Market Insights: Tuesday, January 7th, 2026

Market Overview
US stocks extended their early-2026 rally on Tuesday as investors leaned into strength across technology, energy, and industrials while continuing to price in a supportive macro backdrop for the months ahead. The Dow Jones Industrial Average climbed roughly 1.0%, closing above 49,000 for the first time, while the S&P 500 and Nasdaq each gained about 0.6% to finish at fresh all-time highs. Momentum remained strongest in large-cap tech and AI-linked names as CES week in Las Vegas drove renewed enthusiasm around next-generation chips, data-center investment, and consumer AI adoption. Nvidia and AMD helped anchor the advance after unveiling competing AI platforms, reinforcing confidence that capital spending in the AI ecosystem remains intact despite last month’s volatility. At the same time, investors continued to digest geopolitical developments tied to Venezuela and their implications for global energy markets, which helped keep oil prices elevated and supported cyclical sectors. On the macro front, economic data sent mixed but manageable signals: services activity slowed modestly, while growth expectations remained firm, allowing markets to focus more on earnings potential than near-term policy risk. Treasury yields edged slightly higher but stayed well below levels that would meaningfully pressure equities, keeping financial conditions supportive. Overall, Tuesday’s tape reflected a market firmly in risk-on mode, driven by strong leadership, improving breadth, and optimism that 2026 will deliver both resilient growth and eventual policy easing.

SPY Performance
SPY continued its steady advance, opening at $687.94 and trending higher through most of the session to an intraday high of $691.02 before consolidating modestly into the close at $690.11, up 0.70% on the day. Trading volume rose to 72.38 million shares, signaling a return of institutional participation following the holiday period. Price action remained orderly, with shallow pullbacks quickly bought and no meaningful tests of support. The decisive move above $690 marked a clear technical milestone, as this level had capped upside attempts late last year. Holding above $685 throughout the session reinforced bullish control and shifted the focus toward higher resistance zones near prior extension targets.

Major Indices Performance
Gains were broad-based across the major indices and reinforced the strength of the current uptrend. The Dow led with a 1.02% gain, driven by energy, financials, and industrials. The Nasdaq advanced 0.63%, supported by renewed momentum in semiconductors and AI infrastructure names, while the S&P 500 gained 0.68% and closed at a new record. The Russell 2000 added 0.91%, signaling improving sentiment toward small-cap stocks as risk appetite expanded. The combination of cyclical leadership and sustained tech strength suggested a healthy market structure rather than a narrow rally.

Notable Stock Movements
The Magnificent Seven delivered another strong session, with leadership concentrated in semiconductors and AI-linked megacaps. Nvidia and AMD both advanced solidly following CES-related announcements, while Microsoft and Amazon continued to grind higher on cloud and AI optimism. Tesla rose modestly after recent gains, consolidating near highs rather than showing signs of exhaustion. Apple and Meta finished higher but lagged the broader tech complex, reflecting rotation within megacap leadership rather than outright weakness. Outside of technology, energy stocks remained firm as oil prices stayed elevated, and industrial names benefited from improving growth expectations.

Commodity and Cryptocurrency Updates
Commodities continued to confirm the broader risk-on and growth narrative. Crude oil rose 1.21% to $59.11, extending its rebound and remaining well above the critical $56 level our model has highlighted for months. Sustained trade above this zone keeps the path open toward $60 and potentially higher if supply dynamics tighten. Gold added 0.87% to $4,496, continuing its historic rally as investors maintained exposure to inflation and geopolitical hedges even amid equity strength. Bitcoin climbed 1.94% to close above $95,800, marking a strong start to the year and signaling renewed confidence in risk assets across both traditional and digital markets.

Treasury Yield Information
The 10-year Treasury yield ticked up 0.36% to close near 4.167%, reflecting stronger growth expectations without meaningfully tightening financial conditions. In our framework, yields below 4.5% remain broadly supportive for equities, while sustained moves above 4.8% begin to create valuation pressure. A break above 5% has historically coincided with deeper equity drawdowns, and at 5.2% our model suggests the probability of a 20% or greater correction rises materially. Tuesday’s modest move higher did little to disrupt equity momentum, keeping the focus on earnings and growth.

Previous Day’s Forecast Analysis
In Monday’s newsletter, we noted that as long as SPY held above $685, bullish control would remain intact and the path toward new highs would stay open. We highlighted the potential for stronger directional moves as normal trading volumes returned after the holidays, while emphasizing that resistance near $690 could be tested early in the week.

Market Performance vs. Forecast
Tuesday’s action validated that framework. SPY held firmly above $685 from the open, broke cleanly through $690, and closed above that level, signaling stronger-than-anticipated follow-through. The absence of meaningful pullbacks reinforced the view that buyers remain firmly in control as 2026 begins.

Premarket Analysis Summary
In Tuesday’s premarket notes published at 7:22 AM, SPY was trading near $688.10 with a bias level set at $687.50. We outlined upside targets at $689.50, $691, and $693 while noting that any failure below the bias could trigger a brief consolidation toward $685. Price respected the bias throughout the session and followed the bullish roadmap.

Validation of the Analysis
The intraday tape aligned closely with the premarket plan. SPY held above the bias, reached the $691 target, and consolidated without giving back gains. No downside targets were tested, confirming the strength of the bullish structure and the reliability of the identified levels.

Looking Ahead
Attention now turns to the remainder of the week’s economic calendar. Wednesday brings ADP employment and ISM Services, Thursday features Unemployment Claims, and Friday culminates with the December jobs report. These releases will shape expectations for growth and the Federal Reserve’s policy path early in 2026, particularly as Chair Powell has emphasized labor-market clarity.

Market Sentiment and Key Levels
Market sentiment has turned decisively bullish. SPY’s close near $690.11 places price well above the $685 bull-control level and shifts focus toward higher resistance. Resistance now sits at $692, $695, and $700, while support rests at $688, $685, and $682. Holding above $685 keeps the uptrend intact, while a break below $682 would be the first signal of fading momentum.

Expected Price Action
Our model projects SPY’s maximum range for Wednesday between $687 and $696, with the Call side dominating in a narrow band that signals upward bias with potential intraday chop. As long as SPY holds above $688, continued probing toward $695 remains likely.

Trading Strategy
With bullish momentum firmly established, we favor staying aligned with the trend while respecting resistance near extension zones. Long setups near $688–$685 remain attractive on confirmed support, while failed breakouts near $695–$700 offer tactical short opportunities. Position sizing should remain disciplined ahead of Friday’s jobs data.

Model’s Projected Range

SPY’s projected maximum range for Wednesday is $688 to $696, with the Call side dominating in a narrow band that signals choppy action. SPY rallied 0.62% to close at $691.96, firmly above the $685 level that defines bull control. Volume was slightly below average, which doesn’t necessarily bode well for this rally going forward. Overnight the bulls built on yesterday’s rally, with SPY opening just below $688 and within reach of all-time highs. From the open, aside from a brief pullback around 10:30 am, SPY moved steadily higher in a slow and deliberate trend that trapped and squeezed shorts. As we have stated for weeks, above $685 the bulls control the tape, and today followed that script precisely. The prior all-time high was broken again, with $692.32 marking a new high. Unlike prior attempts, the market did not sell off after making this high, suggesting a shift in investor conviction. SPY closed near the highs at $692, leaving the bears sidelined and reinforcing the bullish structure. Overnight the bulls are expected to defend $688 to preserve momentum. A failure at $688 opens $686, and a break below $686 brings Friday’s low near $680 into play. A move below $680 would give the bears a chance to press lower, though this remains a low-probability outcome without an external catalyst. Holding above $686 keeps the path open for additional all-time highs. Price action at these levels is likely to remain slow and choppy rather than explosive. With SPY firmly above $685, the prior range has broken and the market is positioned to continue higher toward $700. The bears have little influence unless price falls below $680, with the broader bull market intact as low as $640. Traders should monitor geopolitical headlines, developments around Venezuela, Friday’s jobs report, and the risk of a government shutdown at month end. Absent a catalyst, resistance sits at $695, $699, and $700, while support sits at $690, $688, and $686. We favor shorts near $695 on failed breakouts and longs as low as $680. Crypto pulled back more than 2% after a strong holiday run, while MAG stocks were mixed with most declining, led by Tesla. Sustained weakness across both groups would be required for a meaningful pullback. The VIX fell 1.14% to 14.73, supporting risk-on conditions, with SPY closing in the lower third of its bull channel from the April lows and structural support near $679.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a wide, Bullish Trending Market State with SPY closing at MSI resistance turned support. There were no extended targets into the close, but they were present in the morning session and sporadically in the afternoon session, supporting the push to new highs. The MSI rescaled higher shortly after the open and continued to rescale higher indicating herd participation in the day’s move. For tomorrow the MSI is forecasting further strength and support down to $689 which will keep the market seeking new highs. Support is at $691.66 and lower at $689.23.
Key Levels and Market Movements:
Yesterday we stated, “The projected range for tomorrow is extremely narrow, and the session may closely resemble today,” and noted, “The MSI forecasts higher prices with a potential run at the all-time highs, but the move is expected to be slow, choppy, and directional,” while also adding, “The upside ceiling for tomorrow sits at $691, and dips toward $683 should continue to attract buyers.” With this context, and with the MSI rescaling higher just after the open, we looked for long entries supported by structure. Those opportunities were limited, with the only valid signal being a breakout at $688.75. We attempted to enter but missed the move as price surged straight up. We chose not to chase. We then waited for a short near $691. Once extended targets stopped printing, we entered short at $690.50 with T1 at MSI support at $688.60. After T1 was secured, we set T2 at the premarket level of $687.85 and trailed. A textbook failed breakdown just below MSI support caused us to reassess. On a second test of MSI support, we exited the short and reversed long at $688.75. We set T1 at MSI resistance at $690.85. With T1 secured and the MSI rescaling higher, we set T2 at MSI resistance at $691. After securing T2, we moved our stop to breakeven and trailed. Price continued to grind higher and pushed above $692, exceeding the level identified in both the premarket and yesterday’s newsletter. After three failed attempts to extend beyond those highs, we closed the long about an hour before the close and called it a day. Two for two, thanks again to having a clear plan, maintaining patience and discipline, and staying aligned with MSI signals, market structure, and our broader trading framework. The MSI continues to prove its reliability as the cornerstone of our trading process.
Trading Strategy Based on MSI:
Wednesday has ADP, Services PMI, and JOLTS, and none are likely to move the needle. Friday remains the key risk event with the monthly jobs report. Macro risks persist, so traders should be prepared for sudden moves. The projected range for tomorrow is narrow, and the session may closely resemble today. The MSI forecasts higher prices with a potential run at the all-time highs. The move is expected to be slow, choppy, and directional. The upside ceiling sits near $695. Dips toward $686 should attract buyers. This creates a range environment where fading highs and lows makes sense. There is no meaningful bear case unless price falls below $680. The bulls will look to defend the $690 to $686 zone overnight. A failure there likely sends SPY to $680. If support holds, the bulls will attempt another push above $695. Gains above $693 may stall until $695 is cleared, as resistance above $692 remains heavy. Crypto pulled back today and most MAG stocks fell. The long-term bull trend remains intact above $640. In the near term, the bulls retain control as long as price holds above $685. Any test of $695 remains a strong short candidate on a failed breakout, but we continue to favor longs off support as dips are likely to be bought. As always, stay alert to macro risks and be prepared to trade what you see. Failed breakouts and failed breakdowns continue to offer the highest-probability setups, so remain flexible, avoid trading during Ranging Market States, and ensure all trades are fully aligned with MSI signals. Providing real-time insights into market control, momentum shifts, and actionable levels, the MSI when integrated with our Pre-Market and Post-Market Reports continues to sharpen execution precision and elevate trade quality. If you haven’t yet integrated MSI and our model levels into your process, now is the time. Contact your representative to get started as these tools are designed to support consistency and enhance performance.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling SPY $693 to $708 and higher strike Calls while selling $690 to $692 Puts indicating the Dealers’ belief that prices will continue to rally on Wednesday and stay above $690. Dealers only sell ATM Puts when they are convinced prices will move higher. The ceiling for Wednesday appears to be $695. To the downside, Dealers are buying $689 to $565 and lower strike Puts in a 3:1 ratio to the Calls/Puts they’re selling/buying displaying little concern that prices could move significantly lower tomorrow. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Friday:
Dealers are selling SPY $693 to $710 and higher strike Calls while also selling $689 to $692 Puts indicating the Dealers’ belief that prices will continue to rally into Friday and stay above $689. The ceiling for the week appears to be $701. To the downside, Dealers are buying $688 to $565 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying, reflecting a market that is not concerned about lower prices. For the week Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish. We advise reviewing Dealer positioning daily for directional clues. These positions evolve quickly and tracking them is essential for staying ahead of shifting market sentiment.

Recommendation for Traders
Into Wednesday, continue to respect the bullish structure while remaining patient near resistance. Favor longs on pullbacks toward $688–$685 and avoid chasing extended moves. Shorts should be limited to failed pushes near $695–$700 with tight risk controls. With major data approaching, stay flexible, manage risk carefully, and let price action at key levels guide decisions.

Good luck and good trading.