Market Insights: Thursday, July 23rd, 2026
Market Overview
Thursday was a rough session across the board as Wall Street got spooked by two things at once — Alphabet and Tesla's big capex ambitions rattled AI investors, and oil prices blew past $100 a barrel as the Middle East conflict kept escalating. The Nasdaq took the worst of it, tumbling 2.1% and briefly cracking below 25,000 for the first time since May. The S&P 500 dropped 1.5% and the Dow fell 1.1%, extending the pullback that started Wednesday. Alphabet's quarter was fundamentally solid, but the raised capex guidance had investors questioning AI's return on investment. Tesla's Elon Musk didn't help sentiment either, calling 2026 a "massive capex year" with heavy focus on Optimus robots, robotaxis, and data centers.
The oil surge added a whole new layer of concern. Brent crude crossed $100 and WTI climbed after Iran-backed Houthis attacked tankers in the Red Sea, deepening the US-Iran conflict. Rising oil prices stoked fresh inflation fears and sent the 10-year Treasury yield to its highest level in 18 months, pushing back on any hopes the Fed would ease rates this year. On the bright side, initial jobless claims came in at 187,000 — the lowest since 1969 and well below the 210,000 consensus — though the strong labor data did little to calm markets. Earnings continue to roll in, with Intel, T-Mobile, and Lockheed Martin among the names reporting next.
SPY Performance
SPY opened at $739.37 and struggled from the jump, unable to find any sustained buying interest as sellers kept pressure on throughout the session. The intraday range stretched from a high of $742.56 down to a low of $735.21 — a span of more than seven points, a meaningful step up in volatility compared to the sleepy, narrow action from the prior session. The bulls made a brief attempt to stabilize early but never managed to push the tape convincingly higher, and the bears stayed in control for most of the day.
SPY closed at $738.30, down 1.22%, which marks a notable deterioration after a stretch of relatively contained price action. Volume came in at 49.70 million shares, near average, meaning this wasn't a low-conviction drift lower — there was real participation behind the selling. That's the part worth paying attention to. When a decline of this size is backed by average or better volume, it signals genuine distribution rather than just noise. The VIX confirmed the shift in tone, surging 17.73% to close at 19.59 — fear jumped back into the room in a hurry after getting quietly bled out over recent sessions. The bulls gave back ground they worked hard to hold, and with volatility spiking like this, the burden of proof shifts back to the upside. The market will need to respond quickly or risk letting this feel like the start of something more than just a single rough day.
Major Indices Performance
The Nasdaq led the damage today, dropping 2.15% in a broad-based selloff that hit growth and tech names particularly hard. The index has been walking a tightrope for weeks, and today it slipped — Tesla's dramatic collapse dragged the entire growth complex lower and put real pressure on sentiment across the board. When the momentum names start cracking like this, the Nasdaq tends to amplify the move, and that's exactly what played out.
The Dow held up comparatively better, declining 0.97%, though make no mistake — that's still a meaningful down day for blue-chip names. Defensive rotation can only do so much when the selling pressure is this broad. The fact that the Dow outperformed by over a full percentage point versus the Nasdaq suggests investors were at least trying to find shelter in more traditional names, but the bid wasn't strong enough to keep the index in positive territory.
The Russell 2000 actually fared slightly better than the Dow on a percentage basis, falling 0.87%, which is a bit of a surprise given how sensitive small-caps typically are to risk-off environments. That said, don't read too much into the relative outperformance — small-caps are still down, and the broader S&P 500 finishing off over 1% confirms this was a market-wide reset rather than isolated weakness. The spread between the Nasdaq and the Russell — more than a full percentage point — tells you the real pain today was concentrated squarely in growth and large-cap tech, not the small-cap space for once.
Notable Stock Movements
Tesla was the story in the Magnificent Seven today, and not in a good way. A 14.52% single-day drop is a massive move for any company, but for one of the most widely held names in the market, it's the kind of decline that sends shockwaves through sentiment well beyond the stock itself. That's not a normal pullback — that's a flush, and it raises serious questions about whether the selling pressure around Tesla has more room to run or whether this is an exhaustion move. Whatever the catalyst, a drop that size demands attention and commands respect from anyone still holding the name.
The rest of the Magnificent Seven mostly followed Tesla into the red, keeping the group firmly on the wrong side of the ledger for the session. The broad weakness across these mega-cap names compounded the already negative tone in the market, and with Tesla dragging so heavily, the cohort as a whole acted as a headwind rather than the leadership anchor it sometimes provides. When the Magnificent Seven are uniformly struggling, there's no real offset from within the group to stabilize broader sentiment.
The timing of this kind of coordinated selling matters. With the VIX surging 17.73% to 19.59 and the Nasdaq getting hit hard, the Magnificent Seven's red session wasn't happening in a vacuum — it was both reflecting and amplifying the broader risk-off tone. Tesla's 14.52% collapse is the number that will dominate conversation heading into the next session, and how the stock responds from here will likely serve as a meaningful read on whether investors are willing to step back in or continue rotating away from high-beta, high-profile names.
Commodity and Cryptocurrency Updates
Crude oil surged another 5.36% today, closing at $91.48, and at this point there's no other way to describe it — crude has rallied well above recent expectations and shows no intention of pulling back. Geopolitical tensions and supply-side dynamics continue to fuel the move, and with oil firmly entrenched at these levels, the inflationary implications are hard to ignore. Every session crude holds above $70, the Fed's path to any kind of easing gets narrower. Energy at $91 isn't a background consideration — it's an active headwind for monetary policy, and if this move persists, expect it to weigh heavily on the rate-cut conversation well into the months ahead.
Gold had a rough session, giving back 2.27% to close at $4,053. After the strong momentum built over recent sessions — reclaiming $4,000 and pushing through $4,088 — today's pullback is a reminder that even the strongest trending moves need to digest gains along the way. The fundamental backdrop hasn't changed: central bank demand, geopolitical uncertainty, and a complicated global rate environment are all still in play. Bulls will want to see $4,000 hold as support and prevent any further deterioration before calling this a healthy consolidation rather than something more concerning.
Bitcoin slipped again today, dropping 1.85% to close just above $64,877. Two consecutive down sessions aren't cause for alarm on their own, but the lack of a meaningful bounce is worth watching. The broader structure still looks constructive, and key support levels need to hold here to keep the path toward recent highs open. If buyers don't step in soon, the risk of a deeper pullback grows.
Treasury Yield Information
The 10-year Treasury yield is not done moving. Today's session tacked on another 0.99% to push the closing level to 4.700%, continuing a relentless march higher that has now strung together multiple consecutive sessions of gains. The progression has been methodical — 4.600%, 4.630%, 4.660%, and now 4.700% — each step quietly compressing the buffer between where we are and where things start to get genuinely dangerous. This is no longer just background noise. This is a yield environment that is actively working against equity bulls, and the pace of the climb is starting to accelerate.
Inside the framework, 4.700% keeps us deep in the pressure zone above 4.5%, where equity valuations face a persistent structural headwind. But the number that matters most right now is 4.8%, and we are now just 10 basis points away from it. That is razor-thin. At the pace yields have been moving, a single hot inflation print, a strong jobs report, or any hawkish signal out of the Fed could push us through that threshold in one session. Once yields cross 4.8%, selling historically becomes more aggressive and broad-based — not the slow squeeze we've been experiencing, but the kind of selling that feeds on itself and spooks the broader market quickly. The fact that bond buyers are showing no conviction whatsoever and that each session continues to stack another gain makes a breach of 4.8% feel less like a tail risk and more like a base case if conditions don't shift soon.
The equity weakness seen today is entirely consistent with what a yield environment above 4.700% tends to produce. Until the 10-year makes a convincing move back below 4.5% with real follow-through, any rally in stocks is swimming against a strong current. Watch 4.8% closely — if that level breaks, expect the conversation to shift from "pressure" to "panic" very quickly.
Previous Day’s Forecast Analysis
Yesterday's newsletter projected SPY trading within a fourteen-point range, with $739 defining the downside and $753 serving as the max upside ceiling, against a Wednesday close of $747.47 sitting right in the middle of the expected move. That neutral positioning meant neither bulls nor bears held a clear edge heading into the session, with the burden falling on a decisive break of key levels to set the tone.
The critical level to watch was $750, identified as the round-number gamma flip point where buyers would gain a real tailwind on a convincing reclaim. Above there, $752 was the next decision point with $753 as the hard ceiling. On the downside, $745 was flagged as the first line of defense — the heaviest negative gamma strike — with $744 below it sitting in a deep negative gamma pocket that could accelerate selling. A break of $743 was seen as a meaningful tone shift, with $740 serving as the point of last hope backed by a substantial put wall, and $739 marking the absolute floor with $738 just beneath as the ultimate structural support.
The trading strategy leaned long given the constructive volatility backdrop, with VIX at 16.82 holding below 17 as a favorable sentiment signal. Position sizing was recommended at 70-75% of normal exposure with stops in the 1.5-1.75% range. The preferred long entry was a pullback into the $746-747 zone on orderly, light selling, targeting $750 first and $752-753 on follow-through. A clean hold of $750 as new support opened a continuation trade targeting $753 and then $755-756. Short setups remained valid — a failed push above $750 on weak participation was a fade entry targeting $747 and $746, while a decisive break below $746.37 opened downside trades targeting $743 and $740-741. The overall message was to trigger on confirmation, size appropriately, and honor stops without hesitation.
Market Performance vs. Forecast
Thursday's session introduced a sharp downside move that pushed price action outside the projected range, as an unexpected surge in volatility drove SPY well below the model's base case scenario. The session opened at $739.37 — right at the model's downside boundary of $739 — briefly touched $742.56, then broke decisively lower, ultimately settling at $738.30 on a decline of 1.22%. The VIX exploding 17.73% to 19.59 was the defining force behind Thursday's tape, and that kind of volatility expansion is precisely the type of external catalyst the model does not price in as a base case. When sentiment shifts that aggressively and that quickly, it introduces outsized moves that fall outside any structured range framework built on stable volatility assumptions.
That said, the forecast's structural logic held up in important ways. The model had clearly identified $739 as the absolute bottom of the expected move and $738 as the put wall serving as the ultimate floor — and Thursday's close at $738.30 landed almost exactly on that floor, confirming the structural map remained relevant even under duress. The model's warning that a break of $743 would "shift the tone meaningfully" and put $740 in play as the "point of last hope" proved directionally accurate — once $745 gave way, the cascade toward $740 and below unfolded exactly as the framework described. Traders who honored the stop levels outlined below $746 had risk management protocols working in their favor, protecting capital as the tape deteriorated.
The short setup framework also deserves recognition here. The forecast explicitly outlined that a decisive break below $746.37 opened short entries targeting $743 initially and $740 to $741 on an extended decline — that path played out with precision. The volatility surge to 19.59 was the variable that extended the move beyond the projected floor, not a flaw in the underlying structural analysis. The model's level architecture continues to provide a reliable roadmap, and as volatility resets and the framework recalibrates around new gamma concentrations, the edge remains intact heading into the next session.
Premarket Analysis Summary
The premarket analysis posted at market open identified SPY spot at $743.70 sitting in a put-dominated environment, extending the prior session's slide and trading below the negative gamma cluster that had been capping every bounce. The expected move was flagged at 10 points, reflecting trader expectations for larger-than-normal ranges heading into Thursday. The defining gate above was set at $745 — described as the heaviest negative gamma strike and the immediate requirement for any meaningful recovery. Above there, $747 was the first real target, $749 was identified as the level where gamma flips positive and buyers regain a structural tailwind, $750 marked the critical round-number pivot with a major call wall, $752 held the heaviest call interest, and $753 capped the expected move as maximum upside. On the downside, $743 was flagged as the first line to watch given that spot was essentially sitting on it, with a clean break threatening to accelerate selling through the negative gamma pocket. Below that, $742 was where selling could pick up speed, $741 the next decision point, $740 a major battleground with a substantial put wall and deep negative gamma, $736 the point of last hope, and $734 the bottom of the expected move as maximum downside. The bias placed the burden squarely on the bulls, with $749 as the key structural flip and $743 as the immediate line in the sand.
The actual session validated the downside scenario almost precisely. SPY opened well below the premarket spot price at $739.37, gapping directly into the dangerous territory the analysis warned about, with the $740 put wall already breached from the first print. Price briefly recovered to a high of $742.56, tagging the $742 acceleration level but failing to reclaim $743, which confirmed sellers' grip exactly as described. The low of $735.21 sliced through the $736 last-hope level and pushed toward the $734 maximum downside target before finding a floor. The session closed at $738.30, down 1.22% on near-average volume, with the VIX surging 17.73% to 19.59 — a clear confirmation that the cascading negative gamma conditions the analysis flagged played out in full force.
Validation of the Analysis
Today's session was a textbook validation of the premarket's bearish framework, with the put-dominated environment playing out almost exactly as warned from the opening bell. The analysis flagged 743 as the first critical level to watch, noting that losing it cleanly would confirm the sellers' grip — and SPY answered immediately, opening at $739.37, already well below that threshold and skipping straight into the negative gamma pocket the premarket described in detail. That gap-down open below 743 was precisely the scenario the analysis cautioned about, and traders who respected the downside roadmap were positioned correctly before price even printed.
From there, the premarket's lower levels took over with striking accuracy. The analysis identified 741 as the next decision point after 742 gave way, 740 as a major battleground with a substantial put wall, and 736 as the point of last hope before 734 — the bottom of the expected move. SPY's low of $735.21 drove straight through 740 and reached within striking distance of that 734 max downside target, confirming the cascade dynamic the premarket explicitly warned about when it said put-dominated conditions with this much negative gamma below could move quickly. The high of $742.56 never came close to threatening 743 from the upside, let alone the 745 gate — sellers maintained complete control throughout the session, exactly as the framework projected for a market trading below the negative gamma cluster. The VIX surging 17.73% to 19.59 only reinforced the fear-driven, seller-controlled tape the analysis anticipated. For traders who had the downside levels mapped out before the open, this session offered clean, high-confidence entries with well-defined targets every step of the way down.
Looking Ahead
Friday's economic calendar is quiet, with no high-impact releases scheduled to shake up the macro picture heading into the session. That keeps the focus on price action and technicals as traders close out the week without a fresh data catalyst to force a directional move. In the absence of hard numbers, the market leans on what it already knows — earnings momentum, rate expectations, and the risk tone that Thursday's tape establishes heading into the final session.
A quiet Friday close can be deceptive. With no scheduled event to crystallize positioning, the session becomes a referendum on the week's trend — either the dominant side shows up with conviction to lock in gains, or profit-taking creeps in as traders square up ahead of the weekend. Clean structure from Thursday gives the stronger move room to extend into the close. A choppier setup, and the lack of a forcing function means any lingering uncertainty gets worked out through range exploration rather than a clean breakout. Keep your levels defined, stay reactive, and let the price action make the case rather than betting on a catalyst that isn't coming.
Market Sentiment and Key Levels
The directional bias today tilts meaningfully bearish, with the bears clearly holding the upper hand after a broad selloff that hit every major index and sent the VIX surging 17.73% to 19.59. That kind of spike in the fear gauge isn't noise — it's the market pricing in genuine uncertainty, and a VIX pushing toward 20 historically signals that volatility is becoming a headwind in its own right. SPY's -1.22% decline on near-average volume of 49.70M shares gives this move more credibility than a low-volume drift lower would. This wasn't a quiet bleed — it was a purposeful selloff with participation behind it.
Key resistance now sits at $742.56, today's session high, and reclaiming that level with conviction would be the first step toward stabilizing the tape. Above there, $744 and then $747 come back into play, but the bulls have some work to do before those levels are relevant. On the downside, $735.21 — today's intraday low — is the line in the sand. A clean break below that level would leave SPY exposed to a fast move toward $732 and potentially $730, which could accelerate selling if momentum traders pile on. The Nasdaq's -2.15% drop is the most concerning piece of the puzzle today, as tech leadership breaking down tends to drag the broader market with it. Gold pulling back -2.27% to $4,053 alongside equities selling off suggests this isn't a simple flight-to-safety rotation — something more macro-driven appears to be spooking investors across asset classes. Rising yields and elevated energy prices are adding pressure at the margin, squeezing the valuation argument for equities. The bears have a real edge here, and the burden of proof is squarely on the bulls to defend that $735.21 floor going into the next session.
Expected Price Action
Friday's session presents actionable intelligence generated by our AI model, with SPY projected to trade within a range defined by $734 on the downside and $753 as the max upside target. That nineteen-point window signals the market will trend rather than consolidate, and with Thursday's close at $738.30 sitting near the lower end of the expected move, the bias leans bearish heading into Friday's open — sellers maintained control through the session and the burden falls on bulls to reclaim key levels before any real repair can begin.
The defining level to watch Friday is $745 — that's the immediate gate above and the heaviest negative gamma strike, meaning clearing it is the first requirement for any meaningful recovery. Above $745, the model puts $747 in the crosshairs, followed by $749 where gamma finally flips positive and buyers regain a genuine tailwind. Reclaiming $749 and holding it would be the tone-shifter, with $750 serving as the critical round-number pivot and $752 carrying the heaviest call interest. The $753 level caps the expected move top as the max upside ceiling. On the downside, $740 is the major battleground — that round-number level holds a substantial put wall and sits inside deep negative gamma territory, making it the line between an orderly pullback and a faster, more painful leg lower. Below $740, $736 is the point of last hope with another put wall stacked there, and $734 marks the absolute bottom of the expected move. With the VIX surging to 19.59 and put-dominated conditions in place, negative gamma can cascade quickly — if $740 fails to hold early, expect minimal cushion and a fast test of $736, and bears will be firmly in control until $749 is reclaimed with conviction.
Trading Strategy
The VIX surging 17.73% to 19.59 is a clear warning shot — volatility is expanding meaningfully, and that changes the risk calculus for active traders. A move toward 20 puts the market in a zone where uncertainty is being priced more aggressively, and holding just below that level means the next catalyst could push it higher in a hurry. Position sizing should be pulled back to the 60-65% of normal exposure range given the elevated volatility environment, and stop-losses should be widened to the 2-2.25% range from entry to avoid getting shaken out by the increased intraday swings that come with a VIX near 20. This is not a tape that rewards overcommitment — patience and confirmation are essential before pressing either direction with size.
Short setups carry the edge in this environment given the heavy selling and broad weakness across the tape. The $742.56 session high is your primary resistance reference — any bounce back toward the $741-742 zone on weak breadth and fading momentum is a clean short entry targeting $738 first and then $735-736 on follow-through. In a falling market scenario, a decisive break below $735.21 opens the door to further downside, with short entries targeting $732 initially and $729-730 on an extended decline. Stops on short trades should be placed firmly above $743 to keep risk clearly defined and prevent a sharp short-covering rally from running the position.
Long setups are lower probability here but still worth mapping out. In a rising market scenario, a clean hold and reclaim of $740 on improving breadth with the VIX pulling back below 19 sets up a long entry targeting $742 first and then $744-745 on sustained buying pressure. A more conservative long trigger would be a confirmed bounce off the $735-736 support zone with clear demand stepping in, targeting $738 and then $741 on follow-through. Stops on longs belong below $734 to protect against the selling accelerating. With VIX at 19.59, conditions are tense — trigger on confirmation only, respect the elevated risk environment, size down accordingly, and honor your stops without hesitation.
Model’s Projected Range
SPY's projected maximum range for Friday is $731 to $747, with the Put side dominating in an expanding band that suggests trending price action with intermittent chop. Friday brings no economic news due out so the market will trade on technicals. SPY closed at $738.30, down 1.22%, after opening at $739.37, tagging a high of $742.56, and sliding to a low of $735.21 before settling near the middle of that range — a session that showed sellers in control but without a complete breakdown. SPY remains in the $735 to $740 range that has defined recent trading, with ongoing trade policy uncertainty continuing to weigh on sentiment and keeping bulls on defense. Our model shows first resistance at $740, and if that level breaks, price targets $745 next — on the downside, first support sits at $735, and a break there opens the door to $731. If that lower support gives way, there is little to keep price from falling toward $730 and the $725 area beyond it. The long-term bull trend remains intact above $640 with SPY well above structural support. As long as price holds above key structural levels, this remains a broader dip-buying environment. Absent a catalyst, resistance sits at $740, $745, $746, $747, while support rests at $735, $731, $730, $725. We favor shorting rallies near $740 given that SPY closed below that level and the Put side is in control of the range. Bitcoin closed above $64,877, falling 1.85% on the session, while MAG stocks posted a mostly red day led by Tesla cratering 14.52% — sustained weakness across both leadership groups would be required to signal a deeper pullback. The VIX closed at 19.59, up 17.73%, suggesting elevated fear given the broad selling pressure and Tesla's sharp decline dragging on sentiment. SPY closed near the lower portion of its trend channel, with structural support near $735 keeping price from a more decisive breakdown heading into the weekend.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI ended in a Bearish Trending Market State with SPY closing at $738.30. Since SPY closed well below MSI support, that former support level at $743.84 now flips to act as resistance heading into Friday, with $744.44 as the additional resistance above. The MSI width remains very narrow at $0.60, and that extremely tight spread signals consolidation within a bearish structure rather than a market with strong trending conviction. Extended targets were not printing at the close, which is a meaningful detail that reduces the urgency of the bearish case heading into the next session. Extended targets did print below during the AM session and again during the PM session, driving the bulk of Thursday's selling pressure, but their absence into the close suggests the bears may be losing steam. The MSI rescaled lower overnight into a very narrow ranging state, and then again lower roughly two hours before the open into a very narrow bearish state with extended targets printing below. Those targets persisted virtually all day, pushing SPY down to $735 before a hard bounce off the lows brought price back toward the close. SPY still finished down 1.22% on the session. Critically, the MSI did not continue to rescale lower as the day progressed, and extended targets stopped printing into the close. In a truly strong bearish trend, the MSI would be expected to continue rescaling lower with persistence — the fact that it did not implies the probability that SPY may reverse course on Friday and trade higher. This looks more like a one-day flush than the beginning of a sustained downtrend, and any overnight rescaling will go a long way toward confirming or denying that read. The MSI is forecasting a Friday that is likely sideways to possibly up, as the narrow bearish spread suggests consolidation rather than strong trending continuation. That said, the bears are likely to maintain some downside pressure, and any failure of resistance could see SPY retest the day's lows. MSI support is $743.84 with resistance at $744.44.
Key Levels and Market Movements:
Wednesday we stated, "the bulls need to hold $746.24 overnight to keep the momentum case alive, while any failure of that level would be an early warning that the consolidation is leaning toward the downside and a retest of the day's lows could be in store," and added, "bears want to see $746.24 fail — a clean break below that level with the MSI rescaling into a Bearish Trending state and extended targets printing below would shift the tone quickly, bringing $745.06 into view as the next meaningful target," while also noting, "the most productive approach on Thursday is staying reactive to what the MSI communicates in real time rather than committing to a directional bias before the session begins."
That read proved accurate as Thursday delivered a clean and readable bearish session from the opening bell. The MSI had already rescaled lower overnight and was sitting in a narrow bearish state with extended targets printing below before the regular session even began, giving traders an early heads-up that the bears were in control. SPY opened at $739.37 and wasted little time pushing lower as the MSI rescaled several times through the AM session, each rescale confirming that the herd was actively moving price down. Extended targets continued to print below through the PM session as well, providing sustained directional clarity and keeping the short bias firmly intact for most of the day. SPY eventually bottomed at $735.21 before mounting a sharp recovery into the close, finishing at $738.30, down 1.22% on the session. The VIX surged 17.73% to 19.59, a meaningful spike that reflects a market repricing risk in a hurry. Volume came in at 49.70 million shares, near average, suggesting the selling was orderly rather than panicked, which is consistent with a trend-driven move guided by extended targets rather than an indiscriminate flush.
The session offered a clear and well-defined setup for traders following the framework. With the MSI in a Bearish Trending state and extended targets printing below from the early going, the primary strategy was to sell rallies to MSI resistance-turned-support at $743.84, targeting premarket levels below as price had already broken beneath the MSI range. That setup paid off cleanly as SPY pressed steadily lower through the AM and PM sessions with the MSI confirming directional control throughout. The hard bounce off the $735 low into the close, combined with extended targets stopping below, also offered a secondary long opportunity for traders who recognized the potential for a failed breakdown to spark a mean reversion move. At minimum it was a 1-for-1 session for traders following the framework. It was an easy day to read and execute with substantial setups, all identified through proper context, patience, and flexibility while leveraging the MSI, premarket levels, and market structure rather than forcing trades. The MSI continues to prove its reliability as the cornerstone of our trading process.
Trading Strategy Based on MSI:
Friday has light economic news so the market is likely to move more sideways than trend given the Bearish Trending at the close. But with such a narrow range it is also likely the MSI rescales overnight and a short squeeze ensues which will push price back to test higher levels. The same extremely tight $0.60 spread that defined Thursday's close signals a market that is coiling rather than collapsing, and the absence of extended targets into the close reinforces the idea that the bears have not yet proven they can sustain this move. The hard bounce off the $735 low is worth respecting — markets that recover that sharply from intraday lows often have unfinished business to the upside the following session. Any overnight rescaling will be the clearest signal of what Friday intends to deliver.
Heading into Friday the MSI closed in a Bearish Trending state with a very narrow $0.60 spread and no extended targets printing at the close. Former support at $743.84 now acts as resistance, with $744.44 as the additional resistance layer above. These are the levels that matter most heading into Friday's session. The narrow MSI width means a rescale in either direction remains entirely possible overnight, and traders should monitor the premarket session closely for any shift in state that could change the character of Friday's open. The bears need to see $743.84 hold as resistance to maintain any hope of retesting Thursday's lows, while the bulls need to reclaim that level with conviction to shift the tone back toward the upside.
Bulls want to see price push back above $743.84 overnight and hold it as support, using it as a launching pad toward $744.44 and potentially higher premarket levels above. If the MSI rescales higher overnight into a Ranging or Bullish Trending state, the strategy is to buy dips toward $743.84 as support and target premarket levels above, accepting that any recovery may be grinding given the weight of the prior day's selling. Bears want to see $743.84 continue to act as resistance and cap any overnight recovery attempts. A rejection at that level with the MSI remaining in a Bearish Trending state and extended targets resuming below would set up a retest of Thursday's low at $735.21 as the next meaningful downside target. Given the narrow range and the sharp intraday recovery that preceded the close, any continuation lower will need to be confirmed by the MSI before treating it as a genuine directional move rather than noise.
Within the session, the core strategy is to sell rallies to $743.84 as long as the MSI holds in a Bearish Trending state, targeting premarket levels below as the primary objective. If price reclaims $743.84 and the MSI rescales higher, that flip is the signal to shift approach and buy dips toward $743.84 as support targeting $744.44 above and eventually higher premarket levels. A failed breakdown attempt where price dips toward Thursday's lows but reverses with extended targets stopping below is also a high-probability long setup if that situation develops. The narrow MSI width means both directions are genuinely in play on Friday, and the most productive approach is staying reactive to what the MSI communicates in real time rather than committing to a directional conviction before the session begins.
The long-term bull trend remains intact above $640 and failed breakouts and failed breakdowns continue to offer the highest-probability setups. Remain flexible, avoid trading during Ranging Market States unless a clear failed breakout or breakdown presents itself, 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 $746 to $775 and higher strike Calls while buying $739 to $745 Calls, indicating the Dealers' desire to participate in any rally on Friday, as they appear to be anticipating a short squeeze that could push prices back above the 50 DMA. The ceiling for Friday appears to be $758, and once SPY breaks above $746, there is little standing in the way of a move meaningfully higher. Dealers did not add to their protection today, though they remain heavily hedged for any eventuality, with below $745 being bearish and above $746 being bullish. To the downside, Dealers are buying $738 to $676 and lower strike Puts in a 4:1 ratio to the Calls they're selling, displaying significant concern that prices could move lower, though a heavy wall of support at $740 and $735 should help cushion any decline. Dealer positioning is unchanged at neutral/slightly bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $751 to $782 and higher strike Calls while buying $739 to $750 Calls, indicating the Dealers' desire to participate in any rally next week, as they are buying large quantities of ATM Calls even as they remain heavily hedged heading into earnings season. The ceiling for next week appears to be $755, though a wall of resistance above $751 will slow any meaningful ascent before prices reach that level. Traders should remain bullish above $751, but below $747 the bias shifts bearish, with support sitting at $743 and again at $740 if the market loses ground. To the downside, Dealers are buying $738 to $680 and lower strike Puts in a 4:1 ratio to the Calls they're selling, displaying notable concern that prices could move lower, though Dealers have not increased their protection meaningfully in recent sessions. For the week Dealer positioning is unchanged at 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 closed at $738.30 with the VIX surging 17.73% to 19.59 — that's a fear spike worth respecting. Favor the short side on any failed bounce toward $742, and keep stops tight above $742.56. A break below $735.21 opens the door to further downside. Don't force longs here until price stabilizes and VIX starts cooling off.
With elevated volatility and broad-based selling across indices, cut position size and stay disciplined — this is not a tape to overtrade. Review the premarket analysis posted before 9 AM ET for any changes in the model's outlook and Dealer Positioning.
Good luck and good trading!
