Market Insights: Monday, March 3rd, 2025

Market Overview

Stocks stumbled sharply on Monday, kicking off the month of March with a heavy sell-off triggered by renewed fears of an escalating global trade war. The S&P 500 dropped 2%, marking its worst day of 2025, while the Nasdaq tumbled 2.6% and the Dow Jones Industrial Average lost 1.5%, shedding nearly 650 points. President Trump’s confirmation that tariffs on Mexico and Canada will take effect tomorrow, alongside an additional 10% tariff on Chinese goods, reignited investor anxiety and fueled broad-based selling across risk assets.

The latest ISM Manufacturing PMI data also added to the downbeat mood. February’s reading came in at 50.3, down from January’s 50.9, and falling short of expectations for 50.6. Though the reading still signals expansion, growth is marginal at best, and analysts are now increasingly worried that tariffs could further strain the manufacturing sector. The Atlanta Fed’s GDPNow model slashed its first-quarter GDP estimate to -2.8%, nearly double the previous week’s projected 1.5% contraction, stoking fears that the economy could already be slipping into recession.

Tech stocks bore the brunt of the sell-off, with Nvidia sinking over 8% following reports that Chinese buyers are sidestepping U.S. export bans to secure its Blackwell chips. Meanwhile, Bitcoin gave back some of its recent rally, though it still managed to hold above $86,000 after President Trump reiterated his plans to establish a U.S. Strategic Crypto Reserve. Markets now face a crucial week ahead with fresh economic data and retail earnings set to test investor sentiment further.

SPY Performance

SPY opened Monday at $596.18, but the optimism quickly faded as selling intensified throughout the session. SPY reached a high of $597.34 but tumbled to a low of $579.90 before closing at $583.77, down 1.75% for the day. Volume surged to 66.33 million shares, well above average, signaling heavy institutional participation in the sell-off. The break below key levels, including $585, confirmed that the bears remain firmly in control after Friday’s relief rally was quickly unwound.

Major Indices Performance

The Dow Jones Industrial Average fell 1.37% on Monday, shedding nearly 650 points as tariff fears drove defensive positioning across the board. The Nasdaq Composite fared even worse, plunging 2.01% as tech stocks collapsed under the weight of Nvidia’s sell-off. The S&P 500 sank 1.75%, while the Russell 2000 suffered the most, sliding 2.73% as small-cap stocks bore the brunt of risk-off flows.

Weakness was widespread, but technology and consumer discretionary sectors led the decline. Defensive sectors like utilities outperformed on a relative basis but still ended in the red. With tariffs, weak economic data, and rising recession fears dominating the narrative, there were few safe havens for investors.

Notable Stock Movements

The Magnificent Seven stocks endured a brutal session, all finishing deep in the red. Nvidia plunged more than 8%, leading the losses after reports surfaced that Chinese buyers are skirting U.S. export bans to acquire Nvidia’s Blackwell chips. Amazon, Tesla, and Microsoft all dropped over 2%, reflecting the broader risk-off tone in tech.

Capri Holdings briefly bucked the trend on reports that Versace could be sold to Prada for €1.5 billion, but those gains evaporated into the close. Intel gave up early gains to finish 4% lower despite news that Nvidia and Broadcom are running manufacturing tests with Intel’s foundry. The heavy tech losses and broader equity weakness left investors with little appetite to step in and buy dips.

Commodity and Cryptocurrency Updates

Crude oil dropped 1.99%, closing at $68.37 per barrel, as trade war fears raised fresh concerns about global demand. Our model continues to forecast downside toward $60 as the deteriorating macro environment weighs on energy markets.

Gold bucked the trend, climbing 1.96% to $2,904 per ounce as investors sought safe-haven assets amid the equity sell-off. Meanwhile, Bitcoin surged 8.6%, closing just above $86,000. Trump’s reaffirmation of his proposed U.S. Strategic Crypto Reserve helped spark renewed interest, but conviction remains tepid given broader macro uncertainty. Our model still favors Bitcoin between $83,000 and $77,000, though confidence in this range is fading. We have made several trades in and out of BTC from $80K to $93K. We will likely continue to trade Bitcoin in this range until $77K fails, which is becoming more probable. 

Treasury Yield Information

The 10-year Treasury yield dropped 1.63% to 4.160%, as flight-to-safety flows drove bond prices higher. The move lower in yields provided little support for equities, as growth fears tied to tariffs and weak economic data overwhelmed any relief from lower rates. As a reminder, yields above 4.5% remain a key danger zone for equities, with levels above 5% likely to trigger a more severe correction. Falling yields, while good for the economy and consumers are starting to forecast a recession on the horizon. A recession is two quarters of negative GDP growth. PMI is close to turning negative and the Atlanta Fed is already forecasting negative GDP growth for next quarter. While long term we see a need for 5% 10-year yields to attract buyers, in the near term falling yields are troublesome for the equity markets.

Previous Day’s Forecast Analysis

Friday’s forecast projected a trading range between $585 and $600, with a cautiously bullish bias if SPY held above $590. Resistance stood at $595 and $598, with support at $590, $585, and $580. The strategy favored longs above $590 targeting $595 and $598, and shorts below $590 aiming for $585 and $580.

Market Performance vs. Forecast

SPY opened at $596.18, slightly above Friday’s forecasted range, but quickly lost ground. It broke below support at $590 and $585, falling as low as $579.90 before closing at $583.77. This bearish reversal aligned with the forecast’s downside targets, validating the model’s view that below $590, bears would regain control. Traders who followed the plan had multiple opportunities to profit from short trades off failed rallies into resistance.

Premarket Analysis Summary

In today’s premarket analysis, posted at 7:36 AM ET, the model identified $596 as the key bias level. A move above $596 was expected to target $599 and $600.50, while a break below would shift focus to support at $594, $592.90, and as low as $587. The bias leaned cautiously bullish above $596 but turned bearish below it.

Validation of the Analysis

The premarket analysis was spot on, as SPY opened slightly above $596 but quickly failed, triggering a sharp move lower. Support at $594 and $592.90 gave way, leading to a plunge toward $580. The premarket roadmap accurately identified both the upside targets (which were never tested) and the key downside supports, giving traders clear levels to work with throughout the session.

Looking Ahead

The next major economic event arrives Wednesday with the Services PMI report. Thursday brings weekly Unemployment Claims, followed by Friday’s critical nonfarm payrolls report, which could set the tone for the rest of March. With tariffs now in focus and economic data deteriorating, volatility is likely to remain elevated all week.

Market Sentiment and Key Levels

With SPY closing at $583.77, sentiment has turned bearish again, as the break below $585 shifts control back to the bears. Resistance now stands at $585, $590, and $595, while support lies at $580, $575, and $570. Below $580, a retest of the December lows becomes likely. Above $585, bulls will attempt to stabilize, but they face stiff resistance ahead.

Expected Price Action

Actionable intelligence from our AI model forecasts a trading range between $575 and $595 for Tuesday. This wide range signals potential for trending price action. The bias leans bearish below $585, targeting $580 and $575. A break above $585 would flip the bias slightly bullish, aiming for $589. Economic data and tariff headlines will be the primary catalysts to the next market move. With the strong bounce off the day’s lows, the bulls will attempt to back test higher levels at $588 and $595. Should $580 fail however, price falls straight down to $575 and then $570, the 200 DMA, where we expect to see another relief rally take shape.

Trading Strategy

Long trades are favored above $580, targeting $589, with stops below $580 to manage risk. Below $595, shorts are attractive targeting $580. Below $580 look for further downside to as low as $570. Failed breakout and breakdowns are your friend in this environment given macro uncertainties can arise at any time. The VIX remains elevated, reinforcing the need for quick profit-taking and smaller positions.

Model’s Projected Range

The model projects a wide, maximum trading range between $572 and $593.75 for Tuesday, with a Put-dominated structure suggesting downside risk remains elevated. SPY is back in its bear trend channel from the December highs, with resistance at $585 and $589, and support at $580, $575, and $570. The bears stepped on the gas again today with tariffs center stage. Price closed at the $585 dividing line between the bulls and the bears. We said $598 was the likely peak of Friday’s relief rally and today we got there to the penny. While the relief rally looked like it had legs, the market quickly failed at major resistance and the bears reemerged. We said it was likely the market would retrace a bit today, consolidating in a large range between $585 and $595, which is what developed most of the day. Below $585 the bears will press to push price toward $575. Above $585 and the bulls will work their way to $589. We are in a sell the rally mode so its likely rallies will continue to be faded. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Bearish Trending Market State, with price closing at resistance. The MSI range is average without extended targets below implying a weak bear trend. The MSI opened the day in a narrow bullish state without extended targets above. The MSI contained price most of the morning session but at 1 pm ET, the MSI began a series of rescalings lower to a bearish state. With only a few extended targets below, the MSI stayed in a narrow range until 2:45 pm when the MSI began rescaling lower with the range widening with extended targets below. This bearish MSI led price to the lows of the day at $580 where it reversed, closing MSI resistance. MSI support is currently $582.69 and resistance is at $585.45.  
Key Levels and Market Movements:
We stated Friday “the bears want to keep price below $600” as well as stated 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”. We also stated our model needed more price discovery to determine how the week will play out. With the bears wanting to keep price below $600 and with our model identifying $598 as major resistance, we entered short at the open on a failed breakout, taking first profits at MSI resistance turned support at $593.85, taking a second target at MSI support at $591.07. We liked the failed breakdown at 10 am ET and decided to close our short trade and reverse long, knowing in an MSI bullish state, our odds of success are over 70%. While the long was a scalp to MSI resistance, we held onto our runners to see if price would retest $598. After several tests of MSI resistance and a head and shoulders at 11:22 am, we exited our long scalp and reversed short at MSI resistance. We held onto this short given price was trading below $596, a premarket level, below which our bias turned bearish. We also stated on Friday “on any failed breakout between $593 and $595 we are certainly open to a short for any possible retrace of today’s gains”. And sure enough price began falling at 1 pm so we took first profits at MSI support, holding onto runners as the MSI started rescaling lower to a bearish state. Our next target was our models $585 level, which we reached at 3 pm, leaving us with 10% of our position to see if $580 would hold. We closed our short at $580 after a textbook failed breakdown at this level for a monster trade that captured the entire day’s decline. We did not go long on the failed breakdown given extended targets were printing below. Instead we called it a day going three for three once again 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:
Tuesday has no economic news but the President is speaking in the evening which may move the markets on Wednesday. Our general lean is Tuesday could see some follow through to the bounce off today’s lows. But make no mistake in assuming the bottom is in as rallies will continue to be sold until price reclaims $600. $590 won’t get the bulls too excited at this stage given the VIX is forecasting ever increasing volatility not seen in some time. The market is trading in a large range and is likely to continue to do. Therefore we favor the bears and lean toward selling rallies to as high at $595. Above $595, there is a chance the bulls press price toward $600. But we see this as a low probability unless the White House changes its stance on tariffs or some other external catalyst is introduced to the market. Absent such an event, continue to seek failed breakouts or other topping patterns from major levels above $585 such as $590 to $595. A break of $580 has a high probability of price falling to as low as $570. At a minimum the bears want to test the December lows at $575. But our model suggests should $580 fail, price could find lows not seen since August. We have said for several days “March is setting up to be a challenging month with tariffs kicking in, a government shutdown looming, a debt ceiling debate, and unemployment rising”, and now with weaker than expected PMI and possible recession risk, there are even more negatives for the market to digest. Be careful with any longs as these are likely to be short squeezes and relief rallies only. Until price pushes back into the bull trend channel from the September lows, the market has a bearish bias with the bears in control. We only favor longs on failed breakdowns between $580 and $585 and only if the MSI is not printing extended targets below. 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. There are plenty of economic indicators pointing to a slowing economy and with the market at historically expensive levels, any hiccup could cause a major correction. 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 $584 to $610 and higher strike Calls while buying $593 and $602 Calls, as well as selling $580 to $570 Puts. This implies Dealers wish to participate in any rally Tuesday to $602. Dealers typically only sell close to the money Puts when they believe there is a floor in the market. Dealer positioning puts this floor for Tuesday at $580. To the downside Dealers are buying $583 to $569 and lower strike Puts in a 1:1 ratio to the Calls/Puts they are selling/buying, implying a bullish posture for Tuesday. This positioning has changed from neutral to bullish. Dealers still own major downside protection.  
Looking Ahead to Friday:
Dealers are selling $593 to $620 and higher strike Calls while buying $584 to $592 Calls indicating the Dealers desire to participate in any rally this week to as high as $610. To the downside, Dealers are buying $583 to $565 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 is unchanged from today. Dealers continue to hold significant downside protection well below current levels. For the week Dealers are overall neutral, which implies more range bound, consolidative trading, even though our model sees more trending price action. 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 remains the same as today: 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 $15 range between major support and major resistance, we favor two way trading from the edges using our favorite patterns. The bulls lost any control they gained on Friday. Major levels, such as $580, need to hold for the bulls to recapture some of this lost control. A failure to hold $580 and price makes another leg lower toward the 200 DMA. A break above $595 will look to test $600 which needs to be reclaimed for the bulls to take complete control from the bears. $585 remains the dividing line between the bulls and the bears so look to trade from the edges in this wide range and stay nimble, continuing to monitor key levels seeking trades from our model’s major levels. Be sure to review the premarket analysis before 9 AM ET for the day’s updates.

Good luck and good trading!