Market Insights: Thursday, February 27th, 2025

Market Overview

Stocks plunged on Thursday with tech stocks leading the steep decline after Nvidia’s earnings release failed to ignite confidence, and investors reacted to President Trump’s renewed tariff threats. The Nasdaq Composite suffered the biggest hit, falling 2.8%, as semiconductor stocks and broader tech names sold off sharply. The S&P 500 wasn’t far behind, dropping 1.6%, while the Dow Jones Industrial Average posted a more modest 0.4% decline as defensive stocks held up slightly better.

Nvidia initially popped after posting strong earnings, but sentiment quickly turned negative after the company’s gross margin forecast missed expectations, raising concerns about slowing AI demand. Shares of Nvidia slid over 8%, dragging down the entire chip sector and weighing heavily on the broader indices.

Adding to the gloom, fresh economic data painted a picture of a slowing economy. GDP data confirmed a deceleration to 2.3% annualized growth in the fourth quarter, while weekly jobless claims unexpectedly spiked to 242,000, signaling potential cracks in the labor market. Investors also braced for Friday’s PCE inflation report, a key gauge for the Federal Reserve’s policy path.

Meanwhile, President Trump reaffirmed that tariffs on Mexican and Canadian imports will take effect March 4th, while doubling down on his plans to raise tariffs on Chinese goods. This renewed trade war rhetoric fueled fears of further economic slowing, adding another layer of uncertainty to the already fragile market. Bitcoin continued its post-election slide, dipping below $84,000, reflecting the risk-off mood sweeping across asset classes.

SPY Performance

SPY tumbled 1.60% on Thursday, closing at $585.05 after hitting an intraday low of $584.65. The ETF opened at $595.89, briefly tested resistance near $599.58, and then sold off sharply into the close. Volume was robust at 61.69 million shares, significantly above average, highlighting the intensity of the selling pressure. With SPY closing near the lows of the session, the bears remain firmly in control heading into Friday.

Major Indices Performance

The Nasdaq was Thursday’s biggest loser, plunging 2.75% as Nvidia’s disappointing guidance triggered a broad sell-off across technology stocks. The S&P 500 shed 1.60%, weighed down by tech and consumer discretionary sectors, while the Russell 2000 fell 1.53%, reflecting ongoing pressure on small caps. The Dow Jones Industrial Average held up better with a 0.44% decline, thanks to relative strength in defensive sectors like utilities and consumer staples.

The tariff threats combined with rising jobless claims and slowing GDP growth created a toxic cocktail for risk assets, amplifying the volatility in an already fragile market. Tech bore the brunt of the selling as investors fled high-valuation stocks in favor of safer, dividend-paying names.

Notable Stock Movements

Nvidia stole the spotlight for all the wrong reasons, plunging over 8% after its earnings report highlighted growth concerns despite a strong headline beat. The rest of the Magnificent Seven also suffered, with losses ranging from 1.27% to 3.04% across the group. Apple and Tesla were among the hardest hit, reflecting broad risk-off sentiment in mega-cap tech. No stocks in the group managed to eke out gains, marking a stark contrast to the sector’s leadership earlier this year.

Commodity and Cryptocurrency Updates

Crude oil bucked the equity market’s trend, rising 2.13% to settle at $70.10 per barrel. However, our model still expects crude to trend lower toward $60 in the coming months as demand concerns weigh on the outlook. Gold fell 1.58%, closing at $2,885 per ounce, erasing some of its recent safe-haven gains despite the risk-off tone in equities.

Bitcoin slid 0.69% to close just above $83,900. Our model continues to favor buying Bitcoin between $83,000 and $77,000, though conviction is waning given the deteriorating macro backdrop and potential regulatory risks under the current administration. And when our model says buy it implies trading Bitcoin. We have already been in and out twice from $83K. Should the price dip below $77K we will stop trading Bitcoin from the long side.

Treasury Yield Information

The 10-year Treasury yield edged up 0.47% to close at 4.269%. While still below the critical 4.5% threshold, rising yields pose a risk for equities if they continue climbing. Should yields push above 4.8%, equity markets will likely come under serious pressure, with 5% serving as a key psychological level that could trigger a sharper correction. Bond investors appear increasingly nervous about sticky inflation, which could derail hopes for rate cuts later this year.

Previous Day’s Forecast Analysis

Wednesday’s forecast anticipated a trading range between $585 and $600, with a bearish bias unless SPY reclaimed $600. Resistance was expected at $596, $598, and $600, with support at $592, $590, and $588. The strategy called for short trades on failed rallies near resistance, targeting a retest of lower support levels. It was stated a failure of $590 and SPY would plummet to lower levels.

Market Performance vs. Forecast

SPY’s actual range of $584.65 to $599.58 aligned perfectly with the forecasted range, confirming the model’s bearish bias. Resistance at $599 held firm, triggering a sharp sell-off that ultimately broke below $590, aligning with the model’s bearish expectations. Traders who followed the recommendation to short rallies into resistance saw excellent opportunities, as SPY failed multiple times near key levels before rolling over. The close near $585 confirmed that lower support levels remain under pressure.

Premarket Analysis Summary

In Thursday’s premarket analysis, posted at 7:44 AM ET, the model projected a choppy session with key levels at $599, $601, and $605 to the upside and $594 and $591 to the downside. It emphasized caution on shorts below $599 given the potential for consolidation. The analysis noted the possibility of a grind higher, but warned of weakness if $599 couldn’t hold.

Validation of the Analysis

The premarket analysis proved highly accurate. SPY tested $599.58 early, but failed to hold above $599, triggering a slide back to $594 and ultimately below $591. This confirms the model’s warning that weakness would accelerate if $599 failed to hold. Traders who followed the premarket guidance and sold failed rallies near resistance saw profitable setups unfold throughout the day. The projected choppy action played out initially, but the afternoon breakdown confirmed the bearish bias, validating the analysis’ emphasis on resistance failures as short opportunities.

Looking Ahead

Friday’s PCE inflation report takes center stage, with expectations for a slight uptick in core inflation. This data will heavily influence expectations for Federal Reserve rate cuts. Additionally, investors will be watching for any further tariff-related headlines from the White House. With volatility running high, the market remains highly sensitive to economic data surprises and geopolitical developments.

Market Sentiment and Key Levels

SPY closed near $585, a critical battleground level that separates the bulls and bears. Sentiment remains bearish given the breakdown below $590 and failure to hold $600. Resistance for Friday stands at $588, and $590, while support lies at $585, $583, and $580. The bears have full control unless SPY can recapture $590, with downside risks pointing toward $575 if selling pressure intensifies.

Expected Price Action

Actionable intelligence from our AI model forecasts a trading range between $578 and $590 for Friday. This wide range signals likely trending price action with strong two-way price action. The bias remains bearish, with failed rallies into resistance favoring short trades. If SPY holds below $585, a test of $580 is highly probable, with further downside toward $575 if selling accelerates. On the upside, reclaiming $590 could spark a short-covering rally toward $595 and potentially $600. However, upside remains limited unless bulls can firmly retake $600, shifting momentum back in their favor. We see this as a low probability for Friday.

Trading Strategy

Short trades remain favored on failed rallies into $588 and $590, targeting moves toward $585. Aggressive traders can look for quick scalp longs if SPY holds $583, targeting $585 and $588, but stops should remain tight given the dominant downtrend. The VIX is elevated, signaling heightened volatility, which supports quick profit-taking and smaller position sizes until the market stabilizes. Favor shorts over longs and be prepared to trade what you see once PCE information is released into the market.

Model’s Projected Range

The model projects a maximum range between $578.25 and $596.25, reinforcing expectations for high volatility given the size and expanding nature of this range. The bears broke the lower bull trend channel today and price is now trading in the bear trend channel from the December highs. But after six red days the market is overdue for a relief rally which could develop on Friday. With SPY firmly in the bear trend channel in a Put-dominated structure, major resistance sits at $590, with support at $585, $583, and $580. Below $585, bears remain in full control with a high risk of testing $575.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Bearish Trending Market State, with price closing well below support turned resistance. The MSI range is average with extended targets below implying further weakness on Friday. The MSI opened the day in the narrow bullish state present at the end of day Wednesday. SPY tested MSI resistance at $598, which is our model’s major level, and without extended targets above and a very narrow MSI range, price gave way and the MSI rescaled lower to a ranging state and then to a bearish state. Price found support at $590.50 and reversed with the MSI rescaling back to a ranging state. This flip flop back and forth from ranging to bearish states continued until 2 pm ET when price finally fell precipitously and the MSI rescaled lower twice with extended targets below, pushing price to the lows of the day into the close. MSI support is currently $586.40 and resistance is at $589.34.  
Key Levels and Market Movements:
We stated Wednesday “we continue to expect large, two way price swings. We continue to favor selling relief rallies to $600”. We also stated we “are also aware that a break of $590 will lead to a substantial drop to $585 or lower”. Once again two pieces of advice which were clear and well defined for any trader to follow. Out of the gate the market rallied to $598, which as a major resistance level and with a very narrow MSI, we decided to go short looking for a first target at $596.50. But price blew through this level quickly so we decided to hold for another one of our major levels, $595, before taking first profits. We moved stops to breakeven and held our runners to see how far the market would fall, given the MSI rescaled to a bearish state with extended targets below. The MSI range was narrow so on a failed breakdown at $590.50, we decided to exit our runners and wait for another set up. We did take a long given extended targets were printing below MSI support. Price rallied hard but we were not impressed and instead waited for price to reach MSI resistance at $596.50. The MSI was in a ranging state which is not our favorite so we continued to wait for a pattern we could trust to trigger a short entry. We got this on a double top at 11:20 am and entered short once again, eying MSI support at $593.50 as a first target. We hit this fairly quickly and again, stop to breakeven, holding our runners to see if the lows of the day would get tested. The MSI rescaled again to a bearish state and started printing extended targets below so we held until price hit $591.50 and reversed. We decided once again, given the narrow MSI bearish state, to close the second short and wait for another set up. With the MSI flip flopping from a narrow bearish state to a ranging state we were not interested in participating again until the MSI rescaled lower and price broke $590. We knew from our plan that should $590 fail, $585 was entirely possible. Once price broke $590 we jumped on this short looking to the MSI for a first target at $589. We took this first target and held our runners to see if $585 was in store. The MSI printed extended targets but with price hovering around $587, we took more off the table but held 10% of our position for $585 or for a failed breakdown to exit. We closed our trade at $585 at the end of the day for another monster short trade. Three for three and once again with the MSI showing 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, combining with our trading plan, to maximize your long-term success.
Trading Strategy Based on MSI:
Friday has PCE premarket which if running hot could further derail the market. Friday’s have been particularly painful recently and the current environment is full of both macro and economic risks. Not so long ago, $585 was previously the dividing line between the bulls and the bears. With price now at this level, it will likely reestablish itself as the barrier to higher or lower prices. $605 and $608 are now out of the picture and our model will adjust to levels reflected in the current environment. As such our focus will shift to $585 as the dividing line above which bulls will attempt to move prices higher, below which bears will push for the August lows. While the August lows may seem far from current prices, traders should be aware that this low is a viable target for the bears. We told you yesterday a 13% annual retracement is average…17% (the August lows) is not out of the question. If price continues to give way it will not do so in a straight line. There will be violent relief rallies along the way. But with price now in the bear trend channel from the December highs, the market looks like it can only move lower with March setting up to be a brutal month with tariffs kicking in, a government shutdown looming, debt ceiling debates, inflation rising and now unemployment rising. GDP today was in line with estimates but this is a lagging indicator with little predictive value. Falling bond yields are actually implying an increased risk of a recession. Our models aren’t there yet and there are certainly positives that could change things dramatically: An end of the Ukraine and Gaza wars would be positive for the market. And end to government employee firings and tariffs would be another. Therefore keep an open mind and trade what you see each day as opposed to having a fixed view of what is likely to develop. When we post something we use probabilities of specific outcomes. We typically don’t even mention these unless our model gives us a 70% probability of it occurring. For example we have been advising for some time that we are buyers of Bitcoin between $77K and $83K. Price was trading at $105K when we started posting this range. But our models told us price would retrace 30% and we would have an opportunity to own Bitcoin much lower than the $105K+ highs. But it also warned us…should Bitcoin fall below $77K, stop buying until the model updates these levels. And even with Bitcoin, we are trading it and not holding it. We went long at $83K yesterday and exited at $86K. We are long again today at $83K and will look to do the same, as we trade around our levels. We told you the same about Crude moving toward $60; much more difficult to achieve given the macro risks to the energy complex effect price. Therefore we are not buying OR selling Crude until we get closer to this level. The current environment should continue to see large, two way price swings and we continue to favor selling relief rallies to $590. But above $585 we expect to see the bulls once again attempt to push price toward $600. Except for a relief rally, our model still favors selling all rallies to $590. Above $590 our model may look for longs given. After six red days, the market is due for a bounce, but a bounce and sustaining a bounce are two very different matters. Below $585 we are not interested in any longs and will only be looking for short entries. Hurdles for the bulls are now $588 and $590 which looks to be virtually impossible to breach. Therefore, look to sell rallies from $588 to $600. Should price move above $600 there is a chance price moves toward $605 and we will be very careful initiating shorts above this level. Again we see this as a low probability. To the downside support is $595 and $583. Below $583 there is little to keep price from falling to $575 therefore look to ride short trades from MSI resistance to these levels. The bears own this market and we do not advise fighting the trend with long trades until price moves above $600. The prior lows did not hold today and we told you yesterday the “lower channel held today but it may not on a third test” and boy was that an understatement. For Friday be prepared to trade what you see given PCE could change things dramatically. But absent this report, look to fade rallies and trade with the MSI to as high as $590. Above $590 be more cautious shorting. Again March looks like it will be a difficult month so longs should only be taken from failed breakdowns and should be scalps with quick targets with stops quickly moving to breakeven. Shorts are your favored trend trades so 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 $600 to $610 and higher strike Calls while buying $586 and $599 Calls. This implies Dealers wish to participate in any rally tomorrow to $600. To the downside Dealers are buying $584 to $570 and lower strike Puts in a 1:1 ratio to the Calls they are selling/buying, implying a slightly bullish posture for Friday. This positioning has remains unchanged. Dealers are clearly still waiting on the relief rally but have major downside protection in the event it does not develop.  
Looking Ahead to Next Friday:
Dealers are selling $606 to $620 and higher strike Calls while buying $585 to $605 Calls indicating the Dealers desire to participate in any rally next week to as high as $610. To the downside, Dealers are buying $584 to $558 and lower strike Puts in a 1:1 ratio to the Calls they are selling/buying, reflecting a slightly bullish view for next week. Dealer positioning has changed from neutral to slightly bullish. Dealers have added significant downside protection moving their protection much lower and in large quantities. But overall and at least as of today, Dealers still seem to think a relief rally is in store. They have been wrong two days in a row which is unusual for the Dealers. Perhaps on Friday, however, they are positioned properly and will see the rally they have been waiting for. 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 Friday is to 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. We favor shorts over longs but at the same time are maintaining an open mind given a relief rally may come any time. While Dealers continue to believe a relief rally is coming, our model still advises selling rallies at major levels until $590 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!