Market Insights: Thursday, July 7th, 2025

Market Overview

Markets reversed course Monday as President Trump reignited trade tensions with a barrage of tariff threats aimed at several U.S. trading partners, unsettling investors and halting the rally that had propelled equities to record highs last week. Stocks sold off broadly after Trump posted letters to social media detailing plans to impose 25% tariffs on imports from Japan and South Korea starting August 1. The move follows recent warnings from the White House and appears to mark the start of a more aggressive trade posture. The Dow dropped over 400 points, or nearly 1%, while the S&P 500 fell 0.8% and the Nasdaq lost 0.9%, pressured by tech weakness and rising geopolitical risk.

Adding to concerns, Trump sent additional letters to leaders in countries including South Africa and Malaysia outlining potential tariffs ranging from 25% to 40%. He also issued a stern warning late Sunday that any country aligning with the BRICS bloc or endorsing “anti-American” policies would face an automatic 10% tariff hike. These actions spurred anxiety ahead of the July 9 deadline when the administration’s pause on tariffs imposed in April is set to expire. While some deals have been reached with the UK, Vietnam, and potentially China, most countries remain in limbo, heightening the risk of a wider trade war. Meanwhile, markets are bracing for a return to earnings season later this week, with Delta set to kick things off Thursday, adding another potential catalyst to the week’s volatile setup.

SPY Performance

SPY dropped 0.73% on Monday to close at $620.78, falling from an open of $623.37 and dipping as low as $617.87 before staging a modest late-day recovery. Volume surged to 70.03 million shares, well above average and a clear sign of institutional repositioning as trade fears rattled sentiment. After spending nearly two weeks in a tight bullish channel, SPY finally broke lower, underscoring the significance of the tariff headlines and setting the stage for a test of deeper support levels if macro risks persist.

Major Indices Performance

The Russell 2000 led Monday’s declines, tumbling 1.48% as small caps were hit hardest by rising global uncertainty. The Nasdaq lost 0.92%, weighed down by tech weakness, while the Dow shed 0.94%, dropping more than 400 points amid concerns over a potential breakdown in global trade negotiations. The S&P 500 slipped 0.8%, ending a three-day record streak. Broad-based selling was driven by concerns that escalating trade measures could derail earnings forecasts and global growth expectations. Defensive sectors held up slightly better but still ended in the red as traders shifted into risk-off mode.

Notable Stock Movements

The Magnificent Seven all closed in the red Monday, with Tesla leading the downside after falling more than 6.8% amid renewed investor anxiety over Elon Musk’s reported plan to launch a political party. Apple and Alphabet also posted sharp declines, each down more than 1.5%. Amazon was the lone outlier, ending essentially unchanged despite the broader pullback. The sharp drawdown in leading names highlights growing unease in the tech sector and the market’s sensitivity to both macro headlines and leadership volatility.

Commodity and Cryptocurrency Updates

Crude oil climbed 2.38% to $68.10 despite broader equity weakness, defying recent bearish trends. While our model continues to anticipate a move toward $60 later this year, oil’s near-term bounce reflects geopolitical hedging amid tariff-related tensions. Gold was flat, inching down just 0.01% to $3,346 as traders weighed risk-off demand against rising yields. Bitcoin slipped 0.54% to close just above $108,000, continuing to hold above long-term buy zones despite increased volatility and a softer risk appetite.

Treasury Yield Information

The 10-year Treasury yield rose 1.58% to close at 4.384%, extending its move toward the 4.5% mark, a key level that could begin to pressure equities if breached. Monday’s uptick reflects rising uncertainty around fiscal policy and inflation, particularly as tariffs risk pushing prices higher. While yields remain manageable for now, a continued climb above 4.5% would raise concerns about equity valuations. Traders should monitor yields closely, especially with the FOMC minutes on deck later this week.

Previous Day’s Forecast Analysis

Friday’s forecast projected SPY to trade between $619.50 and $632, identifying a bullish bias above $620 with resistance at $628, $630, and $635. The strategy emphasized favoring long trades near support at $620 and $622, with the model expecting any dip to be bought unless a macro shock materialized. A drop below $620 was noted as a potential trigger for downside toward $615 or even $610, though broader sentiment was expected to remain constructive unless SPY broke below $600.

Market Performance vs. Forecast

SPY’s Monday performance fell largely in line with the forecasted range but broke slightly below key support as unexpected tariff headlines fueled sharp selling. The ETF opened at $623.37 and briefly pushed toward $624 before reversing, slicing through the $620 level and hitting a low of $617.87. While the model identified $620 as a pivotal support, the break below—on high volume—signaled a deviation from the expected bullish continuation. That said, the broader forecast acknowledged that geopolitical catalysts could derail the uptrend, which is exactly what played out. The model’s lower support levels at $615 and $610 are now back in focus for potential buy setups if weakness persists.

Premarket Analysis Summary

In Monday’s premarket analysis posted at 8:52 AM, SPY was trading at $623.94 with a key bias level set at $625. The outlook expected early choppiness due to lingering uncertainty around macro catalysts. The strategy leaned bearish under $625, favoring short entries targeting $621 and potentially $618. The only long trades advised were contingent on a break and hold above the bias level or a strong bounce near lower support. The analysis warned that rallies under $625 were likely to be sold unless accompanied by significant volume, and projected a possible run to $630 later in the week if bulls could reclaim control.

Validation of the Analysis

Monday’s price action validated the premarket analysis nearly point for point. SPY never managed to reclaim the $625 bias level, opening below and failing to generate any sustainable upward momentum. Instead, the ETF traded lower almost immediately, slicing through the $621 and $618 downside targets with conviction before stabilizing near $620 late in the session. The analysis correctly favored short trades under $625 and warned that long setups would be difficult without volume and confirmation. Traders who used the roadmap were well-positioned to capitalize on the reversal, reinforcing the accuracy and value of the premarket insights.

Looking Ahead

Tuesday brings a pause in economic data, giving traders room to digest Monday’s tariff-related developments. However, Wednesday’s release of the FOMC minutes and Thursday’s jobless claims report are likely to inject fresh volatility into the market. Until then, geopolitical headlines will remain the primary driver of sentiment, and traders should be prepared for sudden moves on trade updates or Fed commentary. With no catalysts on deck tomorrow, technical levels and macro news will dictate price action.

Market Sentiment and Key Levels

SPY closed Monday at $620.78, marking a clear break of its bullish micro channel and signaling a potential shift in momentum. Market sentiment has turned cautious following the reemergence of trade risks, though the broader uptrend remains intact above $600. Resistance now comes in at $623, followed by a dense band between $627 and $630. Support levels sit at $618, $615, $612, and $610. Bulls will need to defend $618 to avoid deeper pullbacks, while bears will press their case if price slips toward $615. A break above $627 would reopen the door for upside continuation, but headwinds remain until clarity returns on trade and Fed policy.

Expected Price Action

Our AI model projects SPY to trade between $614 and $625.50 on Tuesday, reflecting a slightly compressed range following Monday’s high-volume selloff. This range suggests choppy, two-way action with resistance capping upside attempts unless new bullish catalysts emerge. The market bias has turned neutral to slightly bearish, with short setups favored on rallies below $623 and long trades preferred only on clean bounces near $615 or $610. If SPY breaks below $614, we could see downside extend toward $610 or $608. Conversely, reclaiming $625 could spark a push to $627 or $630. This is actionable intelligence; traders should expect price swings to remain sharp as the market processes macro risks and sets up for midweek catalysts.

Trading Strategy

Traders should now approach the market with greater caution. Long trades can be considered near support at $618, $615, and $610, targeting moves back toward $623 or $627. However, confirmation is needed. Traders should wait for signs of stabilization before entering. Short trades remain viable on failed rallies into resistance at $623, $627, or $630. Stop-losses should be kept tight, especially with volatility on the rise and the VIX jumping to 17.79, signaling increased risk. This is no time for overexposure. Smaller position sizes and nimble execution are key. As always, trade what you see, not what you hope for, and be ready to shift bias quickly based on price reaction at the key levels.

Model’s Projected Range

The model projects SPY’s maximum range for Tuesday between $614 and $625.50 with the Put side dominating within an expanding but narrow range, suggesting choppy price action interspersed with occasional trending moves. Today’s session reflected ongoing concerns over potential tariffs following White House comments on new trade measures. The ten-day extended bull micro channel finally broke down, with price retracing 75 basis points to close at $620.68 on above-average volume, reinforcing the significance of the decline. The market gapped down overnight amid weekend tariff headlines and, after a brief rally toward $625, fell through major support at $618 before bouncing modestly to close just above $620. Despite these uncertainties, the broader uptrend remains intact as long as SPY holds above $585. On Tuesday, bulls will aim to defend the $618 level to support another move higher; failure to hold this could lead to a pullback toward $615, with $610 in play below that. Meaningful downside appears unlikely unless SPY breaks below $600, which could quickly usher in a drop to $585. Our model does not see this as a high-probability outcome, but given the potential for tariffs to destabilize markets, traders should remain flexible and ready to respond. Without a major catalyst, our model anticipates that dips toward $618 will be bought and the market will grind higher. Still, a failure at $618 opens the path to $615, and we are inclined to buy all the way down to $600. Below that, we shift to a bearish stance targeting $585. Resistance is at $623, $627–$628, and $630, while support lies at $616, $615, $612, and $610. SPY remains just above the lower boundary of the redrawn bull channel from the April lows, with dense resistance between $627 and $630 likely to impede upside momentum. A break below $610 could trigger more material downside risk. Overall, market direction remains highly sensitive to macroeconomic indicators, bond yields, inflation data, tariffs, and fiscal policy. Meanwhile, the VIX rose 1.77% to 17.79, still consistent with a risk-on tone, though caution is warranted. At these levels, considering out-of-the-money Calls 90 days out may be wise, as traders should stay nimble in anticipation of potential volatility.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI is currently in a very narrow Bullish Trending Market State, with SPY closing above MSI resistance turned support. There were no extended at the close or for then entire day session as the MSI remained in a very narrow bullish state all day, with only a brief rescale to a bearish state after 2 pm. This is indicative of the strength of the ten-day micro channel. While this failed today, it was strong enough to keep the MSI from rescaling to a bearish state, even after a .75% decline. The MSI is so narrow however that it is highly likely the MSI rescales overnight or in the am. Currently MSI support stands at $619.16 and lower at $618.82.
Key Levels and Market Movements:
On Thursday, we noted: “With a long weekend ahead, market movement could be unpredictable. As we approach the July 9th tariff deadline, we advise caution, particularly given the parabolic rally.” We also recommended: “With protection still relatively inexpensive, all long books should consider purchasing 90-day OTM VIX Calls,” and added, “While external risks, such as tariff headlines, could shift sentiment, holding $620 keeps the door open for a continued move higher. A break below $620 could prompt a test of $615.” With this actionable roadmap in hand and SPY opening above $623, well above MSI support, there was little to do initially but wait for a setup favoring the short side, particularly in light of weekend tariff headlines and the market's reaction to the news. A head and shoulders pattern formed before 10 AM, accompanied by a narrow bullish MSI without any extended targets so we initiated a short at $623, targeting the premarket level of $621. That level was hit just after noon, prompting us to set T2 at MSI support near $619. That target was reached midafternoon, and we trailed the remaining 10% of the position with an eye toward the premarket level of $618. At 2:20 PM, price tagged $618. With MSI rescaling to a very narrow bearish state and no extended downside targets, we exited the short and reversed long on a textbook failed breakdown at that level. We set T1 at MSI resistance of $619.17 with T2 at the premarket level of $621. In the final minutes of the session, price popped, and we exited our remaining 30% just shy of $621, going two for two on the day, with one large, short winner and a countertrend long scalp. Once again, this performance underscored the value of a consistent daily plan, disciplined execution, and the strategic use of MSI for directional clarity, timing, and actionable levels. Integrated into our broader framework and model levels, MSI remains indispensable for consistent trading performance.
Trading Strategy Based on MSI:
Tuesday brings no scheduled economic news, but with tariff talk dominating the narrative, traders should stay alert to headlines, as market movement could remain unpredictable. We previously advised caution ahead of the July 9th tariff deadline, and now with August 1st emerging as the latest drop-dead date for negotiations, July could see a more significant pullback as this risk overhang persists. Given the parabolic rally which finally paused today after ten strong green sessions, caution is warranted. With protection still relatively inexpensive, we recommend all long books consider purchasing 90-day OTM VIX calls as a hedge against potential summer volatility. In the absence of a macro catalyst, the market is likely to retest today’s lows at $618, where bulls are expected to step in once again. However, if $618 gives way, $615 could be tested quickly. Repeated tests of these levels weaken their support, increasing the likelihood of a breakdown. A decisive break below $615 could bring $600 into play, below which we would shift exclusively to short setups. Until then, we expect buyers to continue supporting dips. This outlook, however, could shift rapidly on new negative headlines out of the White House. If these levels hold, the market could resume its upward grind toward $635. With the MSI currently in a very narrow bullish state, a retest of today’s lows seems likely, but the overall trend remains intact. 75 basis points of downside is not enough to reverse it. Bulls remain in control and will likely use any pullback as a liquidity opportunity. While volume was higher than average, it was not alarmingly so. For bears to gain real traction, a break below $600 would be required. A close above $625, on the other hand, would strengthen the case for a move toward $630 and new highs. We continue to favor long setups above $615, while short opportunities may emerge above $620 or on failed breakouts and breakdowns below $615 especially when MSI signals weakening market conditions. As always, failed moves remain among the highest-quality setups. Stay nimble, avoid trades during Ranging Market States, and ensure full alignment with MSI. Providing real-time insights into market control, momentum shifts, and actionable levels, the MSI when integrated with our Pre-Market and Post-Market Reports continues to sharpen execution precision and elevate trade quality. If you haven’t yet integrated MSI and our model levels into your process, now is the time. Contact your representative to get started as these tools are designed to support consistency and enhance performance.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling SPY $627 to $640 and higher strike Calls while also buying $621 to $626 Calls, indicating the Dealers desire to participate in any rally on Tuesday. Dealers are no longer selling close to the money Puts. The ceiling for Monday appears to be $630. To the downside, Dealers are buying $620 to $586 and lower strike Puts in a 2:1 ratio to the Calls they’re selling/buying implying little concern that prices will continue to move lower on Tuesday. Dealer positioning has changed from neutral/very slightly bearish to neutral.   
Looking Ahead to Friday:
Dealers are selling SPY $621 to $640 and higher strike Calls while also selling $615 Puts, indicating the Dealers belief that prices will likely to move higher this week, or at a minimum, not fall beyond $615. The likely ceiling for the week is currently $630. To the downside, Dealers are buying $620 to $579 and lower strike Puts in a 3:1 ratio to the Calls/Puts they’re selling, reflecting a slightly bearish outlook for the week. Dealer positioning has changed from 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

With SPY breaking below key support and ending Monday’s session at $620.78, traders should remain cautious but alert for fresh setups. Long trades near $618 and $615 may offer strong risk-reward profiles if buyers return. However, confirmation is key. Look for failed breakdowns or strong intraday reversals before entering. Short trades can be considered on weak rallies toward $623 or $627, but only with signs of rejection. With VIX up to 17.79, volatility is back slightly, and stops should be tight. Be selective and protect capital until directional clarity returns. As always, 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!