Market Insights: Tuesday, August 19th, 2025
Market Overview
US stocks finished broadly lower Tuesday as weakness in Big Tech dragged down the major indexes, leaving investors cautious ahead of Wednesday’s FOMC minutes and Friday’s speech from Fed Chair Jerome Powell. The Nasdaq led the downside with a sharp 1.5% drop, weighed heavily by a 9% plunge in Palantir and a more than 5% slide in AMD. Nvidia also fell over 3%, extending the losses across the semiconductor space. While the S&P 500 lost about 0.6%, the Dow managed to close just slightly above the flatline.
Leadership in the market appears to be shifting. After a summer rally driven by a few large-cap tech names, breadth is starting to improve, with health care, homebuilders, and mid-cap stocks contributing more meaningfully. Defensive sectors outperformed on Tuesday, with Real Estate, Consumer Staples, Utilities, and Health Care showing relative strength amid the broader decline.
Home Depot kicked off retail earnings with a mixed report, missing estimates but offering encouraging signs as US same-store sales returned to growth. The stock rose 3% on hopes that housing sector softness may be easing. Target and Walmart will follow with earnings on Wednesday and Thursday, offering deeper insight into consumer trends as the impact of Trump’s tariffs continues to ripple through supply chains.
Intel, meanwhile, gained on news that SoftBank is taking a $2 billion stake in the chipmaker, helping offset investor unease following reports that the Trump administration may also pursue a 10% ownership stake. In geopolitics, markets digested developments from President Trump’s renewed push for talks between Ukraine and Russia. A reported ask for Putin to meet with Zelensky has drawn global attention, keeping geopolitical tensions on the radar and contributing to a risk-off tone across markets.
SPY Performance
SPY fell 0.54% to close at $639.81, losing ground after opening at $643.12 and briefly testing a high of $644.11. Sellers eventually took control, dragging the ETF down to an intraday low of $638.48 on rising volume of 62.89 million shares, well above Monday’s total. The decisive close beneath $640 marked a meaningful break of short-term support and suggested mounting downside pressure after several sessions of tight-range trading.
Major Indices Performance
The Dow eked out a small 0.02% gain, resisting the broader market pullback thanks to strength in defensive sectors and a 3% pop in Home Depot. The Russell 2000 dropped 0.77%, underperforming again as small caps remain sensitive to macro and rate expectations. The S&P 500 slid 0.6%, while the Nasdaq plunged 1.46%, its worst single-day drop in weeks, as losses in chip and AI stocks intensified. Health Care and Utilities outperformed, underscoring the defensive tilt of Tuesday’s action, while Tech bore the brunt of the selling.
Notable Stock Movements
It was a red day across the board for the Magnificent Seven, with Nvidia leading the losses after falling more than 3%, followed by significant declines in AMD and Palantir. The selling in tech suggests traders are lightening up ahead of macro catalysts. Even recent outperformers like Amazon and Tesla succumbed to the broad weakness, as sector rotation accelerated and profit-taking set in. Intel bucked the trend with modest gains on SoftBank’s strategic investment, though overall sentiment in chips remained negative.
Commodity and Cryptocurrency Updates
Crude oil declined 1.07% to settle at $62.03, continuing its slow grind toward the model’s long-standing $60 target. Gold also slipped 0.55% to close at $3,360, reflecting soft demand for hedges amid low equity volatility but persistent rate risk. Bitcoin dropped 2.60% to finish just above $113,380 as crypto markets remained under pressure, tracking broader risk-off behavior. The overall action in commodities and crypto reflects defensive positioning and a lack of clear conviction.
Treasury Yield Information
The 10-year Treasury yield dipped 0.67% to close at 4.311%, retreating modestly from last week’s high. While still comfortably below the red-alert threshold of 4.5%, the downshift offers some short-term relief for equity bulls. But with Friday’s Fed commentary looming, bond markets are bracing for renewed volatility. A surge above 4.8% remains the key line to watch, as it would likely trigger a deeper correction in risk assets, with 5.2% potentially leading to a drawdown of 20% or more.
Previous Day’s Forecast Analysis
Monday’s forecast called for SPY to trade between $638.50 and $647, with a bullish bias above $641.90. Upside targets were listed at $645 and $648.35, while downside levels included $640 and $638.40. The strategy favored long trades near $641 and $640, while shorts were recommended below $640 or on failed breakouts above resistance. The model anticipated choppy consolidation and brief momentum surges, all driven by positioning ahead of key macro news midweek.
Market Performance vs. Forecast
SPY opened at $643.12, rallied to $644.11, and then reversed into a daylong selloff, falling to $638.48 before closing at $639.81. The ETF stayed mostly within the projected range, though the final break below $640 confirmed the shift in tone. The long trades above $641.90 early in the session offered little follow-through, while the short setups below $641 and especially under $640 worked best. The decisive move through key support confirmed the model’s warning of fading momentum and set the tone for a more bearish bias into Wednesday.
Premarket Analysis Summary
In today’s premarket analysis posted at 7:04 AM, SPY was trading at $642.81 with a key bias level identified at $643.35. The model leaned bearish beneath this level, favoring short entries toward $641.85 and extended downside targets as low as $638.35. Upside targets of $644.35 and $645 were only to be considered if SPY broke above the bias. Without a strong external driver, the ceiling was expected to remain low and the strategy focused on selling rallies.
Validation of the Analysis
Tuesday’s price action aligned closely with the premarket outlook. SPY failed to reclaim the $643.35 bias level and reversed early gains to fall steadily throughout the day. The model’s first downside target of $641.85 was hit by late morning, and the decline extended nearly to the projected $638.35 level. Traders who followed the guidance to favor shorts below the bias had multiple opportunities to profit from the breakdown. Once again, the premarket levels proved accurate and actionable, reinforcing their value in navigating uncertain sessions.
Looking Ahead
Wednesday brings the release of the July FOMC minutes, a key market-moving event that could reshape expectations for interest rate policy heading into Powell’s Friday address. Traders will be listening closely for any language that hints at inflation concerns or a timeline for potential cuts. Target’s earnings before the bell will also provide fresh insight into consumer sentiment. Volatility may pick up as markets begin to react to policy signals and shifting positioning.
Market Sentiment and Key Levels
SPY closed at $639.81, settling just below the key support level of $640 and signaling increased vulnerability heading into midweek catalysts. While bulls have repeatedly defended this area, the close beneath it gives bears the edge, at least temporarily. Major support now rests at $638 and $636, while overhead resistance sits at $642, $645, and $648. The break of $638 could trigger further downside if not quickly reclaimed, while a move back above $642 would be needed to restore bullish momentum. The broader tone has shifted toward caution, and market leadership is beginning to fracture.
Expected Price Action
Our AI model projects SPY to trade between $636 and $643 on Wednesday, signaling a wider range with potential for trending moves. The bias has shifted cautiously bearish beneath $640, with downside targets at $638 and $636. A break below $636 could bring $632–$630 into view. If bulls reclaim $640 and hold above $642, resistance levels at $645 and $648 may be tested, though sustained upside is unlikely without support from macro catalysts. This forecast is actionable intelligence, helping traders plan for failed bounces and directional breakouts around key inflection zones.
Trading Strategy
With SPY closing below $640 and the VIX rising 3.54% to 15.49, traders should lean toward short setups on weak rallies into resistance at $640 and $642. If the market bounces early, those levels offer ideal areas to initiate short trades with targets at $638 and $636. Long trades should be considered if SPY reclaims $642 with strength, aiming for quick gains at $645 and $648.35, or on a failed breakdown below $638. Volatility is picking up, so traders should tighten stops and reduce size. Stay nimble, especially into and out of FOMC minutes and Powell’s Friday speech.
Model’s Projected Range
The model projects SPY’s maximum range for Wednesday between $634 and $644, with the Put side dominating in an expanding band that suggested consolidation with periods of trending moves. After drifting slightly lower overnight, SPY opened with a successful test of the $642 level that briefly propelled prices to the day’s highs before reversing into a steady selloff. Beginning after 10 a.m., the selloff lasted nearly the entire day, breaking through major support levels as repeated tests of $642 exhausted liquidity, a common dynamic that ultimately saw this level give way with price falling sharply to intraday lows of $638.48. A late afternoon rally attempt lifted SPY from the lows but failed to regain momentum, and the close below $640 left bears encouraged by the day’s 55 bps decline and rising volume that confirmed the move. Heading into the next session, bulls will attempt to defend the $638 level. A failure there could open the door to $636 and potentially $632–$630. A successful defense could push SPY back toward $642, with resistance expected at $640, $645, and $648, where supply may cap further gains. Since reclaiming $585, SPY has remained in a persistent uptrend with dip buyers stepping in almost every time, but today’s weakness in the “Mag” stocks, led by Nvidia down more than 3%, is the type of action bears want to see if a more significant selloff is to develop. We continue to view the parabolic advance as high risk and low reward, favoring quick profit-taking and avoiding overnight holds, particularly as early signs still point to a potential correction between September and mid-October. The VIX rose 3.54% to 15.49, flashing a warning for bulls, and while volatility below 23 remains broadly supportive of equities, a breakout above that level could spark the widely anticipated 5–10% pullback this fall. Wednesday expect sideways-to-down price action absent an external catalyst such as clarity from the Fed on rate cuts at the upcoming Jackson Hole Symposium. SPY remains in the bull trend channel from the April lows having tested the lower channel today virtually to the penny.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI ended the day in a Bearish Trending Market State, with SPY closing at resistance. There were no extended targets at the close but several printed during the regular session as SPY spent much of the day selling off. But without extended targets and an MSI that did not rescale lower after 1 pm, the MSI is implying sideways to potentially higher prices as the bulls look to hold the $638 level. Overnight the MSI remained in a ranging state until just after the open when the MSI rescaled to a very narrow bullish state. But this did not hold as price fell the rest of the day with the MSI rescaling lower rapidly several times, pushing SPY to the day’s lows. MSI support is currently $638.80 with resistance at $640.13.
Key Levels and Market Movements:
On Monday we wrote, “We expect the market overnight to drift slightly higher without breaching $645 or breaking below $642” and noted, “A break of $642 could trigger a move toward $640 or lower.” We also stated that we favored long setups above $640 and shorts only on a confirmed break below $640 or a failed breakout near $645. With that context, and with the MSI in a Ranging Market State at the open, we waited for a test of either $642 or $645. Within two minutes of the open, SPY tested $642 on a textbook failed breakdown, which had us long at $642.25 with T1 set at the premarket level of $643.35. That target was quickly hit, so we set T2 at MSI resistance at $643.70. Price moved lower first, but MSI support held, and we secured T2 before 10 a.m. With a stop at breakeven, we let our 10% runner trail toward the premarket level of $644.35. SPY got close, but a narrow MSI and a failed breakout had us exit and reverse short at $644. We set T1 at MSI support at $642.93, which was quickly hit, and then T2 at the premarket level of $641.85. The MSI began rescaling lower with extended targets, so we held the position and continued to trail as profits stacked up. By 11 a.m. T2 was in hand, and we allowed the runner to work as the MSI kept rescaling lower. Around 1 p.m. the MSI stopped printing extended targets and settled into a normal range, but instead of exiting we held to see if SPY could reach the premarket level of $638.35. Price rebounded to MSI resistance at $640.13, and although we were tempted to reload short, discipline kept us from pressing our luck. Later in the afternoon, SPY fell below MSI support and printed another failed breakdown, so we exited the trailer at 3 p.m. and called it a day. The result was two-for-two with one clean long and a powerful short, achieved through a clear plan, disciplined execution, and strong alignment between MSI signals, our broader market model, and key technical levels. The MSI continues to be a cornerstone of our consistent trading process.
Trading Strategy Based on MSI:
Wednesday brings the release of FOMC minutes, which could move markets ahead of a busy slate of Fed speakers later this week. Absent such a catalyst, we expect dip buyers to emerge as long as $638 holds, with the expanding range suggesting more trending price action. With a close below $640, the bears are pressing their luck in hopes of breaking $638, and while a move as low as $636 could trap shorts before a bullish reversal, a clean failure of $636 would target $632 and potentially $630. That said, as long as $638, or at worst $636 holds, the bulls are likely to defend support and attempt to reclaim $642, with potential upside toward $645. The overall structure still favors the bulls despite today’s retracement, and overnight we expect either a modest drift higher or a retest of the day’s lows, which we expect to hold, at least on the first attempt. For bears to seize real control, a decisive break below $632 is needed, with $630 as the line that could shift the outlook and raise the risk of a 10% or greater correction. With the MSI now in a Bearish Trending Market State and SPY closing at resistance, we will watch for the MSI to rescale higher as price attempts to repair today’s damage. We continue to favor long setups above $638 while taking shorts on a confirmed break below $636 or a failed breakout near $644. As always, failed moves remain among the highest-probability 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 $645 to $655 and higher strike Calls while buying $640 and $645 Calls indicating the Dealers desire to participate in any rally on Wednesday. The ceiling for tomorrow appears to be $648. To the downside, Dealers are buying $639 to $575 and lower strike Puts in a 4:1 ratio to the Calls they’re selling/buying displaying some concern that prices could move lower on Wednesday. Dealer positioning is unchanged from bearish to bearish.
Looking Ahead to Friday:
Dealers are selling SPY $646 to $665 and higher strike Calls while buying $640 to $645 Calls indicating the Dealers desire to participate in any rally later this week. The ceiling for the week appears to be $650. To the downside, Dealers are buying $639 to $575 and lower strike Puts in a 7:1 ratio to the Calls they’re selling/buying, reflecting a bearish outlook for the week. For the week Dealer positioning is unchanged from bearish to bearish. We advise reviewing Dealer positioning daily for directional clues. These positions evolve quickly and tracking them is essential for staying ahead of shifting market sentiment.
Recommendation for Traders
SPY’s close beneath $640 shifts the tactical edge to bears, and short trades are now favored on weak bounces toward resistance at $640 or $642, with profit targets at $638 and $636. Long trades should be considered on strength above $642 with targets at $645 and $648.35 or on a failed breakdown at or below $638. With the VIX at 15.49, volatility is rising, and traders should remain cautious, reducing size and avoiding overexposure until Powell’s Friday speech. Monitor key levels closely and adjust strategies as momentum shifts. Be sure to review the premarket analysis posted before 9 AM ET to account for any changes in the model’s outlook and Dealer Positioning.
Good luck and good trading!
