Market Insights: Friday, August 1st, 2025
Market Overview
Markets cratered Friday as confidence collapsed under the weight of President Trump’s sweeping tariff escalation and a surprisingly weak July jobs report. The Dow plunged over 500 points, or 1.23%, while the S&P 500 lost 1.62%, marking its worst single-day drop since May. The Nasdaq bore the brunt of the selloff, tumbling 2.24% as tech stocks unraveled. All three indices logged weekly losses exceeding 2%, erasing July’s gains in a matter of hours.
Investors were hit with a one-two punch. First, Trump slapped nearly all major U.S. trading partners—including Canada, Taiwan, and India—with a barrage of tariff hikes. While some deals were brokered before the August 1 “Liberation Day” deadline, the new executive order confirmed sweeping rate increases ranging from 15% to 40%, with a steep 35% levy on Canadian goods taking effect immediately. Then came the labor market shocker: just 73,000 jobs were added in July, far below the 104,000 expected, with previous months revised sharply lower. Unemployment rose to 4.2%, adding fuel to fears that economic momentum is fading. In response, Trump announced he would fire the Bureau of Labor Statistics commissioner, accusing her of political manipulation.
Amid this turmoil, traders ramped up bets on rate cuts, sending the 10-year Treasury yield plunging to 4.22%. But hope was in short supply. Amazon’s earnings, particularly from its AWS unit, disappointed investors and dragged the stock down more than 8%. Apple fared better, posting solid results boosted by strong iPhone sales, though even it couldn’t escape the selling pressure. Markets are now confronting a rapidly shifting macro landscape, and investors are bracing for a volatile start to August.
SPY Performance
SPY fell 1.62% on Friday to close at $621.82, marking a sharp breakdown below key support and cementing the worst session in months. The ETF opened at $626.30 and made a feeble attempt to rally, peaking at $626.34 before plunging to an intraday low of $619.29. Volume exploded to 131.18 million shares—well above average—as traders rushed to reposition amid the macro-driven carnage. After hovering just above critical support early in the session, SPY sliced through $625 and confirmed that the dip-buying impulse has weakened, at least for now.
Major Indices Performance
The Nasdaq led Friday’s declines, falling 2.24% as tech names bore the brunt of the selloff. The Russell 2000 followed with a 2.08% slide, reflecting rising risk aversion in small caps. The S&P 500 lost 1.62%, while the Dow shed 1.23%, erasing more than 500 points. All major indices ended the week deeply in the red, dragged lower by the double whammy of new tariffs and weak jobs data. Rate-sensitive sectors like tech and consumer discretionary were hit hardest, while even defensive names failed to attract meaningful bids. The rally from late April has clearly stalled under growing macro headwinds.
Notable Stock Movements
It was a sea of red across the Magnificent Seven, led by Amazon’s 8% plunge after underwhelming AWS growth cast doubt on its leadership in cloud computing. All other members of the group also closed significantly lower, with no bright spots to offset the rout. Apple dropped despite strong iPhone sales, while Microsoft and Alphabet retreated amid broader tech weakness. This uniform decline shows sentiment has turned sour, and traders are taking profits as macro pressures mount.
Commodity and Cryptocurrency Updates
Crude oil slumped 2.87% to $67.27, reversing earlier strength as fears over global demand re-emerged in light of the new tariffs. Our model continues to call for a move toward $60 by year-end, viewing recent rallies as seasonal and unsustainable. Gold surged 2.01% to $3,415 as investors rotated into safe-haven assets amid risk-off sentiment. Bitcoin dropped 2.11% to settle below $113,300, remaining under pressure as sentiment sours across risk assets.
Treasury Yield Information
The 10-year Treasury yield dropped sharply by 3.23% to close at 4.219%, its steepest one-day decline in weeks. Traders now anticipate that the Fed may act sooner on rate cuts, especially after Friday’s dismal jobs report. While still under the danger zone of 4.5%, this sudden yield drop reflects growing concerns about growth, and further declines in yield would signal an even more defensive market. The drop in yields provided no refuge for equities, suggesting the selloff was driven by panic more than rotation.
Previous Day’s Forecast Analysis
Thursday’s forecast outlined a wide trading range between $628 and $640, with a bearish bias below $632. Key support levels were identified at $630, $625, and $620, while resistance was expected near $633, $635, $638, and $640. The model warned that a break below $630 could open the door to $625 or lower, particularly if macro headlines turned negative. With heavy macro catalysts on deck—namely the jobs report and tariff fallout—the strategy emphasized short trades below $632 and urged caution ahead of data releases. The volatility spike was fully anticipated, and the outlook clearly favored a downside scenario if $632 failed to hold.
Market Performance vs. Forecast
SPY’s actual session aligned closely with Thursday’s bearish roadmap. It opened at $626.30, barely attempted to rally, and failed near the opening tick at $626.34 before diving straight through $625 and bottoming at $619.29. The close at $621.82 fell well below the key $625 support zone, validating the model’s warning that a failure at $632 would invite deeper selling. The trading plan, which called for shorts on breakdowns below support, paid off handsomely as SPY fell over $10 intraday. The projected range of $628 to $640 proved accurate on the upper bound but underestimated the full extent of downside risk. However, the call for trending action and directional movement was dead on. Traders who followed the plan and avoided premature dip-buying were well positioned.
Premarket Analysis Summary
In Friday’s premarket analysis posted at 7:06 AM, SPY was trading at $625.46 with downside targets at $625, $624, and $620. Resistance was noted at $628, $632, $634, and $635, and the bias level was identified at $628. The analysis warned that staying below this level favored sell-the-rip strategies, particularly if SPY dropped into the 624–625 zone. It also emphasized rapid profit-taking given the day’s volatility potential and cautioned against long exposure unless SPY could reclaim $628 and sustain a move higher toward $632–$635.
Validation of the Analysis
The premarket forecast proved spot-on as SPY never challenged the $628 bias level and quickly broke below $625. From there, it plunged to the next key downside target of $620, where it briefly stabilized before closing at $621.82. The market behaved exactly as projected: rallies failed, support was lost, and bearish momentum intensified. Traders who took short setups from $625–$628 and managed risk effectively had multiple opportunities to capitalize on the forecast. The warning to exit long trades and avoid chasing strength was critical, as intraday price action was one-directional and followed the script with precision.
Looking Ahead
Tuesday brings the ISM PMI report, the only meaningful economic release this week. With no news Monday, markets may take time to digest the latest macro shocks. Traders will be closely watching for signs of a demand slowdown in manufacturing, especially as tariff concerns intensify. Any negative surprise could accelerate downside momentum, while a stronger-than-expected print may provide a temporary reprieve. Either way, expect volatility to remain elevated into the next economic catalyst.
Market Sentiment and Key Levels
SPY enters Monday’s session on the back foot, trading at $621.82 and well below critical support levels. Market sentiment has clearly turned bearish as macro fears pile up. Resistance sits overhead at $622, $625, $627, and $630—levels that will be difficult to recapture without a catalyst. Support rests at $620, $615, and $610, with little standing in the way of a quick drop to the lower band. Bulls must defend $620 or risk triggering a deeper correction. Momentum now favors the bears, and the burden of proof is on buyers to stabilize the tape.
Expected Price Action
Our AI model projects SPY to trade between $610.75 and $631 on Monday, signaling a wide and volatile session driven by macro forces. With the Put side still dominating, and the trend channel redrawn bearish, the outlook leans heavily to the downside. If SPY fails to hold $620, look for swift moves toward $615 or even $610. Below $610, the risk of a rapid plunge toward $600 rises dramatically. On the flip side, if bulls reclaim $625 and hold above it, a reflexive move toward $630 is possible, but likely to be sold. Actionable intelligence suggests staying tactical, avoiding longs under $625, and preparing for deeper downside risk.
Trading Strategy
Traders should focus on short setups below $625, with downside targets at $620, $615, and $610. If SPY drops below $610, look for accelerated selling. Long trades are only viable above $625, with upside targets at $627 and $630. As volatility rises, position sizes should be reduced, stops tightened, and profit targets managed carefully. VIX surged 21.89% to 20.38—this is a clear red flag that volatility is back and not going away soon. Elevated VIX levels imply larger swings and thinner liquidity, which means execution must be precise. Use failed rallies for entries, and don’t fight the trend.
Model’s Projected Range
The model projects SPY’s maximum range for Monday between $610.75 and $631, with the Put side dominating within a wide and expanding band suggesting trending price action to start the week. Overnight, markets fell on renewed tariff fears and weak jobs data. By the open, SPY had broken major support at $632 and was trading at $626.30, just above the next key level at $625. While that initially looked like it might hold, participants saw the weak jobs print and tariff risk as a cue to exit the frothier names that had led the rally since late April. Every Magnificent 7 stock declined, and once SPY broke $625, the path to $620 became obvious. We warned yesterday that a session printing new highs but closing at the lows on heavy volume is often ominous, and that a 5–10% pullback remains a realistic risk. Since reclaiming $585, SPY had been in a strong uptrend, but today’s close woke the bears finishing at $621.72, near the day’s lows. A failure at $620 is likely to invite significantly lower prices. Dip buyers are unlikely to return until price reclaims $630 so until then, it’s a sell-the-rallies environment while the market decides how low it wants to go. In addition to tariff-related concerns, new fears about war with Russia are adding to the risk-off tone. Heading into Monday, key resistance levels are $622, $625, $627, and $630, with support at $620, $615, and $610. Below $610, little support exists to prevent a rapid sell-off, though some buying interest is emerging between $620 and $610. Strong resistance between $622 and $630 will likely cap upside attempts. Without a major catalyst, overnight action may lead to a retest of today’s lows. Bulls must defend $620 to stabilize the market; a break below likely sends SPY to $615 or even $610. As warned, a $10 move in either direction was on the table today and that’s exactly what unfolded. Our model has now turned bearish, increasing the probability of a break below $600 and a retest of the critical $585 level, which serves as a major line in the sand for the bulls. Seasonal volatility from August to October tends to favor bears, and SPY’s close well below the lower boundary of a redrawn bull channel from the April lows may necessitate a shift to a bear channel, though the algo has not yet redrawn it, likely awaiting Monday’s action. Meanwhile, the VIX surged 21.89% to 20.38; we’ve been advising buying VIX Calls for over a week, and today that paid off handsomely. While VIX below 23 remains market-supportive, the current contango setup implies further upside in volatility. A break above 23 could easily trigger the 5–10% pullback we've been anticipating. If you haven't already secured VIX Calls, QQQ Puts may serve as an effective hedge, given that tech remains priced to perfection and is vulnerable to longer-term weakness. We anticipate elevated volatility continuing into year-end.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI closed in a Bearish Trending Market State, with SPY closing well below support turned resistance. Extended targets did not print into the close but did print for much of the day’s session. Overnight the MSI rescaled lower several times, but by the open, the MSI had settled into a wide bearish state which remained for the entire session. Extended targets printed for much of the day but the lack of movement in the MSI lower after the open gave the bulls some hope prices might bounce. And they did briefly. While SPY closed off the lows of the session, with the wide MSI and extended targets for much of the day, overnight and Monday is likely to see additional weakness to at least test the day’s lows at $619.29. This level must hold for the bulls to have any chance of moving price higher. Watch the MSI for clues about what will follow on Monday. MSI resistance is currently $626.06 and higher at $629.88.
Key Levels and Market Movements:
On Thursday, we wrote: “We expect the market to respond sharply to these releases (Jobs), making it essential to trade what you see,” and added: “It's likely that price hovers near current levels in the premarket, with the potential for $10 swings in either direction after the Jobs Report.” We also noted: “While the odds of a meaningful decline have increased, it remains a lower-probability scenario unless $625 breaks cleanly.” With this plan in place, SPY opened just above $625, a major line in the sand and a level the bulls needed to defend. While we considered a long trade at that level, extended downside targets and a strongly bearish MSI kept us from taking the long. Instead, when it became clear that MSI support wouldn’t hold, and given the less-than-ideal failed breakout at 8:45 a.m., we chose to go short at $625 as price broke below the overnight lows. This was an advanced setup and not one we typically teach in this newsletter. The odds of success are relatively low, so we recommend mastering simpler failed patterns before attempting more complex trades like this one. In any case, we were short, with a first target at the premarket level of $620. While a stretch, we felt it was realistic given the speed of the decline and the strongly bearish MSI with extended targets below. We reached T1 before 10 a.m., and following a textbook failed breakdown, we decided that $5 in profit was enough and exited the trade in full, waiting for the next setup. While a long opportunity developed off that failed breakdown, with extended targets still printing, we held off until they stopped. We then entered long at 10:08 a.m. at $621.50, with T1 set at $624 where support had turned to resistance. It took some time to reach, but by noon we were out of 70% of the position and moved our stop to breakeven. With strong profits already secured, we shifted into profit-protection mode. SPY struggled to move past the 200-period moving average. With a double top forming and a persistent downtrend, we chose to exit the remainder of the position at $624 and waited to see what might develop. That proved to be the right call, as SPY soon retested the day's lows at $620. We anticipated a small break of the day’s lows and a possible failed breakdown at that level. It came at 2:20 p.m., but with extended targets printing again, we opted not to re-enter long and instead called it a day and a week. Two for two: driven by a clear plan, disciplined execution, and strong alignment between MSI’s directional cues, our broader market model, and key technical levels. The result was a highly satisfying and well-structured trading session. The MSI remains a cornerstone of our consistent trading process.
Trading Strategy Based on MSI:
Monday brings no scheduled news, but weekends under the current administration continue to pose macro risks. As such, we recommend closely monitoring the overnight action to determine the best course of action heading into the session. The broader narrative has shifted: while the bulls still hold a slight edge, that advantage flips to the bears if $620 fails. Bulls won’t regain full control until $632 clears. Bears, on the other hand, can press their case with a push to $615, which would likely act as a pause on the way to $600. There’s an open gap from June 23rd at that level, making it a realistic downside target and a 7% pullback from the highs. That’s not especially dramatic, considering the size of the rally since the April lows. A clean break of $600, however, would shift the dynamic significantly, making a 9% pullback more probable. Remember, the average market decline is around 13%, so even that wouldn’t be excessive in context. With a projected wide range and the MSI currently bearish, traders should expect additional volatility and at least a test of Friday’s lows on Monday. If $620 fails and doesn't recover quickly, $615 becomes the next likely stop, with a breakdown below that opening the door to $600. The odds of a meaningful decline have increased significantly, so we favor selling into resistance and watching for failed breakdowns at key levels for counter-trend longs. 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 $636 to $650 and higher strike Calls while also buying $622 to $635 Calls indicating the Dealers desire to participate in any rally on Monday. The ceiling for Monday appears to be $641. To the downside, Dealers are buying $621 to $525 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying displaying a bit less concern that prices could move lower on Monday. Perhaps Dealers believe a dead cat bounce is in order for the day. Dealer positioning has changed from bearish to slightly bearish/neutral.
Looking Ahead to Next Friday:
Dealers are selling SPY $638 to $660 and higher strike Calls while also buying $622 to $637 Calls indicating the Dealers desire to participate in any rally next week. The ceiling for the week appears to be $640. To the downside, Dealers are buying $621 to $555 and lower strike Puts in a 4:1 ratio to the Calls they’re selling/buying, reflecting a bearish outlook for next week. Dealers have maintained their net bearishness for the week with the ratio displaying Dealers holding significant protection. 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 is now firmly below key support levels, and Friday’s price action confirmed that the uptrend has broken. Short trades are favored under $625 with targets at $620, $615, and $610. Long trades should only be considered on a reclaim of $625, with targets at $627 and $630, but rallies are likely to face selling pressure. We favor selling into rallies as well to as high as $630. The VIX surged to 20.38, confirming elevated risk and increasing the importance of precise trade management. Traders should reduce size, tighten stops, and remain highly reactive to shifting levels. Be sure to 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!
