Market Insights: Thursday, May 22nd, 2025

Market Overview

Markets attempted to find their footing Thursday after a volatile selloff earlier in the week, as investors weighed fresh economic data against growing fiscal concerns. Stocks chopped sideways for most of the day after the House narrowly passed President Trump’s sweeping tax-and-spending bill by a single vote. That last-minute approval came after tweaks to win over skeptical conservatives, including an expanded deduction for state and local taxes. The move pushed the legislation closer to becoming law but also amplified Wall Street’s concern about ballooning debt levels. Moody’s recently downgraded U.S. credit in part due to this bill, and the risk of adding trillions to the national deficit remains front and center. Meanwhile, bond yields eased slightly after surging earlier this week, helping stabilize sentiment. The 30-year Treasury dipped just below 5.1% after testing financial crisis-era highs, while the 10-year fell to around 4.55%, still well above danger zones for equity markets. Elsewhere, bitcoin extended its rally, breaching $111,000 for the first time on strong institutional interest. Ether joined in with notable gains. Economic output improved in May with the S&P Global composite PMI rising to 52.1, up from 50.6 in April, suggesting growth is stabilizing. However, the labor market showed signs of strain, with continuing jobless claims climbing to 1.9 million—the highest level since November 2021. While Thursday’s data offered some relief, the macro backdrop remains tense and markets continue to tread carefully.

SPY Performance

SPY closed virtually flat on Thursday at $582.86, holding just below Wednesday’s close of $583.05. The ETF opened at $588.44 and saw a choppy session, rallying early before slipping into negative territory and briefly testing $581.41. Volume dropped to 66.45 million shares, below the prior day’s surge, as traders adopted a more cautious tone ahead of the long weekend. Despite briefly reclaiming the $585 level intraday, SPY couldn’t hold above it, signaling lingering hesitation. While bulls attempted to stabilize the decline, the market remains under pressure with key support still in play.

Major Indices Performance

The Nasdaq led the market Thursday with a modest 0.28% gain, while the Dow followed close behind, rising 0.26%. The S&P 500 hovered just below unchanged, ending the session slightly in the red, while the Russell 2000 dipped 0.08% as small-cap stocks lagged. The upward move in tech stocks helped buoy the broader indices despite mixed economic data. PMI data topped expectations, indicating improved business activity, while jobless claims hinted at a cooling labor market. Sector-wise, the day lacked strong rotation, with both defensive and cyclical groups performing in line with the broader market. The tone was cautious but steadier following Wednesday’s bond-driven selloff.

Notable Stock Movements

The Magnificent Seven had a mostly green session Thursday, with Tesla and Alphabet leading the pack, each climbing over 1.35%. These two names saw renewed buying as traders shifted back into select tech stocks with stronger earnings visibility. Netflix and Apple were the only decliners in the group, slipping modestly on the day. The broader rally in mega-cap tech showed a measured return of confidence, albeit without the momentum seen in recent weeks. As macro pressures persist, investors appear more selective, favoring names perceived as resilient in a higher-rate environment.

Commodity and Cryptocurrency Updates

Crude oil slipped another 1.14% to settle at $60.85, inching closer to our long-standing downside target of $60. We maintain a bearish outlook in the near term and expect crude to potentially drop to $50, where we would become buyers. While a declining dollar could spark short-term rallies, rising interest rates are expected to support a rebound in the dollar and cap oil gains. Gold declined 0.70% to $3,290, easing after a strong run as investor appetite for risk returned. Bitcoin surged 2.94% to close above $111,400, continuing its record-setting run. We remain long-term buyers between $83,000 and $77,000, but caution against buying below that range due to risk of steep drawdowns.

Treasury Yield Information

Yields pulled back slightly on Thursday, offering brief relief to equity markets. The 10-year Treasury yield fell 1.20% to 4.542%, dipping just under the key 4.55% threshold. The 30-year also retreated below 5.1%, though both remain elevated and threaten to pressure stocks if they climb again. Yields above 4.8% have historically triggered sharp equity declines, and a move beyond 5.2% would likely lead to a major correction. For now, the slight retreat gives markets breathing room, but fiscal concerns remain a potential catalyst for further volatility.

Previous Day’s Forecast Analysis

Wednesday’s forecast projected a wide trading range between $577 and $588, with a bearish bias under $585. Resistance was noted at $588 and $590, and support was pegged at $580 and $574. The model favored short trades below $585 and warned that any failure of $580 could open the door to a drop toward $564. Long setups were discouraged unless SPY reclaimed $588. The strategy prioritized short entries and emphasized discipline around key levels amid rising volatility and bearish macro conditions.

Market Performance vs. Forecast

Thursday’s price action closely tracked the prior forecast. SPY opened strong at $588.44 and pushed near $586.61, testing resistance before falling back. Support at $580 held firm after an early dip to $581.41, validating the model’s view that buyers could step in near key levels. Although SPY briefly reclaimed $585, it failed to sustain above it, confirming that resistance remains stiff. The forecast correctly anticipated the intraday reversal, and traders following the model would have benefited from short trades at resistance and caution around long entries. With SPY closing just below $583, the market stayed within the forecasted range and respected key pivot zones.

Premarket Analysis Summary

In Thursday’s premarket analysis posted at 8:12 AM, SPY was trading at $581.49 with the day expected to open under continued selling pressure following the prior day’s weak bond auction. The bias level was set at $582, and the analysis called for short setups while SPY remained under that level. Upside targets were set at $582, $586, $588.25, and $593, while downside levels were outlined at $578.75 and $576.25. The report advised caution and patience, favoring short entries near resistance unless strong buying emerged.

Validation of the Analysis

Thursday’s market action validated the premarket outlook. SPY initially bounced after dipping to $581.41, testing the $582 and $585 levels before rolling over. The failure to hold above $585 reinforced the bearish bias, and while downside targets like $578.75 were not hit, the rejection at resistance played out as expected. Traders who shorted near intraday highs or waited for confirmation around $582–$585 likely saw positive setups. The cautious tone of the premarket report was well-matched to the choppy session and accurately highlighted the risk-reward around key levels.

Looking Ahead

Friday brings no major economic releases, setting the stage for lower volatility ahead of Monday’s Memorial Day market closure. Attention now turns to next week, with Wednesday’s FOMC Minutes and Thursday’s Preliminary GDP and Unemployment Claims on deck. These events are likely to shape expectations for Fed policy heading into June. Traders should stay light heading into the holiday and prepare for larger moves next week as the macro narrative takes center stage once again.

Market Sentiment and Key Levels

SPY closed at $582.86 and continues to trade inside the $565–$585 zone, an area of heavy institutional activity. The bulls attempted to reclaim $585 but failed to close above it, keeping short-term sentiment slightly bearish. Major resistance remains at $585, $586, and $588, while support is found at $580 and $577. If $580 fails, bears could drive price toward $574 or even the gap at $564. Bulls need a decisive move back above $585 to regain control. With macroeconomic headwinds still swirling, the battle over $580 will be crucial for determining the next trend direction.

Expected Price Action

Our AI model forecasts a narrow range between $577 and $591.25 for Friday, signaling potential for choppy, sideways trading with pockets of trend behavior. The market retains a bearish bias below $585, meaning short setups remain favored while that level holds. If SPY breaks below $580, downside targets include $577 and $574. A move through $575 would open the door to the unfilled gap at $564. On the flip side, if SPY can close above $585, a test of $588 becomes possible, with $591 as a stretch target. Traders should remain flexible, watch for failed breakouts or breakdowns, and adjust to intraday reversals. No major news is expected Friday, so price action may be technical and less directional.

Trading Strategy

Short trades are preferred below $585, with initial targets at $580, then $577 and $574. If SPY loses $574, look for a fast drop to the gap at $564. Long trades can be considered only if SPY reclaims $585 and holds above it, with upside targets at $588 and $591. If SPY rallies early and stalls near $585 or $586, it may offer a high-probability short setup. Conversely, if SPY dips to $580 and holds, longs can be initiated with tight stops. The VIX ended at 20.27, reflecting elevated but not extreme volatility. In this environment, use smaller size, stay nimble, and manage risk closely as direction remains unclear and subject to rapid shifts.

Model’s Projected Range

The model’s maximum projected range for Friday is $577 to $591.25, with the Put side dominating in a narrowing range suggesting choppy price action with periods of trending behavior on Friday. There are no major economic releases expected tomorrow to move the market. Today’s PMI and Unemployment data came in better than expected, providing the market with enough momentum to stage a modest recovery from the past two days of declines. Overnight, SPY broke below the prior day’s lows, hitting a key support level at $580 before buyers stepped in. By the opening bell, SPY had rebounded to $583. After a choppy trading session, it rallied to briefly clear the important $585 level, only to meet resistance and close virtually unchanged. $585 now stands as a major resistance level, and the bulls will likely need multiple attempts to break through it. Additional resistance lies at $586, $589, and $592. On the downside, support levels are found at $582, $580, $577, and $575. Notably, resistance is building above $592, while support below $575 appears to be weakening. Bears have re-entered the picture and may attempt to push SPY below $580. Looking ahead to Friday, and barring any external catalysts, the bulls need to reclaim $588 to stabilize the recent downtrend. That effort begins with a close above $585. As long as $580 holds, a retest of higher levels is possible. However, unless $588 is recaptured, any upside moves are likely to face selling pressure. If $580 fails, SPY could move toward filling the gap from May 9 at $564, which also coincides with the lower boundary of the trend channel that began in April. SPY is once again trading within the $565–$585 range, a zone where institutional selling has been taking place. Today’s normal trading volume and flat close reflect a market in balance, with bulls and bears both active. A retest of the April lows may come back into focus if the gap fills. Since early April, market behavior has been heavily influenced by macroeconomic drivers such as bond yields, inflation, tariffs, and fiscal policy. These forces are likely to remain dominant unless there is a meaningful policy shift from the White House. The VIX closed higher at 20.27, still below the critical 23 level and down 2.92% on the day. Historically, a VIX above 23 pressures equities, while levels below that tend to support bullish momentum. With SPY now below $585, the bulls have lost their recent edge. While bears haven’t fully taken control either, the market appears to be entering a more neutral or consolidative phase. SPY remains within a steep bullish trend channel from the April lows, but the current pace of gains may not be sustainable. A period of sideways consolidation would be a healthy and constructive development. Given the elevated volatility and continued macro uncertainty, traders should stay nimble and remain responsive to evolving price action in the days ahead. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a narrow Bearish Trending Market State, with SPY closing mid-range. There are no extended targets printing. Overnight the MSI range held steady but when extended targets began printing, SPY fell to the major $580 level where dip buyers were waiting. For most of the day the MSI was in a ranging state, although today we say all three states present. When the MSI rescaled to a narrow bullish state in the afternoon session, extended targets above printed briefly which pushed price to $586 before sellers appeared and SPY fell to close virtually unchanged, suggesting a relatively balanced market which may continue to consolidate before breaking out. MSI support stands at $582.34, with resistance at $583.36.
Key Levels and Market Movements:
On Wednesday, we noted: “SPY may move sideways in the near term, likely holding above $580 and potentially back-testing higher levels.” We also mentioned: “If $580 holds, a rebound toward $588 is possible; however, in the absence of an external catalyst, such a move will likely be sold.” Finally, we stated: “We recommend monitoring for failed breakdowns near $582 as potential long setups.” If you're unable to develop a plan from that guidance, you're missing the core value of these newsletters. Just take a look at today’s price action; this wasn’t close to what transpired, it was exactly what transpired. With that framework in mind: SPY held the $580 level overnight and opened right at $582. A failed breakdown at 9:32 AM triggered our first long entry at $582.50, with an initial target at MSI resistance near $585.50. As we waited, the MSI rescaled to a narrow bullish state, prompting us to reduce our first target to $585. We exited 70% of the position there. SPY then sold off sharply, returning to our entry level. As we’ve said before, when trading with the trend, we often keep our stop back until reaching the second target so we remained in the trade. At 10:56 AM, SPY presented another failed breakdown at the $582 level. We reloaded our long position to full size, setting a first target at the conservative level of $583 to protect prior gains. That target hit quickly, and we aimed next for MSI resistance at $584.50, which was also achieved by noon. We moved our stop to breakeven. The MSI rescaled higher again, so we used $585.25 as our next resistance target, taking another 20% off the position. We then moved our stop to breakeven again. At 12:16 PM, SPY set up a textbook failed breakout above $585. Anticipating sellers would fade any backtest of higher levels as we had outlined in our plan, we reversed short, setting our first target at MSI support near $583. That target was hit, and we took 70% off the table, looking for a second target at $582. That level never came. SPY reversed off $582, and although we considered flipping long again, we held off. Once SPY broke $583.50 and entered mid-range in an MSI "ranging" state, we exited our short entirely. We considered a long again at 1:30 PM when the MSI rescaled to a bullish state, but didn’t love the setup: the MSI was narrow, there were no extended targets, and $585 remained a key resistance level. The market and MSI both pushed higher but having already gone three for three, we opted to preserve gains and step away for the day. There was a textbook failed breakout at 3:35 PM, but by then we were done. Thanks to the MSI’s clarity in identifying market control, timing shifts, and pinpointing actionable levels, we were able to enter with precision and exit with discipline. When combined with a structured trading process and the model’s key levels, the MSI proves to be a powerful tool for consistent performance. We continue to strongly recommend integrating the MSI into your approach as it helps align you with dominant market forces, avoid traps, and execute with confidence.
Trading Strategy Based on MSI:
Today was a largely sideways session, and with little on the calendar tomorrow and a long weekend ahead, Friday is also likely to be a quiet, range-bound day absent any unexpected catalysts. The $580 level remains critical. If it holds, SPY may again attempt to back-test higher levels. A rebound toward $588 is possible; however, such a move is still likely to face selling pressure. Should the bulls reclaim $588, they may aim for a close above it, which would shift control of the dominant trend back in their favor. Conversely, a failure to hold $580 could open the door to a quick move down to $575. A break below $575 would likely trigger a gap fill toward $564. While the bears have reentered the picture, the odds still modestly favor the bulls. That said, they no longer have the firm grip on the market that they held earlier this week. The next few sessions will likely determine which side takes the lead. For now, traders should closely monitor the $580, $586, and $588 levels as these are key areas the bulls must defend or reclaim to regain momentum. A breakdown below $580 would hand further control to the bears. The MSI currently reflects a weak bearish trending state, suggesting we may be entering a period of consolidation. While a test of the March highs near $597 is off the table for now, the broader bullish trend may simply need more time to consolidate before resuming. We continue to recommend watching for failed breakdowns near $582 as potential long setups, and failed breakouts near $586 as possible short entries. With no significant macroeconomic news expected out of Washington, our bias has shifted to neutral. Two-way trading is favored. As always, stay aligned with the MSI and avoid trading during Ranging States. Remain disciplined and responsive to shifts in market structure. The MSI offers powerful real-time insights into momentum and structural changes. When paired with our Pre-Market and Post-Market Reports, it helps identify high-probability setups and precise entries keeping traders in sync with the tape and helping avoid costly mistakes. If you haven’t yet integrated the MSI and model levels into your trading approach, now is the time. Reach out to your representative to get started. These tools can make a meaningful difference in both performance and consistency.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling $594 to $610 and higher strike Calls while buying $584 and $593 Calls indicating the Dealers belief that prices may move higher on Friday. Dealers appear to project a ceiling for Friday at $595. To the downside Dealers are buying $583 to $500 and lower strike Puts in a 3:1 ratio to the Calls they are selling/buying, implying a slightly bearish posture for Friday. Dealer positioning is unchanged from slightly bearish to slightly bearish.
Looking Ahead to Next Friday:
Dealers are selling $589 to $610 and higher strike Calls while buying $584 and $588 Calls implying the Dealers belief that prices may continue to rally next week but not beyond $595. To the downside, Dealers are buying $583 to $440 and lower strike Puts in a 3:1 ratio to the Calls they’re selling, reflecting a slightly bearish outlook for the week. Dealer positioning is unchanged from slightly bearish to 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

SPY continues to trade under $585, and we recommend maintaining a cautious approach. Short setups are favored while SPY remains below this level, with targets at $580, $577, and $574. Long trades can be considered if SPY reclaims $585 and holds, targeting $588 and $591. Watch for failed breakdowns near $580 and failed breakouts near $585 for intraday trading signals. Volatility remains elevated with the VIX at 20.27, signaling ongoing risk. Traders should scale back position size, tighten stops, and avoid overtrading in uncertain conditions. Be ready for directional shifts, particularly next week when key economic releases return. Review the premarket analysis posted before 9 AM ET to account for any changes in the model’s outlook and in Dealer Positioning.

Good luck and good trading!