Market Insights: Wednesday, May 7th, 2025

Market Overview

Markets moved higher on Wednesday as traders reacted to the Federal Reserve’s decision to hold interest rates steady and digested headlines about renewed US-China trade discussions. The Dow climbed 0.7%, gaining nearly 300 points, boosted by a sharp 10% rally in Disney shares. The S&P 500 added 0.4%, and the Nasdaq inched up 0.3%, though a steep 7% drop in Alphabet shares weighed on tech performance. The Fed kept rates unchanged for the third straight meeting, holding steady in the 4.25% to 4.5% range. In his post-meeting remarks, Fed Chair Jerome Powell emphasized a cautious stance, saying the central bank remains in "wait and see" mode due to elevated uncertainty about the economy. Powell noted that the risks of higher inflation and unemployment have both risen and reiterated that rate cuts aren’t guaranteed. “There are cases in which it would be appropriate for us to cut rates this year, there are cases in which it wouldn’t,” Powell said. “We just don’t know.” Elsewhere, optimism flickered over upcoming US-China trade talks set for this weekend, the first such engagement since President Trump sharply raised tariffs in April. While the Geneva meeting may not yield a breakthrough deal, the mere act of dialogue has helped keep investor sentiment afloat. That optimism was tempered when Trump dismissed the idea of reducing Chinese tariffs to encourage negotiations, responding with a flat “no” when asked directly during a press conference. Nvidia popped more than 3% after a report that the Trump administration plans to repeal AI chip export limits originally implemented under President Biden. The change is part of a broader effort to reverse Biden’s AI Diffusion rule, which had curbed international AI development by US firms. Nvidia’s strength contributed to broader gains in the chip sector and underscored the market’s sensitivity to tech regulation and policy shifts.

SPY Performance

SPY rose 0.43% to close at $561.19, marking a moderate recovery following two days of losses. The ETF traded between a low of $556.04 and a high of $563.82, ending just below the first key resistance level. Volume picked up to 46.57 million shares but remained below average, signaling traders stayed cautious into and after the Fed announcement. While SPY avoided further downside, the failure to convincingly clear $563 suggests the market is still consolidating, waiting for a catalyst to spark direction.

Major Indices Performance

The Dow led the way with a 0.70% gain on the back of strong performances from Disney and other consumer names, followed by the S&P 500 with a 0.43% rise. The Nasdaq lagged with a 0.27% advance as weakness in Alphabet dragged on the tech-heavy index. The Russell 2000 added 0.26%, showing modest participation from small caps. Despite the green across the board, market breadth was mixed, with defensive sectors like utilities and staples seeing less enthusiasm than cyclical names. The day's tone was cautious but constructive, shaped largely by the Fed’s decision to pause while signaling no urgency for rate cuts.

Notable Stock Movements

Nvidia was the standout performer among the Magnificent Seven, rallying more than 3% after reports suggested a rollback of Biden-era AI chip export restrictions. Amazon also posted a solid gain, adding strength to the group. Most of the remaining members traded higher with modest gains, though Apple dipped 1.15% and Alphabet plunged over 7.29% following investor concerns about growth and regulatory risk. The divergence reflects a market that is still heavily dependent on tech leadership but is becoming more selective, especially as regulatory scrutiny intensifies.

Commodity and Cryptocurrency Updates

Crude oil fell 1.90% to $57.97, reversing some of Tuesday’s gains. The pullback was attributed to renewed strength in the U.S. dollar and fading geopolitical risk. Our model still sees oil declining toward $50, where we would turn buyers again. Gold also slipped, dropping 1.47% to $3,372 as safe-haven demand waned following the Fed’s less dovish tone. Bitcoin bucked the trend, rising 2.58% to close just above $97,100. Our stance remains long-only on Bitcoin within the $83,000 to $77,000 range, targeting profits above $85,000. Below $77,000 remains a no-buy zone due to the risk of steep declines.

Treasury Yield Information

The 10-year Treasury yield eased 1.13% to 4.269%, retreating modestly as the Fed stuck to its policy script. Yields remain below the danger threshold of 4.5%, offering temporary relief to growth stocks. However, if the yield curve begins to steepen in response to inflation surprises or aggressive Fed commentary, equity markets could face renewed headwinds. For now, the dip in yields helped support a modest recovery in risk assets post-FOMC.

Previous Day’s Forecast Analysis

Tuesday’s forecast projected a wide range of $552 to $570, highlighting potential for a volatile post-FOMC session with consolidation early and trending moves later. The report emphasized a bullish leaning only if SPY reclaimed $560 and suggested long trades above $558 with targets at $560 and $565. Downside levels at $557 and $555 were flagged as potential support zones. The strategy also warned against overtrading during high volatility and noted the possibility of failed breakouts and breakdowns at critical levels. This framework clearly favored defensive positioning and nimble trading around key inflection points.

Market Performance vs. Forecast

SPY opened at $559.98 and traded as high as $563.82 before closing at $561.19, validating Tuesday’s forecast range of $552 to $570. The reclaim of $560 triggered upside moves toward resistance at $563, although the market stalled before hitting the $565 target. On the downside, SPY tested the $556 level early, holding above the $555 support and confirming the strength of that floor. The model’s expected two-way action played out cleanly, providing actionable trades on both sides of the market. Traders who used the forecast likely found favorable opportunities during the session, especially with long entries off the $558–$560 zone and exits near the upper resistance levels.

Premarket Analysis Summary

In Wednesday’s premarket analysis posted at 7:50 AM, SPY was trading near $562.35 with a neutral-to-bullish bias contingent on holding above $563.75. The outlook anticipated a quiet start ahead of the FOMC announcement, followed by potential upside targets at $567 and $572 if momentum developed. Downside risk was noted at $559 and $555 in the event of a sell-off. The report cautioned traders to be patient and avoid overcommitting prior to the Fed’s decision, with a clear focus on waiting for confirmation above or below key levels before acting.

Validation of the Analysis

Wednesday’s price action aligned closely with the premarket analysis. SPY flirted with the upper resistance of $563.75 but failed to break through, topping at $563.82 before slipping back to close at $561.19. The pre-Fed calm gave way to modest upward momentum, though the move fell short of reaching the $567 or $572 targets. On the downside, SPY respected the $559 level and never tested the $555 or $552 thresholds. Traders who followed the premarket guide had clear reference points, and the analysis proved reliable in framing the session’s range-bound yet slightly bullish character. The levels held firm, reinforcing the value of disciplined execution and a rules-based approach.

Looking Ahead

Thursday’s calendar is relatively light with only Unemployment Claims scheduled for release in the premarket. The focus now shifts to how the market absorbs the Fed’s message over the next few sessions. While volatility may cool somewhat, traders should remain alert for headline risk from upcoming Fed speeches on Friday. Any surprise remarks could shake the market from its current consolidation zone.

Market Sentiment and Key Levels

SPY ended Wednesday at $561.19, holding just below the key resistance band near $563. Sentiment remains cautiously bullish following the Fed’s hold, with the bulls attempting to regain momentum. Resistance sits at $563, $566, and $569, while support levels are found at $558, $555, and $552. The $560–$570 range remains the battleground, with a close above $570 needed to re-establish upside dominance. Failure to hold above $555 would invite deeper selling toward $550 or even lower. The market is still digesting Fed language, and any abrupt macro news or tariff headlines could swiftly change sentiment.

Expected Price Action

Our AI model projects a trading range of $555 to $565 for Thursday, suggesting a session with consolidation early, followed by trending potential if key levels break. The market remains Call-dominated, implying a bias toward sideways action with an upward lean. If SPY can break above $563 and hold, upside targets include $566 and $569, with a breakout possibly reaching $572. However, a failure at $558 increases the likelihood of retests at $555 and $552. If $550 is lost, downside momentum could accelerate. Traders should remain tactical and focus on failed breakout or breakdown setups at key levels.

Trading Strategy

SPY’s current range favors long trades above $555 with targets at $560 and $565. If momentum builds, $569 and $572 come into play. Short trades may be considered on failed tests near $565 or from breaks below $555, targeting $552 and $550. With the VIX easing slightly to 23.55, volatility is still elevated but manageable. Traders should stay nimble, reduce position sizes, and favor trend-aligned trades. Maintain tight stops near resistance and allow wider stops near support, especially if trading ahead of potential macro headlines. Flexibility remains key in this environment.

Model’s Projected Range

The model’s maximum projected range for Thursday is $549.75 to $568, with the Call side dominating in an expanding range suggesting consolidation with periods of trending behavior. Only Unemployment Claims are scheduled for release in the premarket tomorrow, so we anticipate a relatively quiet day barring any unexpected developments from the White House. While the projected trading range has widened slightly, it continues to hold the low at $550, suggesting more sideways pressure rather than a continuation of the recent bullish trend. For several days, we've noted that as SPY approaches the $565–$585 zone, institutional traders are likely to scale back exposure and deploy protective strategies to lock in gains. While a push toward the 200-day moving average remains possible, that level still represents a major hurdle for the bulls. The FOMC meeting had minimal impact on price action, with the market trading sideways in a tight range leading up to it. Bulls still hold the advantage unless SPY begins probing key lower support levels. A close above $585 would confirm a decisive reclaiming of the broader uptrend, while a break below $545 could trigger a retest of $535. Should that level give way, a gap-fill move toward $530 becomes increasingly likely, shifting momentum back in favor of the bears. Key technical levels for Thursday include resistance at $563, $566, $569, and $570, and support at $558, $555, $552, and $550. The resistance wall from $560 to $570 remains formidable, while support beneath $555 has weakened. Over the next 80 days, tariffs, bond yields, and inflation will remain dominant macroeconomic forces unless clearer policy direction emerges from the White House. The VIX closed slightly lower at 23.55, hovering near its 23 pivot point. Moves above this level typically pressure equities, while dips below often support rallies. With SPY settling at $561, bulls may attempt to push price back above $565. The ETF remains stuck in a range between $555 and $562, which is likely to lead to further consolidation as the market builds energy for a potential breakout above $565. If $555 fails, a test of $550 is likely. A break below that could give bears enough momentum to challenge significantly lower levels heading into the end of May. SPY continues to trade above the upper boundary of the bear trend channel established since December. However, our model has yet to define a new bullish channel, remaining unconvinced that the rally is sustainable. Still, if upward momentum persists, a new bullish channel could begin to form. Momentum currently favors the bulls, but in such a volatile environment, staying nimble and prepared for rapid sentiment shifts is essential. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a wide, Ranging Market State, having initially rescaled overnight into a broad bullish state. However, following the FOMC event, it transitioned once again through all three states, ultimately closing the day back in a Ranging Market State. This suggests market indecision and implies consolidation within the $558–$562 zone. There were no extended targets all day, indicating a lack of strong directional conviction from the herd. In essence, the MSI is signaling that the market is consolidating and awaiting an external catalyst to prompt a decisive move. After nine consecutive up days, a period of flagging and minor pullback is both normal and healthy. Current MSI resistance is at $561.88, with support at $557.99.
Key Levels and Market Movements:
On Tuesday, we noted: “the morning will likely be choppy and rangebound.” We also stated: “On any post-FOMC sell-off, bulls will aim to defend $550, potentially setting up a failed breakdown below today’s lows. If they’re particularly motivated, they may not allow SPY to drop below $558, instead driving a move back into the $565–$585 zone.” Finally, we cautioned: “the first move post-FOMC is often a trap,” and highlighted that “Short setups become interesting above $565, while long setups may form around $555.” With this plan in hand, we entered the day without strong conviction to trade, anticipating choppy conditions. By 11:12 AM, SPY had fallen to MSI support at $558.30. We considered a long to the premarket level of $563.75 but, with only a couple of hours left before the FOMC announcement, we opted to sit on our hands and wait for the main event. At 2:00 PM ET, the market initially sold off on the FOMC news, prompting the MSI to rescale to a bearish state. However, without extended targets and with SPY bottoming near $556 in what looked like a textbook failed breakout, we took a shot at a mean reversion long at $557, targeting a move back to the premarket level of $559. With MSI resistance less than $1 above our entry, we took off 70% of the position at the premarket level of $559 and held the rest for a potential push higher, even though the MSI had rescaled to a Ranging Market State, which typically isn't ideal for directional trades. The next level up was $563.75, but it seemed a stretch for a second target. So, we moved our stop to breakeven and waited. SPY quickly reversed back to MSI support at $558, nearly tagging our stop. Since MSI support held, we reloaded our long at $558, a level which had been identified in yesterday’s post-market report. Our first target this time was MSI resistance at $561.88, which was hit quickly. Given the solid reward, we took off 90% of the position and moved our stop on the runner to breakeven. By 3:30 PM, our remaining 10% was stopped out at breakeven. With the day winding down and two solid trades already booked, we wrapped it up. In the final 30 minutes, price spiked to the premarket level of $563.75. But given the chop and noise, we were satisfied locking in profits, especially with the MSI in a Ranging Market State. Today’s success came from disciplined execution, a solid plan, and clear guidance from the MSI and our model’s levels. The MSI reveals who’s in control, when that control shifts, and where actionable levels lie—enabling precise entries and exits. When paired with our framework, it keeps traders aligned with dominant market forces. It continues to deliver with high precision, helping us avoid traps, stay in sync with momentum, and capture profits with confidence. We strongly recommend integrating the MSI into your trading toolkit. When combined with a structured plan, it becomes a powerful engine for long-term performance.
Trading Strategy Based on MSI:
Thursday brings little in the way of market-moving news. While Unemployment Claims could become a factor in the future, they’re unlikely to impact tomorrow’s session. With the FOMC now behind us, the day is expected to resemble the past four. SPY is likely to remain rangebound. The MSI remains in a wide Ranging Market State, signaling limited directional conviction until it rescales either higher or lower. SPY is expected to trade between $555 and $562 as it builds momentum for a breakout. Given the prevailing bullish trend, a break higher is more probable, barring an external catalyst that disrupts the current rally. Bulls may attempt to push SPY back above $565. However, as price enters this zone, hedging activity will likely increase, acting as a drag on continued upside. The prudent approach remains to trade with the trend and for now, the bulls are in control. That said, bears are waiting. A break below $555 would invite attempts to test $550. Still, any meaningful bearish progress depends on a breakdown below $545. Until then, failed breakdowns below $555 and failed breakouts above $562 are likely. This range supports a two-way trading environment with opportunities on both sides. Should $545 break, the door opens to $535, with a gap-fill toward $525 potentially in play. Conversely, if bulls reclaim and hold $565, a push toward the 200-day moving average at $572 becomes likely. The 200 DMA is a significant resistance level, so expect more of a gradual grind than a sharp rally. Above $585, bulls would firmly regain control, setting their sights on new highs. For Thursday, it’s best to remain patient and wait for a trend to emerge with the MSI. Avoid trading when the MSI is in a Ranging State. As always, trade what’s in front of you. The MSI continues to prove invaluable in this environment, providing real-time insight into structural shifts and momentum. When combined with the levels from the Premarket Report, it highlights high-probability targets and clean entry points—helping traders stay aligned with dominant flows and avoid costly missteps. If you’re not yet using the MSI and model levels, now is the time. Reach out to your rep as these are powerful tools that can make a real difference in your trading.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling $562 to $605 and higher strike Calls indicating the Dealer’s belief that the market is likely to move more sideways that rally hard on Thursday. The upside appears limited to $570 for Thursday. To the downside Dealers are buying $561 to $515 and lower strike Puts in a 2:1 ratio to the Calls they are selling, implying a slightly neutral posture for Thursday. Dealer positioning has changed from slightly bearish to neutral, Dealers seem ready for the market move both higher toward $570 or drop to $550.
Looking Ahead to Friday:
Dealers are selling $562 to $600 and higher strike Calls indicating the Dealer’s belief that the market is likely to move more sideways than rally hard into Friday. Dealers appear to believe the peak for SPY for the week is $570. To the downside, Dealers are buying $561 to $500 and lower strike Puts in a 4:1 ratio to the Calls they’re buying/selling, reflecting a bearish outlook for the week. Dealers are heavily protected should $555 fail but are also open to prices reaching $570 this 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

SPY’s close at $561.19 keeps it in a tight band between critical support at $558 and resistance near $563. Long trades may be considered if SPY reclaims $563 with conviction, with upside targets at $566 and $569, as well as from $555 on a failed breakdown. Short trades may become viable if SPY fails to hold $558, with potential downside to $555 or $552 and again, also from failed breakouts above $563. Elevated volatility, with the VIX closing at 23.55, means quick moves and fakeouts are possible. Use tight stops and favor trades near well-defined levels. Monitor how SPY reacts around $560 and avoid overexposure ahead of Friday’s Fed commentary. Remember to review the premarket analysis before 9 AM ET for updated model levels and any shifts in Dealer Positioning.

Good luck and good trading!