Dealers sell Calls just above the close price indicates Dealers believe price may retrace tomorrow but perhaps not fall materially.” Our understanding of Dealer positioning comes from thousands of hours of machine learning analyzing this positioning to determine the highest probability outcome. To the downside Dealers are buying $561 to $530 and lower strike Puts. Dealers are buying Puts in a 3:1 ratio to the Calls they are selling/buying, implying a slightly bearish posture for Wednesday. This positioning has changed from slightly bullish to slightly bearish.
Looking Ahead to Friday:
Dealers are selling $579 to $600 and higher strike Calls while buying in size $562 to $578 Calls indicating the Dealers desire to participate in any rally this week to as high as $582. Dealers are heavily invested in $571 to $574 Calls. Should price resume higher by the end of the week, Dealers stand to realize substantial profits. To the downside, Dealers are buying $561 to $530 and lower strike Puts in a 1:1 ratio to the Calls they are selling/buying, reflecting a slightly bullish view for the week. Dealer positioning is unchanged from yesterday. Dealers have amassed large quantities of both much lower strike Puts and near the money Calls. This positioning tells us Dealers believe prices may move higher this week, but they are also prepared for any price decline, adding very inexpensive far OTM Puts. With so many Calls in the bank, Dealers are displaying optimism as we head into Friday. 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 to expect muted price action until 2 pm as the market consolidates and pauses ahead of FOMC. Two way trading if favored until FOMC but more than likely there will be few if any set ups prior to the release. Like every recent day, remain alert and exercise caution given the continued, economically hostile policies coming out of the White House. The market is highly reactive to any news, good or bad and it’s probable rallies will continue to be sold until price reclaims the 200 DMA at a minimum. We continue to advise trading smaller, adjusting to current conditions, being prepared to trade what you see and trading 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. Trading from the “edges” using our favorite failed breakout and failed breakdown patterns will put you in trades with lower risk and higher odds of success. The bears remain in control until $570 is reclaimed while above $570, the bulls will have the edge pushing price to $575. But $585 still needs to be reclaimed for the bulls to take control away from the bears. A failure to move above $570 and rallies will continue to be sold. A break below $560 will likely lead to a test of $550, while a break of $550 will see price visiting 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!
