Market Insights: Wednesday, March 5th, 2025

Market Overview

US stocks staged a strong comeback on Wednesday, with the S&P 500, Nasdaq, and Dow all closing solidly higher after President Trump paused auto tariffs on imports from Canada and Mexico, granting a one-month exemption. This move gave the market a much-needed relief rally after several days of tariff-driven declines. The Nasdaq led the way, rising over 1.4%, followed closely by gains of roughly 1.1% for both the Dow Jones Industrial Average and the S&P 500.

Automakers saw particularly sharp gains, with Ford, General Motors, and Stellantis all jumping more than 5% after the exemption news broke. This marked a significant reversal from Tuesday’s deep losses, which saw the S&P 500 erase all post-election gains. The broader rally was helped by a sharp sell-off in the US dollar, which fell nearly 1.4%, helping export-sensitive sectors like materials and industrials. Despite the strong bounce, lingering uncertainty around trade policy and upcoming economic data kept some investors cautious. Adding to the uncertainty, ADP’s private payroll report for February showed just 77,000 new jobs, well below expectations and raising fresh concerns about labor market strength heading into Friday’s key nonfarm payroll report.

SPY Performance

SPY opened Wednesday at $576.73, quickly dropping to a low of $573.08 before recovering sharply. The afternoon rally lifted SPY to a high of $584.88 before closing at $583.06, gaining 1.07% on the session. Trading volume came in above average at 66.30 million shares, reflecting the intensity of the back-and-forth price action driven by the tariff pause headlines and economic concerns.

Major Indices Performance

The Nasdaq led the rally with a gain of 1.04%, as technology stocks rebounded sharply following days of selling. The Dow Jones Industrial Average and the S&P 500 both gained 1.07%, with the broad-based recovery lifting nearly every sector. The Russell 2000 advanced 1.00%, helped by strength in economically sensitive names tied to the tariff news. Materials and industrials stood out, surging as the dollar weakened, while technology and consumer discretionary names followed closely behind. The risk-on tone was a sharp shift from earlier in the week, though traders remained on edge ahead of key economic reports due later in the week.

Notable Stock Movements

The Magnificent Seven stocks all enjoyed a green day, with the exception of Apple, which slipped slightly. Microsoft stood out, rallying over 3%, while Tesla, Meta, and Amazon followed with solid gains. Microsoft’s strength was partly due to favorable analyst commentary highlighting the company’s relative insulation from trade war risks. Tesla’s rebound came after a series of sharp declines, with short covering helping to accelerate gains. The broader tech rally reflected improving sentiment toward growth stocks after several days of aggressive selling.

Commodity and Cryptocurrency Updates

Crude oil tumbled 2.74%, settling at $66.39 per barrel, as growing concerns about global demand weighed heavily on prices. Our model continues to forecast further downside toward $60 unless global growth expectations recover. Gold edged higher by 0.29%, closing at $2,929 per ounce, as safe-haven demand moderated but remained elevated. Bitcoin surged 3.01%, closing just above $90,000, as speculative appetite returned. Our model continues to favor buying Bitcoin in the $83,000 to $77,000 range. We have been long several times the last few days and are booking profits at $90K. We will wait for another pullback to initiate new long positions.

Treasury Yield Information

The 10-year Treasury yield rose 1.66%, closing at 4.280%. This climb reflects ongoing uncertainty about inflationary pressures stemming from tariffs and economic data showing persistent labor market tightness despite the weak ADP report. Yields remain well below the critical 4.5% level where equities typically face stronger headwinds, but any sustained rise above 4.8% would quickly shift sentiment sharply bearish. Traders remain wary of Treasury moves, with inflation and growth data both in focus as key drivers.

Previous Day’s Forecast Analysis

Tuesday’s forecast projected a trading range between $570 and $590, with a bearish bias below $585 and clear downside targets at $580 and $575. The plan favored long trades on breakdown failures near $575, while shorts were expected to dominate below $585. The strategy emphasized the importance of the $585 level as the key dividing line between bulls and bears, and warned that any break below $575 could open the door to a test of $570 and lower.

Market Performance vs. Forecast

Wednesday’s price action adhered closely to the forecast, with SPY opening at $576.73, just beneath the $577 support noted in the premarket analysis. Early weakness pushed SPY to a low of $573.08, perfectly aligning with the lower target of $573. A strong midday rally followed on tariff news, taking SPY to an intraday high of $584.88, just shy of the critical $585 resistance. The forecasted bounce off support and test of resistance played out almost exactly as anticipated, offering clear trading opportunities for both longs and shorts, with the initial dip providing a low-risk long entry and the test of $585 acting as a logical area to book profits.

Premarket Analysis Summary

In today’s premarket analysis, posted at 9:38 AM ET, the model identified $582.50 as the key bias level. Below this level, pressure was expected to drive SPY down to $577, $573, and potentially $568. Above $582.50, upside targets were limited to $586. The analysis leaned cautiously bearish, reflecting strong headwinds despite some potential for a brief rally. Traders were advised to enter trades carefully, given the risk of choppy and confused price action.

Validation of the Analysis

Wednesday’s price action validated the premarket analysis well. SPY opened at $576.73, just under the $577 support level, before quickly testing and bouncing off $573.08, precisely aligning with the identified target. The subsequent rally lifted SPY to $584.88, within a fraction of the $586 upper target. Traders following the premarket roadmap were able to capture profitable long trades off the morning lows and could have booked gains near major resistance. This reinforces the accuracy and value of the premarket analysis in identifying critical levels and guiding traders through volatile sessions.

Looking Ahead

Thursday’s primary focus will be on weekly Unemployment Claims, which could provide fresh clues about labor market health ahead of Friday’s nonfarm payrolls. With the labor market under scrutiny after Wednesday’s weak ADP report, any disappointment in claims could amplify concerns about economic growth, adding volatility to the session. Investors will also be watching for further trade-related headlines, particularly regarding any additional tariff exemptions or policy shifts.

Market Sentiment and Key Levels

SPY closed at $583.06, putting it right below the crucial $585 resistance level. This leaves the bears still in control, though the bulls made significant progress with Wednesday’s rally. Immediate resistance stands at $585 and $590, while support lies at $580 and $575. A sustained break above $585 would shift some control to the bulls, potentially targeting $590 or higher. However, a failure at $585 and a return below $580 would quickly shift focus back to the $575 support level and possibly lower toward $570. A break of $570 and price falls as low as $555. Sentiment remains fragile, with tariffs, labor data, and recession fears dominating the outlook.

Expected Price Action

Actionable intelligence from our AI model forecasts a trading range between $575 and $590 for Thursday, reflecting an expanded range with Call-dominated positioning. The bias leans slightly bearish beneath $585, with downside targets at $580 and $575. Above $585, a push toward $590 becomes likely. Economic data and tariff headlines remain key drivers, with volatility expected to stay elevated.

Trading Strategy

Long trades are favored on dips to $575 if price holds and reverses upward, targeting $580 and $585. Short trades remain attractive beneath $585 or as high as $590 on failed breakouts, with targets at $580 and $575. A clean break below $575 would open the door for a sharp drop toward $570 or lower and a drop below $570 starts a new major leg lower toward $555. With the VIX at 21, volatility remains elevated, requiring smaller position sizes and quick profit-taking to manage risk effectively. Use the model’s levels for entries and exits, and favor trading with the trend unless a clear failed breakdown or breakout pattern emerges.

Model’s Projected Range

The model projects a maximum, wide trading range between $573 and $593 for Thursday, indicating trending potential. SPY remains within its bear trend channel from December’s highs, with $585 and $590 acting as major resistance and $580 and $575 as key support. The market is Call-dominated, signaling some bullish bias, but the bears retain control unless price can break and hold above $585. While the bears gave up some control today, with price still below $585, the bears continue to have the upper hand.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a Bullish Trending Market State, with price closing mid-range. The MSI range is narrow without extended targets above, implying a weak bull trend. The MSI opened the day in a wide ranging state from the prior day. At 11:06 am the MSI rescaled lower to a bearish state but without any extended targets below price only reached our premarket’s major support level of $573 before reversing course. Tariff relief for a month on automakers was the driver of the day’s rally. The MSI rescaled to wide ranging state as price rallied, then began a series of rescalings higher to a bullish state. While the MSI range was narrow, by 2 pm the MSI began printing extended targets above and price rallied hard with the MSI quickly rescaling higher several times. Several rapid rescalings with extended targets indicate a strong trend. Finally by 3 pm the MSI stopped printing extended targets with the MSI no longer moving higher. Price fell from the $585 major resistance level to close at $583.06. MSI support is currently $581.83 and resistance is at $584.76.  
Key Levels and Market Movements:
We stated Tuesday “our general lean is Wednesday the market can attempt to once again clear $582 and then $585”. We also advised trading what you see given “bias can easily be made moot from the introduction of new information”. Today both pieces of advice were proven to be highly accurate. After much weaker than expected jobs growth but stronger than expected Services PMI, the market was confused. At the open, SPY chopped around within a large MSI Ranging State without a clear direction. As we state often, in this state, we do not favor initiating positions. We waited for the MSI to provide a clearer road map and once price broke MSI support and rescaled lower to a bearish state, we entered short targeting MSI support at $572.36. Without extended targets below and a relatively narrow MSI range, we didn’t expect much from this trade, but held for our first target which never came. Instead the MSI rescaled higher but remained in a bearish state. This was a warning sign to us that the bear trend was losing steam so we took first profits at the revised MSI support level at $573.25 and moved our stop to breakeven. We were quickly stopped out with just a single target when updated tariff news hit the wire at 11:50 am. We decided to jump on this news trade long once price cleared $575 looking to our model for first targets at $580. The MSI rescaled to a ranging state so we took our first profits and moved our stop to breakeven given a ranging state isn’t a trending state and not our favorite state to trade. But the MSI quickly started rescaling higher to a bullish state so we held our runners, ultimately seeing if price would reach major resistance at $585. We took a second MSI resistance target at $584 at 2 pm and with the last push to $585 and no more extended targets above, we took final profits on our remaining 10% position at MSI resistance of $584.75. Given the hour was 3 pm, we decided one small winner and one large winner was enough and we called it a day. Fortunately we had the MSI to help us with targets both on the short side and long side, and ended the day solidly in the green, 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:
Thursday has Unemployment Claims in the premarket. A weakening jobs picture could move the market lower. As such we continue to advise trading what you see when new information is introduced to the market. Absent any external macro or news events, our general lean for Thursday is that price can attempt to clear $585 once again. Its probable $585 holds at least for one more test and back fills the range between $575 and $585. Consolidation in this range is most probability for tomorrow. A break above $585 will push price toward $590, emboldening the bulls to try for more. Similarly a break of $575 will retest today’s lows if not lower. A failure of $570 and as we said yesterday, things get very ugly very quickly with $555 as the next likely stop. We still forecast rallies will be sold until price reclaims $600 OR until the trade war is suspended. VIX dropped to $22 but remains elevated, producing large trading ranges with large price swings both ways. This is likely to continue until the markets see through the looming trade wars and administration’s volatile policies. Therefore 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 so we do not favor shorts above $595. 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 there are still material risks to March including tariffs, a government shutdown, a debt ceiling debate, and unemployment rising. Add the risk in April of more tariffs on our EU partners and its likely this volatility continues for some time. At the current $585 level we do not favor longs without a clear failed breakdown pattern. For the bulls to reclaim control, price needs to move back into the bull trend channel from the September lows. Therefore we suggest only initiating longs on failed breakdowns from major levels and only if the MSI is not printing extended targets below. Otherwise continue to look for shorts from major levels with a preference for failed breakouts. 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. 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 $590 to $600 Calls while buying $584 and $599 Calls. This implies Dealers wish to participate in any rally on Thursday to as high as $600. Dealers are no longer selling close to the money Puts. Dealers nailed it today with their positioning, calling the floor at $570. To the downside Dealers are buying $583 to $564 and lower strike Puts in a 2:1 ratio to the Calls they are selling/buying, implying a neutral posture for Thursday. This positioning has changed from strongly bullish to neutral. While Dealers still own major downside protection, the had the perfect call for today, both with the floor and the rally.
Looking Ahead to Friday:
Dealers are selling $588 to $610 and higher strike Calls while buying $584 to $587 Calls indicating the Dealers desire to participate in any rally this week to as high as $600. Dealers do not seem to believe prices will exceed $600 by Friday. To the downside, Dealers are buying $583 to $560 and lower strike Puts in a 3:1 ratio to the Calls they are selling/buying, reflecting a slightly bearish view for the week. Dealer positioning has changed from bullish to slightly bearish. It appears Dealers are not convinced prices can continue to rally into Friday. 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 Thursday remains the same as the past few day: 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. SPY is likely to trade in a large $10 range while it consolidates to build energy for its next move. As such we favor two way trading from the edges using our favorite failed breakout and failed breakdown patterns. The bears continue to have an edge of the bulls. $585, need to be reclaimed for the bulls to build on today’s gains. A break above $585 will target $590 but $600 needs to be reclaimed for the bulls to take control from the bears. A failure to move above $585 and price will work its way toward $575. A break below $575 and particularly $570, and price moves toward the August lows. $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!