Market Insights: Tuesday, March 4th, 2025

Market Overview

The Dow Jones Industrial Average tumbled more than 650 points on Tuesday, extending Monday’s sharp sell-off as President Trump’s tariffs on Canada, Mexico, and China officially took effect. The S&P 500 erased its post-election gains, falling 1.2%, while the Nasdaq Composite managed to avoid a deeper decline, slipping just 0.4% after a brief attempt at positive territory earlier in the session.

Markets remain on edge as investors assess the economic fallout of the aggressive trade measures, which include 25% tariffs on imports from Canada and Mexico, along with a doubling of tariffs on Chinese goods to 20%. In response, Canada retaliated with its own broad tariffs on U.S. products, and China followed with 15% duties on U.S. agricultural exports, including chicken and pork, starting next week. While some analysts noted China’s response appeared less severe than feared, leaving room for potential negotiation, the immediate uncertainty kept risk appetite subdued.

Corporate earnings also reflected growing unease. Target reported stronger-than-expected results but warned that the tariffs could squeeze its first-quarter profits, keeping its stock mostly flat. Best Buy echoed this cautious tone, delivering a modest beat but lowering its full-year sales forecast due to weakening consumer demand. With global trade uncertainty, softening economic data, and mixed corporate commentary, the market’s tone remained decidedly risk-off throughout the day.

SPY Performance

SPY opened Tuesday at $579.49, slightly below Monday’s close, setting a bearish tone from the start. Early attempts to rebound faded quickly, and SPY sank to a low of $572.25 before staging a modest intraday bounce. It briefly reached a high of $585.39 but ultimately closed at $576.91, down 1.18% on the session. Trading volume surged to 92.77 million shares, far above average, indicating heavy institutional activity as traders adjusted positions to account for escalating trade war fears and rising recession risks.

Major Indices Performance

The Nasdaq fared the best among the major indices on Tuesday, shedding only 0.55% as its earlier strength in tech names helped cushion the blow. The Russell 2000 followed, dropping 1.11%, while the Dow Jones Industrial Average posted the steepest decline, falling 1.60% as tariff-sensitive names came under significant pressure. The S&P 500 declined 1.18%, erasing all of its post-election gains, confirming that the broader market remains in a vulnerable state.

Sector performance reflected a strong flight to safety, with defensive areas like utilities holding up better than cyclicals, while technology stocks experienced mixed performance. Overall sentiment remains fragile, with trade war headlines, weakening economic data, and corporate caution creating a challenging backdrop for equities.

Notable Stock Movements

The Magnificent Seven stocks experienced another tough session, with most names finishing in the red. Tesla led the decline, tumbling over 4%, as risk-off sentiment hit growth stocks hard. The only exceptions were Microsoft, Nvidia, and Alphabet, which managed to eke out small gains thanks to brief midday recoveries before fading slightly into the close. Nvidia’s resilience stood out after recent selling pressure tied to Chinese demand concerns, while Alphabet found some support from defensive repositioning.

Broader market sentiment weighed on retail names, with Target’s post-earnings caution on tariffs and Best Buy’s weaker forward guidance underscoring the consumer strain. Meanwhile, energy names were under pressure alongside crude oil prices, adding to the broadly negative tone for the day.

Commodity and Cryptocurrency Updates

Crude oil slipped 0.10%, settling at $68.29 per barrel as fears of weaker global demand tied to the trade war offset supply concerns. Our model continues to forecast further downside toward $60 unless demand expectations improve significantly. Gold climbed 0.97%, closing at $2,929 per ounce, as safe-haven flows accelerated amid deepening equity market weakness. Bitcoin advanced 1.84%, closing just above $86,800. We remain buyers of Bitcoin in the $83,000 to $77,000 range, though our model’s conviction in this zone is waning. Overall, the commodity and crypto complex reflected ongoing uncertainty and the search for safer alternatives to equities.

Treasury Yield Information

The 10-year Treasury yield rose slightly by 0.62%, closing at 4.205%, a move that indicates lingering inflation concerns despite mounting growth fears. Yields remain well below the critical 4.5% level, where equity markets typically begin to face more acute pressure. However, any sustained move above 5% would signal severe trouble ahead. For now, rising yields in the face of weaker data and trade war fears signal confusion among investors, as some view Treasuries as a safe haven while others anticipate inflationary pressure from tariffs.

Previous Day’s Forecast Analysis

Monday’s forecast anticipated a trading range between $575 and $595, with a bearish bias below $585 and upside targets at $589 if bulls regained control. The primary strategy favored longs above $580 targeting $589, and shorts below $580 targeting $575 and potentially $570. Monday’s analysis emphasized the risk tied to escalating tariff headlines and highlighted $585 as the dividing line between bullish and bearish control.

Market Performance vs. Forecast

Tuesday’s price action played out largely in line with the bearish scenario outlined in the prior forecast. SPY opened at $579.49, just under the critical $580 level, confirming the bearish bias. SPY quickly tested lower support at $575, with an intraday low of $572.25. The afternoon bounce briefly carried SPY to $585.39, right into the previously identified resistance zone, where selling pressure promptly returned. The forecasted strategy for shorts below $580 targeting $575 proved highly profitable, while longs from the $572 area saw brief success before momentum faded into the close.

Premarket Analysis Summary

In today’s premarket analysis, posted at 7:36 AM ET, the model identified $580 as the key bias level, with upside targets at $582.50, $585.50, and $588.50. On the downside, support was expected at $580, $577.50, and $575. The analysis leaned cautiously bearish below $580, while warning that any sharp bounce off that level could trigger a fast short squeeze toward $585.50.

Validation of the Analysis

Tuesday’s market validated the premarket analysis nearly perfectly. SPY opened below $580, triggering immediate downside toward $575, with an eventual low of $572.25. The anticipated bounce off these lower levels pushed SPY back toward $585.39, precisely aligning with the upper target range. This accurate roadmap provided traders with clear entry and exit points, demonstrating once again the high value of the premarket analysis.

Looking Ahead

Wednesday’s Services PMI will be the primary economic focus, providing fresh data on the health of the service sector. Given the weakness already seen in manufacturing data, any disappointment in the PMI could further pressure equities. With tariffs still dominating headlines and market sentiment fragile, volatility is likely to remain elevated into midweek.

Market Sentiment and Key Levels

SPY closed at $576.91, keeping the bears firmly in control. Resistance now stands at $580, $585, and $590, while support lies at $575, $570, and $555. Below $575, the December lows are back in play, while above $585, bulls would face stiff resistance at $590. The broader sentiment remains bearish as trade war fears dominate and economic data deteriorates.

Expected Price Action

Actionable intelligence from our AI model forecasts a wide trading range between $570 and $590 for Wednesday, consistent with elevated volatility. The bias leans bearish below $585, with downside targets at $580 and $575. If SPY reclaims $585, a move toward $590 could develop. Economic data and tariff headlines will drive price action, with any upside tempered by persistent macro uncertainty.

Trading Strategy

Long trades are favored on failed breakdowns below $575, targeting $580 and $585. Short trades are attractive below $585, targeting $580 and $575. A clean break below $575 would open the door for a swift move to $570 and possibly lower. The VIX remains elevated, meaning traders should trade smaller size and take profits quickly when trading counter-trend rallies. Keep an open mind and trade what you see in this macro/news driven environment.

Model’s Projected Range

The model projects a maximum trading range between $567 and $588 for Wednesday, reflecting continued Put-dominated positioning and trending potential. SPY remains in its bear trend channel from the December highs, is mid-range, with resistance at $585 and $590, and support at $575 and $570. Bears hold the upper hand unless a surprise catalyst emerges. We saw a massive, short squeeze today from the day’s lows which faded rapidly once price reached the $585 dividing line. This is still the level for the bulls to overcome to have any hope at a sustained rally. But it looks like the bears are in charge for the foreseeable future and until there is some resolution to the trade wars.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Ranging Market State, with price closing just above support. The MSI range is wide, implying confusion and uncertainty about the market’s next move. The MSI opened the day in a wide bearish state with extended targets below after rescaling lower several times in the premarket. At 10:20 am ET as price fell to our models major level and the 200 DMA, the MSI rescaled lower once again but stopped printing extended targets below. While the range was wide, the MSI was showing us the bear trend was seeking a bottom at MSI support at $572.39. After a triple bottom, SPY reversed course and a short squeeze ensued pushing price back to the $585 dividing line between the bulls and the bears. The MSI rescaled several times higher to a bullish state in the process but a lack of extended targets above informed us the trend was nothing more than a short squeeze which would fail at major resistance. That happened at 3:24 pm ET and price fell with the MSI rescaling to its current ranging state. MSI support is currently $575.59 and resistance is at $581.97.  
Key Levels and Market Movements:
We stated Monday “make no mistake in assuming the bottom is in as rallies will continue to be sold”. We also stated we “lean toward selling rallies to as high at $595”. Finally we stated 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”. So today should not have come as any surprise to those who read these newsletters. Out of the gate at 9:30 am ET with price at $581 and the MSI in a bearish state with extended targets below, we were short on a triple top targeting $575, per our plan from yesterday. We got there quickly and took first profits and trailed to see if $570 was next up. But as price broke lower, even with the MSI rescaling lower, extended targets stopped printing so we decided to take profits on our runners at MSI support at $572.50 to see if price would set up another trade. We were looking for a failed breakdown which never came so we held off on any counter trend long. By 11 am however with the MSI remaining fixed and with price testing the lows of the day three times without breaking it, we took a crack at a triple bottom long off MSI support, targeting MSI resistance at $577.75. We took first profits there and moved our stop to breakeven. Normally we keep our stop very loose when we are trading with the trend. But when we trade counter trend, we like to move our stop to breakeven after our first target. Price pulled back a bit but never fell below $575, so we held our runner to see if the short squeeze would continue higher. While we had a pretty decent failed breakout at 1 pm, with the MSI in a ranging state, we didn’t take exit or take the short given we do not favor initiating trades in an MSI ranging state. With a stop at breakeven we had no risk so we let the trade run to see what would happen. Sure enough price pushed straight up and the MSI started rescaling higher several times indicating a strong bull trend. We took a second target at $585 knowing this was a major hurdle for the bulls, holding onto 10% of our long just in case price exploded higher. We had a couple of extended targets above so we waited to see what would happen. And at 3:24 pm, extended targets stopped printing and SPY put in a perfect failed breakout at our major resistance level of $585 so we reversed short, targeting MSI support at $582. We reached that target in just a few minutes and decided to hold for a retest of $575. And just before the close, we saw $575 and exited our runners for a monster trade with the trend. Three for three with huge profits on each trade, all 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:
Wednesday has Services PMI as well as ADP Unemployment change. Both can move the market. These reports will be delivered in the premarket. The President speaks to Congress tonight as well which also has the potential to move the markets on Wednesday. We highly advise trading what you see given this new information is unknown to our quantitative model and its bias can easily be made moot from the introduction of new information. Absent these macro/news events, our general lean is Wednesday the market can attempt to once again clear $582 and then $585. Any failure to crack these levels and SPY will fall back to today’s lows and likely to $570. Below $570 things get very ugly with $555 as the next likely stop. Above $585 price will run into major resistance at $590, which needs to be overcome for the bulls to reclaim any control from the bears. As we said yesterday make no mistake in assuming the bottom is in as rallies will continue to be sold until price reclaims $600. VIX at $25 is forecasting ever increasing volatility the markets have not seen since September. The ranges are increasing and large swings are to be expected. Until something changes on the macro front, continue to favor the bears, selling rallies to as high at $595. Above $595, there is a chance the bulls press price toward $600. Continue to seek failed breakouts or other topping patterns from major levels. Our model suggests should $570 fail, price could find lows not seen since August. And once again as 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”. Weaker than expected PMI and possible recession risks, add to the negatives for the market. 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 suggest only initiating longs on failed breakdowns from major levels 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. 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 $577 to $586 Calls while buying $587 and $603 Calls, as well as selling $575 to $564 Puts. This implies Dealers wish to participate in any rally Wednesday to as high as $603. Dealers typically only sell close to the money Puts when they believe there is a floor in the market. Clearly they were wrong about the $580 floor they established yesterday but at the close, they likely eked out of their Puts without much damage. Dealer positioning for Wednesday puts a floor at $570. To the downside Dealers are buying $563 to $551 and lower strike Puts in a 1:2 ratio to the Calls/Puts they are selling/buying, implying a strongly bullish posture for Wednesday. This positioning has changed from bullish to strongly bullish. Dealers still own major downside protection. It’s also worth noting when price trades in a very large range, its likely Dealers add protection in the form of Futures which is unknown to the market so keep this in mind when assessing Dealer positioning.   
Looking Ahead to Friday:
Dealers are selling $591 to $610 and higher strike Calls while buying $577 to $590 Calls indicating the Dealers desire to participate in any rally this week to as high as $600. To the downside, Dealers are buying $576 to $555 and lower strike Puts in a 1:1 ratio to the Calls they are selling/buying, reflecting a bullish view for the week. Dealer positioning has changed from neutral to bullish. Dealers continue to hold significant downside protection well below current levels. 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 consistent with the last two days: 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 $20 range between major support and major resistance, we favor two way trading from the edges using our favorite patterns. The bears have complete control to the bears and major levels, such as $585, need to be reclaimed for the bulls to recapture any control. A failure to hold move above $585 and price makes will work its way toward $570. A break below $570 and price moves toward the August lows while a break above $585 will target $590. But $600 needs to be reclaimed for the bulls to take 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!