Market Insights: Tuesday, February 11th, 2025

Market Overview

US stocks ended Tuesday’s session mixed as investors remained cautious ahead of key inflation data while processing Federal Reserve Chair Jerome Powell’s congressional testimony. The Dow Jones Industrial Average edged 0.24% higher, while the S&P 500 barely managed to stay in positive territory. The Nasdaq Composite lagged, falling 0.31%, as weakness in major tech stocks weighed on the index.

Investors continued to grapple with President Trump’s latest tariff decisions. On Monday, he announced sweeping 25% tariffs on all steel and aluminum imports, effective March 12. This move places additional pressure on key trading partners like Canada and Mexico and has injected fresh uncertainty into the markets. However, Powell’s testimony provided a sense of stability as he reiterated that the Federal Reserve remains in no rush to adjust interest rates. He also emphasized that the central bank remains data-dependent and does not comment on trade policy.

With inflation still a pressing concern, all eyes are now on Wednesday’s Consumer Price Index (CPI) report. Given the persistent price pressures seen in recent months, any upside surprise could reignite fears of prolonged higher interest rates, potentially leading to a market sell-off. Thursday’s Producer Price Index (PPI) report and Friday’s retail sales data will also be closely watched, as they provide further insights into economic strength and consumer behavior. Until then, the market is likely to remain in a holding pattern, with traders bracing for potential volatility.

SPY Performance

SPY managed a modest gain on Tuesday, closing at $605.25, up just 0.07% for the session. The ETF opened at $602.52 and climbed to an intraday high of $605.86 before dipping slightly into the close. The low of the day came in at $602.44, confirming strong support around the $602 level. Trading volume was 26.64 million shares, remaining below average, which suggests a lack of strong conviction ahead of Wednesday’s CPI report. Key resistance remains at $608 and $610, while support holds firm at $602 and $600.

Major Indices Performance

The Dow Jones Industrial Average led the market with a 0.24% gain, reflecting strength in defensive sectors and a more cautious investor approach. The S&P 500 followed, eking out a slight gain, though it struggled to maintain momentum. The Nasdaq Composite was the biggest laggard, dropping 0.31% as tech stocks faced renewed selling pressure. Meanwhile, the Russell 2000 fell 0.57%, showing notable weakness in small-cap stocks.

Sector-wise, defensive plays such as utilities and consumer staples saw modest gains, while technology and growth stocks faced headwinds. The market’s subdued performance reflected investors' reluctance to take big bets ahead of the upcoming inflation data.

Notable Stock Movements

The Magnificent Seven stocks had a rough session, with red dominating the group except for Meta and Apple, with Apple managing to gain over 2%. Tesla was the biggest laggard, plunging more than 6% as concerns over vehicle demand and margin pressure continued to mount. With this latest decline, Tesla appears increasingly likely to test the $300 level before finding material support. The broader weakness in tech stocks weighed heavily on the Nasdaq, reinforcing the market’s cautious stance ahead of inflation data.

Commodity and Cryptocurrency Updates

Crude oil climbed 1.19% to settle at $73.18 per barrel, extending its recent rebound as traders adjusted supply-demand expectations. Gold, however, slipped 0.25% to $2,927 per ounce, reflecting some profit-taking ahead of inflation data that could impact interest rate expectations. Bitcoin saw a notable decline, dropping 2.11% to close just above $95,300, signaling a cooling-off period after its recent strong rally. We reiterate we are buyers of Bitcoin at $83000 to as low as $77000.

Treasury Yield Information

The 10-year Treasury yield rose 0.91% to close at 4.536%, firmly above the critical 4.5% level. This increase in yields continues to pressure equity markets, as historically, moves above 4.5% have led to pullbacks. If yields continue to rise and approach the 5% threshold, a deeper market correction could follow, as higher borrowing costs weigh on corporate earnings and economic growth.

Previous Day’s Forecast Analysis

Monday’s forecast projected a trading range of $600 to $608, with a Call-dominated market suggesting a consolidation bias with periods of trending behavior. The model indicated that SPY holding above $600 would favor a test of $605 and $608, while breaking below $600 could open the door to downside risk at $595. The analysis also highlighted key levels at $602 and $603 as spots to seek longs.

Market Performance vs. Forecast

SPY’s actual range of $602.44 to $605.86 aligned well with the forecasted range, though price action remained more subdued than expected. The ETF respected the key $600 support level, reinforcing the bullish bias noted in the forecast. While SPY reached $605, it did not make a strong push toward $608, suggesting a more cautious tone ahead of CPI data. Traders who followed the model’s guidance and focused on support levels at $600 and $602 had solid buying opportunities as well as fading $605 into the close.

Premarket Analysis Summary

Tuesday’s premarket analysis, posted at 8:40 AM ET, anticipated a sluggish and sideways trading session, with key levels at $604.65 and $607.50 as resistance, and $602 and $600.25 as support. The analysis suggested that SPY would likely move toward either side but struggle to fully break through without increased volume. The bias level for the day was identified at $604.65, with a tilt toward downside movement if SPY remained below this level.

Validation of the Analysis

The premarket analysis was highly accurate, as SPY spent most of the day oscillating around $604.65 and $605 without making a significant directional move. The ETF respected the projected range and showed the expected choppy behavior, reinforcing the value of trading from the edges rather than getting caught in the middle. Traders who followed the analysis had clear trade opportunities, particularly near the support at $602 and resistance at $605.

Looking Ahead

The focus now shifts to Wednesday’s CPI report, which is expected to be a major market-moving event. A higher-than-expected reading could renew concerns about inflation and put pressure on equities, while a softer print might provide relief and support a market rally. Thursday’s PPI and Friday’s retail sales data will also be closely monitored for additional insights into economic trends.

Market Sentiment and Key Levels

SPY is consolidating near $605, with major resistance at $608, $610, and $612. Support levels remain at $602, $600, and $597. The market remains cautiously bullish above $600, but any failure to hold this level could trigger downside momentum. Weakness will start to creep in on a break of $605. With CPI data looming, traders should brace for heightened volatility.

Expected Price Action

Our AI model forecasts a trading range of $600 to $610 for Wednesday, with a wide and expanding range suggesting trending price action. If SPY breaks above $610, it could set the stage for a push to new all-time highs to $615. However, if price action weakens and falls below $600, downside risk increases toward $595, where support begins to thin. Given the uncertainty surrounding inflation data, traders should remain flexible and prepared for rapid shifts in sentiment and trade what they see.

Trading Strategy

With the market still leaning bullish, long trades remain favored above $600, with targets at $605 and $608. However, caution is warranted ahead of CPI data, as any surprises could trigger sharp volatility. We advise trading in small size, ¼ of your typical size given the number of unknowns for tomorrow. Short trades below $600 should target $597 and $595, but these should be executed with care given the overall market trend remains long. The VIX is hovering at 16, but a jump toward the mid-20s is possible if inflation data disappoints, signaling a shift toward risk-off sentiment.

Model’s Projected Range

The model forecasts a maximum projected range of $599 to $611.75, reinforcing $600 as the critical dividing line between bulls and bears. The market remains in a broader bullish trend, but CPI data will likely determine the next major move. The market remains Call dominated with resistance at $610 key for a breakout higher, while support at $597 is crucial to prevent further downside. SPY continues to trade in the bull channel from the September lows.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a very narrow, Bullish Trending Market State, with price closing just above support. There are no extended targets above implying a weak bull trend. The MSI remained in a ranging state for much of the day after rescaling lower to a bearish state overnight. Price reached a low of $602 by 9 am and put in a failed breakdown which led to the day’s rally. By the open, extended targets below had stopped printing and as price broke above MSI resistance, the MSI entered a ranging state which remained until 2:40 pm ET with the MSI rescaling to its current bullish state. MSI support is $604.87 and resistance is $605.66.  
Key Levels and Market Movements:
As we stated yesterday, today, “with the MSI in a wide Ranging Market State, we expect more of the same as today. Absent any news from the White House, the projected range is narrowing which means more consolidation and less trending action” and certainly today was just a mess of range bound trading from the edges. We also stated trade “from the edges, favoring longs over shorts but looking for set ups from failed patterns” as well as “look for longs from $602 to $603.50, targeting $605”. We also stated from $605 look for failed breakouts for shorts. Our plan was set well in advance of the day and we knew precisely how to navigate today’s session. At the open, with price at $602.50, on MSI support and with a failed breakdown pattern just prior to the open, we went long, ultimately looking for $605. We took first profits at MSI resistance at $603.50. Price created a failed breakout just shy of $604 but we didn’t take this short trade given we favored longs over shorts and do not love trading in an MSI ranging state. We held our long and price pulled back to $602.70 putting in another failed breakdown so we added to our long given there were no extended targets below, and took first profits on the add at $604 and held runners for $605. Once price reached $605, the MSI was in a ranging state, again not our favorite to trade. But price put in a failed breakout so we exited our long trade and waited on another set up. Price fell fairly quickly to MSI support at $603.50 so once again, on another failed breakdown, we entered long looking for a retest of $605 and an opportunity to short on a failed breakout. Price reached $605.30 but did not set up the pattern we love to trade so we took first profits and held runners to see if price would move a bit higher. By 2:40 pm price had reached $605.86 and after another failed breakout, we exited our long runner and reversed short to MSI support at $604.89 where we exited our short trade into the close. A horribly choppy and nasty day to trade, but with the MSI and our trading plan, we were able to navigate four trades with four winners and earn a week’s worth of profits in one day. This is no accident. This is what is possible with our model’s plan and the MSI. Again and again the MSI informed us who controlled the market, when they took control and where, which allowed us to trade our plan profitably. The MSI does this every single day, day in and day out. The MSI keeps 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:
For Wednesday with CPI looming the day is more about trading what you see after CPI than a fixed plan. Be nimble and prepared. That said, absent this information, with the MSI in a narrow Bullish Trending Market State, we expect prices to drift higher overnight toward $608. While its unlikely price reaches this level before CPI, the upward drift should persist unless the White House announces additional tariffs or other market impacting news. The projected range is widening implying more trending price action on Wednesday so its likely tomorrow is a day to get with the trend and stay with it. Do not fight the MSI if there are extended targets above OR if the MSI range widens substantially. We continue to favor longs over shorts but will seek short set ups from failed breakouts above $605 or below $600. A hot CPI and the market will likely sell off while a cooler CPI will favor rate cuts sooner rather than later and fuel the continuation of the current rally. CPI days are trap filled so using failed breakout/breakdown patterns is key to trading successfully tomorrow. We advise trading in small size given stops will likely need to be larger than normal. There are 250 trading days a year so there is no need to gamble on one day. We continue to advise deferring to the trend and looking for cracks in the armor which will present should price break $600 to the downside. If SPY breaks $610, $612 is the next stop higher. The MSI is designed to keep you safe, positioning you on the right side of the market, which is critical to trading success, especially on a major news day like CPI and PPI. Therefore if you utilize our model’s levels with the MSI to stalk entries and exits, trading on the right side of the market, your odds of success increase dramatically. If you do not have this invaluable tool, we highly suggest contacting your representative to secure a copy.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling $606 to $615 and higher strike Calls implying the Dealers belief there is a ceiling in the market on Wednesday at $610. To the downside Dealers are buying $605 to $590 and lower strike Puts in a 2:1 ratio to the Calls they are selling, implying a neutral outlook for Wednesday. This positioning is unchanged from today.   
Looking Ahead to Friday:
Dealers are selling $606 to $620 and higher strike Calls implying Dealers believe there may be a ceiling in the market this week at $620. To the downside, Dealers are buying $605 to $575 and lower strike Puts in a 3:1 ratio to the Calls they are selling, reflecting a slightly bearish view for the week. Dealer positioning has changed from bearish to slightly bearish. Dealers seem to be convinced the data to be released will be favorable to the market’s strength and that market participants may attempt to make a new all-time high. That said Dealers have plenty of downside protection including far out of the money Puts which they own cheap. We continue to “advise any long book purchase protection to the downside in the form of VIX Calls or SPY/SPX Puts or shorts in the Futures market”. We also advise reviewing Dealer positioning daily for clues to the market’s direction and 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 trade small and cautiously, with the trend. Having the MSI will makes trading easier given it updates in real time. But if you do not own this tool, we recommend caution tomorrow, entering on failed breakout and failed breakdowns as triggers to entry. Look for trades from the levels identified as major support and resistance and favor the prevailing trend. At the same time do not have a bias heading into CPI and instead be prepared to trade what develops. Continue monitoring the key $600 level but also watch $605 as a major level given the bulls will attempt to break the prior highs and $605 needs to hold for the bulls to remain in complete control. Be sure to review the premarket analysis before 9 AM ET for any updates.

Good luck and good trading!