Market Insights: Friday, February 6th, 2026

Market Overview
US stocks staged a historic rebound on Friday, snapping a brutal three-day selloff and capping one of the most volatile weeks of the year with a powerful risk-on surge. The Dow Jones Industrial Average led the charge, soaring more than 2.5%, or over 1,200 points, to close above the 50,000 level for the first time in history. The S&P 500 jumped 2% in its strongest session since May of last year, while the Nasdaq Composite gained roughly 2.1%, as buyers rushed back into beaten-down equities following days of relentless selling pressure. The rally marked a dramatic reversal from Thursday’s panic-driven close and underscored how quickly sentiment can flip once forced selling exhausts itself.

The rebound came as Wall Street reassessed fears surrounding artificial intelligence, massive capital expenditures, and the broader implications of new AI tools on legacy tech business models. After a week dominated by concern that ballooning AI spending could crush margins and derail earnings visibility, investors appeared willing to look past near-term uncertainty and refocus on longer-term growth potential. Big Tech CEOs and analysts pushed back against the most pessimistic narratives, helping stabilize confidence after what had increasingly looked like a full-scale liquidation across technology and software. Despite the powerful rally, the week still ended mixed, with the Dow finishing up roughly 2.5% for the week, while both the S&P 500 and Nasdaq remained in the red after failing to fully recover earlier losses.

Technology stocks led Friday’s advance, reversing sharply from earlier weakness. Nvidia surged more than 8%, helping fuel the Nasdaq’s rebound, while Broadcom and Tesla also posted sizable gains as investors rotated back into high-beta names. Not all tech gloom faded, however, as Amazon shares tumbled more than 7% after the company outlined plans for a massive jump in 2026 capital spending to at least $200 billion while issuing a weaker-than-expected operating income outlook. The conflicting signals highlighted a market still grappling with the tradeoff between long-term AI opportunity and near-term profitability. Beyond equities, the tentative risk-on tone extended into crypto markets, with Bitcoin climbing back above $70,000 after touching a 16-month low overnight. Despite the rebound, Bitcoin remains down nearly 20% year to date after wiping out all of its post-election gains earlier this week, reinforcing how fragile confidence remains across speculative assets.

Elsewhere, Strategy, one of the companies most exposed to Bitcoin’s decline, reported a quarterly loss that initially weighed on its stock. Shares ultimately surged more than 13% as Bitcoin rebounded and management downplayed concerns around debt servicing, illustrating how quickly sentiment can turn once selling pressure eases. Outside of technology, Stellantis warned it will take a charge of more than €22 billion as it scales back its EV ambitions, sending shares of the Jeep maker plunging more than 20% in both US and European trading. Looking ahead, attention now shifts to the labor market, with the closely watched January jobs report pushed to Wednesday next week due to the government shutdown. Fresh signs of stress have already emerged, as job openings have fallen to their lowest level since 2020 and layoff announcements have surged, keeping macro risk firmly in focus despite Friday’s dramatic rebound.

SPY Performance
SPY delivered a massive reversal session that erased three days of losses in a single trading day. The ETF opened at $681.36, dipped briefly to an intraday low of $680.85, and then surged throughout the session to a high of $692.31 before closing near the highs at $690.69, up 1.93% on the day. Trading volume jumped to 82.95 million shares, well above average, confirming strong participation and signaling a classic short squeeze rather than a low-liquidity bounce. The rally reclaimed the critical $685 level with authority and pushed SPY back above the 50-day moving average, restoring bull control and sending bears back into defensive mode.

Major Indices Performance
Gains were explosive across the major indices. The Nasdaq surged 2.18%, rebounding sharply after days of tech-led selling. The Dow jumped 2.47%, reflecting broad-based participation beyond technology. The Russell 2000 soared 3.53%, marking one of its strongest sessions in months and signaling aggressive risk re-engagement across small caps.

Notable Stock Movements
It was the strongest day across the Magnificent Seven in weeks, led by Nvidia, which surged as much as 7.87%. Most megacap names finished solidly green, with the notable exceptions of Meta, Alphabet, and Amazon, which lagged after earnings-related concerns. The synchronized strength across megacap technology and crypto marked a key shift, as sustained weakness across both groups is typically required for deeper pullbacks, and Friday’s action decisively broke that pattern.

Commodity and Cryptocurrency Updates
Commodities and crypto reflected renewed risk appetite. Crude oil rose 0.30% to $63.48, continuing to hover near the $60 level our model has been forecasting for months. While further downside remains possible, sustained trade above $56 keeps the door open for a rally toward $70. Gold climbed 1.83% to $4,978 as investors balanced risk-on equity flows with continued hedging demand. Bitcoin surged 10.75% to close above $70,000, marking a sharp rebound from recent lows and contributing meaningfully to the broader risk-on tone.

Treasury Yield Information
The 10-year Treasury yield slipped 0.17% to close near 4.201%. In our framework, yields above 4.5% begin to create headwinds for equities, while sustained trade above 4.8% often coincides with sharper selloffs. Friday’s modest decline in yields provided a supportive backdrop for the equity rebound.

Previous Day’s Forecast Analysis
Thursday’s framework warned that while downside momentum was strong, a test of the December lows could trigger at least a temporary recovery. We emphasized that February is historically prone to sharp selloffs followed by violent reversals.

Market Performance vs. Forecast
Friday’s session validated that outlook decisively. SPY tested key support near the December lows and then exploded higher, producing one of the largest single-day reversals of the year and reclaiming critical technical levels in the process.

Premarket Analysis Summary
In Friday’s premarket notes published at 8:10 AM, SPY was trading near $681.08 with a bias level at $681.50. Upside targets were identified at $684, $685.50, and $688, while downside risk sat near $678 and $675. The plan anticipated consolidation higher if the bias level could hold.

Validation of the Analysis
The session exceeded expectations. SPY not only held the bias level but ripped through all upside targets, ultimately closing above $690 and delivering a historic squeeze that few models anticipated.

Looking Ahead
Monday has no scheduled economic releases, though geopolitical risk remains elevated. Tuesday brings Retail Sales, Wednesday delivers CPI, and Friday brings CPI again, setting the stage for another potentially volatile week.

Market Sentiment and Key Levels
Sentiment has swung sharply back toward bullish but remains fragile. SPY closing above $685 restores bull control. Resistance sits at $693, $695, and $700, while support rests at $686, $685, and $680. Holding above $685 keeps the path open for an attack on $700.

Expected Price Action
SPY’s projected maximum range for Monday is $688 to $697, with the Put side dominating in a narrowing band that signals choppy price action with intermittent trending periods.

Trading Strategy
After a move of this magnitude, patience is essential. Buying dips toward $685 is favored, while shorting failed breakouts above $695 remains viable. Expect choppy price discovery over the next one to two sessions.

Model’s Projected Range
SPY’s projected maximum range for Monday is $688 to $697, with the Put side dominating in a narrowing band that signals choppy price action with intermittent trending periods. Monday has no economic news, but with a weekend and the current administration, anything can happen so traders should stay alert to geopolitical events. Consumer Sentiment jumped to its highest level in six months, signaling improved confidence, while inflation expectations fell, reinforcing the rate-cut narrative. The real catalyst, however, was the test of the December 17th low, which triggered a massive short squeeze after Thursday’s close which drove SPY sharply higher, erasing three days of losses in a single session. SPY closed up 1.92% at $690.62, well above the $685 level that puts the bulls firmly back in control and sends bears back into hibernation. Days like this only occur a handful of times per year, making this a session for the record books, especially given that nearly every model and tool we use was pointing to lower prices. Markets love to surprise, and this rally took SPY back to Tuesday’s levels and above the 50 DMA, with volume well above average confirming strong participation. We have warned for weeks that February often brings sharp selloffs and that those dips should be used to position for a spring and summer rally, though we did not expect such a violent reversal to unfold in just three days. After a move like this, the market likely needs a day or two of price discovery, and until that happens there is no clean bull or bear case. Over the weekend and into Monday, bulls want to hold above $685 at worst to remain in full control, and if $685 holds next week, the path opens once again for an attack on $700. If $685 fails, SPY is likely to backtest $680, which would reawaken bear interest. As stated previously, a test of the December lows was likely to generate at least a temporary recovery, and that scenario played out perfectly. February remains historically prone to surprise selloffs, so any deeper pullback should still be viewed as a buy-the-dip opportunity with the long-term bull trend intact above $640. Absent a catalyst for Monday, resistance sits at $693, $695, and $700, while support rests at $686, $685, and $680. We favor shorting failed breakouts above $695 and buying dips to $685, though Monday and Tuesday are likely to be choppy so quick profits are advised. Crypto rallied hard today and MAG stocks were broadly higher except for Amazon, Alphabet, and Meta, and as we have said repeatedly, sustained weakness across both groups is required for a larger pullback, which this week’s selling failed to achieve. VIX dropped 18.42% to 17.76, returning to neutral territory, and SPY closed back above the bull trend channel from the April lows with structural support near $686.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in wide Ranging Market State with SPY closing at MSI resistance. There were no extended targets all day as the MSI didn’t move for the entire session. We state often big up followed by big down = big confusion so the MSI is confused and is basically saying we are in a transition/trading range until one side or the other takes the lead. Overnight the MSI rescaled to the current state and that didn’t change all day. For Monday the MSI forecasts choppy trading with perhaps some additional strength with also the possibility of a test of MSI support at $678. We do believe there will be some back testing on Monday and possibly Tuesday. MSI resistance is $691.18 with support at $678.03.
Key Levels and Market Movements:
Thursday we stated, “Friday’s economic news may move the market given its fragile state,” and added, “it would not surprise us to see the day’s lows fail, followed by an attempt by the bulls to backtest higher levels, starting with $680 and possibly $685,” while also noting, “as long as SPY remains within the $675–$685 range, a brief period of stabilization is possible.” With the MSI opening in a wide ranging state, a state we do not favor trading, it was difficult to anticipate a 2% rally. While the overnight gap higher clearly signaled the potential for a bear squeeze, there was little structure to lean on for a long entry, so many likely missed the move. That said, we explicitly stated the market would likely backtest $680 and possibly $685. Traders who followed that guidance and bought near $680 were positioned early and could ride the move to MSI resistance near $691 for a large one-and-done trade. That was the only clean opportunity of the session, and it delivered significant profits. Once again, the day reinforced the importance of context, patience, and flexibility, using the MSI, premarket levels, and market structure together to guide execution rather than forcing trades. The MSI continues to prove its reliability as the cornerstone of our trading process.
Trading Strategy Based on MSI:
Monday has no economic news, but over a weekend anything can happen, so stay alert to macro risks. For Monday we expect a period of price discovery with a slight upward drift, but with the potential to backtest as low as $680, although the bulls will do their best to hold above $685. Absent an external catalyst, the edge is bullish as long as SPY remains above the $685 range. If $685 fails and price closes below that level, $675 becomes a likely test, though we see this as a low-probability outcome without new catalysts. Above $685, the market may test $695, but resistance above $690 is heavy, making further upside difficult without a significant increase in volume. The bias favors selling failed breakouts above $695 and buying dips to as low as $685, while any sustained move below $685 should be approached cautiously, letting the MSI define what comes next. The long-term bull trend remains intact above $640. 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

Dealers are selling SPY $691 to $715 and higher strike Calls indicating the Dealers’ belief that Monday may see a period of calm with prices staying in a relatively tight range. The ceiling for Monday appears to be $696. To the downside, Dealers are buying $690 to $635 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying displaying some concern that prices could move lower. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $696 to $718 and higher strike Calls while also buying $691 to $695 Calls indicating the Dealers’ desire to participate in any continued rally this week. The ceiling for the week appears to be $700. To the downside, Dealers are buying $690 to $585 and lower strike Puts in a 5:1 ratio to the Calls they’re selling/buying, reflecting a market that is concerned about lower prices. For the week Dealer positioning is unchanged from bearish to 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 Monday, respect the restored bullish structure but avoid chasing strength. Favor buying dips that hold above $685 and selling failed breakouts near $695–$700. Stay flexible, manage risk tightly, and let price action confirm the next move after this historic reversal.

Good luck and good trading!