Market Insights: Monday, February 24th, 2025

Market Overview

The stock market struggled for direction on Monday, with major indices wavering as investors weighed the implications of President Trump’s latest tariff plans. The Dow Jones Industrial Average closed slightly higher, up 0.19%, while the S&P 500 dipped 0.5%. The tech-heavy Nasdaq Composite was hit the hardest, sliding 1.2% as major technology stocks faltered.

Market sentiment remained cautious after last week's sharp declines, as investors kept an eye on Nvidia’s upcoming earnings report, which is expected to be a pivotal moment for the AI-driven market narrative. Nvidia tumbled 3% ahead of its Wednesday earnings release, with traders questioning how the company will navigate growing trade tensions and competitive pressures from China-based AI chipmakers like DeepSeek. Microsoft also weighed on the market, slipping after reports surfaced that the company is slowing its data center expansion.

Adding to the uncertainty, President Trump confirmed during a Monday press conference that tariffs on Mexico and Canada would move forward as planned after a one-month delay. Investors remain wary of the broader economic implications, particularly on supply chains and inflation, as new trade barriers could put additional strain on corporate earnings.

Amid the tech sector's weakness, Apple managed to buck the trend, closing higher after announcing a $500 billion U.S. investment plan, including a manufacturing facility in Houston and the addition of 20,000 new jobs. Meanwhile, traders are closely monitoring this week’s economic reports, with Consumer Confidence on Tuesday and the highly anticipated PCE inflation report on Friday. With trade policy and inflation back in the spotlight, volatility is expected to persist in the coming sessions.

SPY Performance

SPY declined 0.46% to close at $597.21, marking its second straight session in the red. The ETF opened at $601.99 and briefly climbed to an intraday high of $603.02 before slipping lower. Sellers took control in the afternoon, pushing SPY to an intraday low of $596.49. Trading volume was in line with its daily average at 43.71 million shares. The loss keeps SPY below the key $600 level, where it continues to battle for direction in a choppy environment.

Major Indices Performance

The Dow Jones Industrial Average was the only major index to finish positive, inching up 0.19% in a quiet session. In contrast, the Nasdaq Composite dropped 1.16% as weakness in mega-cap tech stocks weighed on the broader market. The S&P 500 slipped 0.5%, failing to reclaim lost ground from last week’s sell-off.

Small-cap stocks continued to struggle, with the Russell 2000 declining 0.72%, reflecting investor skepticism about riskier assets amid ongoing trade tensions. Sector performance was mixed, with technology and growth stocks under pressure, while defensive names showed relative resilience. Traders are awaiting clarity from upcoming economic data and corporate earnings before taking on larger positions.

Notable Stock Movements

It was a rough day for the Magnificent Seven stocks, with most finishing in the red. Nvidia, Meta, and Tesla led the declines, each falling between 2% and 3%. Nvidia’s 3% drop came as investors braced for its earnings report, while Microsoft also slid after news broke of a slowdown in data center expansion. Amazon joined the downward trend, weighed down by concerns over consumer spending.

Apple was a rare bright spot, closing slightly higher after revealing a massive $500 billion investment plan in the U.S., including expanded manufacturing efforts and hiring. Investors welcomed the news as a sign of Apple's long-term commitment to domestic growth despite global trade tensions.

Commodity and Cryptocurrency Updates

Crude oil edged higher by 0.65% to close at $70.86 per barrel, though it remains in a broader downtrend. Market sentiment around oil continues to weaken, with analysts still targeting a move toward $60 in the coming months.

Gold gained 0.39%, closing at $2,965 per ounce. The yellow metal remains near all-time highs, supported by ongoing uncertainty in equities and persistent inflation concerns.

Bitcoin extended its slide, dropping 3.74% to settle just above $92,600. While Bitcoin remains in an overall uptrend, the conviction level of the model’s buy zone between $83,000 and $77,000 is beginning to weaken. Traders are closely watching for any signs of renewed momentum.

Treasury Yield Information

The 10-year Treasury yield declined slightly, falling 0.43% to close at 4.401%. While still below the critical 4.5% level, any move back above 4.8% could exert downward pressure on equities. Should yields climb past 5%, the risk of a sharp market correction increases substantially, with a potential 20% decline in the cards if yields hit 5.2%.

Previous Day’s Forecast Analysis

Friday’s forecast called for a broad trading range of $593 to $607, with a bearish bias. SPY was expected to remain under pressure as long as it stayed below $600, with downside targets of $598, $595, and potentially $593. The report warned that a failure to hold $598 could lead to additional declines toward $585. Resistance was expected at $601, $605, and $609, with any rally above $605 facing strong selling pressure unless $608 was reclaimed.

Market Performance vs. Forecast

SPY’s actual trading range of $596.49 to $603.02 aligned with the forecasted range but stayed in a narrower band than projected. As expected, the ETF failed to hold above $600, leading to further downside pressure. The failure to reclaim $605 confirmed bearish momentum, with price action respecting major levels from the prior day’s analysis. Traders who shorted near resistance at $603 had profitable setups as the market failed to sustain a rally. The forecast correctly identified key support at $598, with price only briefly dipping below before this level finally gave way into the close.

Premarket Analysis Summary

Monday’s premarket analysis, posted at 7:44 AM ET, projected upside resistance at $605 and $607, while support levels were identified at $603, $602, $599, and $597.50. The expectation was for an initial attempt to rally, but weakness was anticipated if SPY fell below $603. A drop under $602 was expected to trigger further selling toward $599 and potentially $597.50.

Validation of the Analysis

The premarket analysis proved highly accurate, as SPY struggled near $603 before reversing lower. The forecasted bias level of $603 served as a critical pivot point, with downside targets at $599 and $597.50 coming into play. Traders who followed the outlined levels had multiple opportunities to short failed rallies and take profits near expected support zones.

Looking Ahead

This week features several key economic releases. Tuesday brings the latest Consumer Confidence report, which will provide insight into consumer sentiment amid trade concerns. Nvidia’s earnings on Wednesday will be a major event for tech stocks, while Thursday’s Unemployment Claims and Friday’s PCE inflation report could set the tone for the broader market.

Market Sentiment and Key Levels

The market remains under bearish pressure, with $600 acting as a key dividing line. Resistance is now at $599, $600, and $601, while support sits at $595 and $590. If SPY breaks below $595, a move toward $590 and lower is likely. Bulls need to reclaim $605 to mount any sort of comeback, but until $608 is recovered, the bears remain in complete control.

Expected Price Action

The AI model forecasts a wide trading range of $593.75 to $603 for Tuesday, implying another volatile session. The market leans bearish, with downside targets at $595 and $590 if SPY remains below $600. A relief rally attempt is possible, but resistance at $605 is expected to hold unless buying momentum strengthens.

Trading Strategy

Short setups should be favored on failed breakouts near $599 to $605, targeting moves toward $598 and $595. Long trades should only be considered on a confirmed reclaim of $608 OR on a failed breakdown below $595. If the bulls can overtake $598 they can work toward $600 and perhaps $602. But should any retest of $598 fail with price dropping below $595, the bears will push for another leg lower to perhaps the 150 DMA at $580 where the bulls will reengage. The VIX remains elevated, signaling increased volatility, so traders should reduce position sizes and be prepared for sharp intraday swings.

Model’s Projected Range

The model’s maximum projected range for Tuesday is $592.75 to $608, indicating trending price action. SPY remains in a Put-dominated structure, with the market nearing the lower end of the trend channel that has been in place since the September lows. The battleground is $600 and as long as price is below this level, the bears have the ball. Price could pause at the lower channel at $590 and drift lower, moving back into the bear channel from the December highs. Key resistance is $599, $600, and $601 with major support at $595 and $590.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Bearish Trending Market State, with price closing at the lows of the day, well below support now turned resistance. The MSI range is wide and extended targets are printing below, printing both in the morning and afternoon sessions implying the likelihood of further weakness on Tuesday. The MSI did not rescale lower today even with price spending much of the day below MSI support turned resistance. This kept price from moving significantly below the $598 major support level and once extended targets stopped printing in the morning session, price moved back above resistance. Later in the day the White House announced tariffs on Canada and Mexico would move forward and after the news, extended targets once again started printing and price fell to the lows of the day. MSI resistance is currently $599.53 and higher at $602.95.  
Key Levels and Market Movements:
We stated Friday “the bears have the ball and rallies will be sold. Monday could see a relief rally to as high as $605 where we favor shorts” and sure enough like clockwork, overnight the bulls did their best to push price higher to MSI resistance at $603, putting a failed breakout before the open. This worked to perfection got us short at MSI resistance, as we knew the odds of success were close to 70%. We took first profits at MSI support at $599.50 and held our runners given price was moving lower quickly with extended targets printing below. A failed breakdown at major support below $598 and we decided to book profits on our runners for a massive first trade. While that could have been enough for any trader to call it a week, we decided to see if the MSI would set up another trade per our Friday plan. We said in Friday’s newsletter “we do not favor longs until price breaks today’s lows, tests the next major level at $598 and recovers” and we got this exact set up at 10:06 am ET. But we didn’t go long because the MSI was printing extended targets below and we know better than to fight the MSI. Instead we waited for extended targets to stop printing at 11:26 am and went long at MSI support at $599.50, targeting our MSI resistance at $603. While price tried hard to get to MSI resistance, after an hour bouncing off $601.75, mid MSI, we exited our long with a decent profit and looked for an opportunity to go short. A triple top with a lower high and a weak failed breakout had us short once again at $601.35, taking first profits at MSI support at $599.50. Extended targets started printing below once again so we held our runner and exited at the close for another monster winning trade. We stayed in our short trades much longer than our countertrend long, following our trading plan to the letter, ending the day three for three with two huge trades and a countertrend long scalp. The MSI once again 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:
Tuesday has Consumer Confidence at 10 am ET with a slew of Fed speakers talking as well so we would be very careful at that time. The market is looking for any excuse to push lower so poor economic news or further news by this administration of tariffs and the market will move lower. As such, we continue to favor selling relief rallies to $605. The bulls need to reclaim $608 to wrestle control from the bears but bulls have major hurdles at $600 and $601 to overcome to even start that process. While we could see a relief rally to as high as $605, again we continue to favor shorts as long as the MSI is not printing extended targets above. A break of today’s low will lead to a test of $595 which must hold for the bulls to contain the damage from this sell off. Should $595 fail, SPY moves much lower with the 150 DMS as a likely target. For Tuesday, with the MSI in a wide bearish state look for a short set ups on failed breakouts near MSI resistance or higher, to as high as $605. Above $605 be careful shorting. And while a relief rally may come at any time, we do not favor longs until price tests the next major level at $595 and recovers. Should this occur we will look for longs on failed breakdowns, targeting $600. Volume is back to normal indicating large players are participating once again so prepare for more trending price action and continue to 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 $601 to $610 and higher strike Calls while buying $598 to $600 Calls implying the Dealers desire to participate in any relief rally on Tuesday to as high as $605. Dealers appear to have set a ceiling on Tuesday at $605, which is much lower than it has been in some time. To the downside Dealers are buying $597 to $580 and lower strike Puts in a 2:1 ratio to the Calls they are selling/buying, implying a neutral posture for Tuesday. This positioning has changed from bullish to neutral. Dealers seem to think today’s decline is nearing an end and a relief bounce is in store. But they do not see price moving much beyond $605 tomorrow therefore selling rallies is favored.
Looking Ahead to Next Friday:
Dealers are selling $610 to $620 and higher strike Calls while buying $598 to $609 Calls indicating the Dealers desire to participate in any rally this week to as high as $615. To the downside, Dealers are buying $597 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 bearish to neutral. It seems Dealers believe a bottom could be forming as soon as tomorrow but certainly by the end of the week. As such if you still own protection we would take more profits and keep just a small portion (10%) open in case things unravel more seriously. Otherwise Dealers are showing you based on their positioning that the market will rally this week. 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 Tuesday is to heed news coming out of the White House and economic releases as well as the Federal Reserve. Continue to seek failed breakout and failed breakdown patterns from our model’s major levels and continue to favor shorts over longs. At the same time keep an open mind because relief rallies can be quite violent and fast. Dealers seem to think a relief rally is possible this week. Our model still advises selling rallies at major levels until $608 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!