Market Insights: Thursday, August 21st, 2025
Market Overview
Stocks slid across the board on Thursday, extending recent declines as hotter-than-expected unemployment data and disappointing Walmart earnings raised fresh concerns about the strength of the economy ahead of Friday’s pivotal Jackson Hole speech. The Dow dropped 0.34%, the S&P 500 lost 0.4%, and the Nasdaq gave up 0.34%, marking a fifth consecutive day of losses for the S&P. Pressure in Big Tech remained a key headwind, despite the Nasdaq showing some signs of support earlier in the week. Short sellers have capitalized on the weakness, reportedly gaining over $5 billion from their bearish bets on tech as enthusiasm around AI continues to waver.
Investor anxiety was also stoked by rising jobless claims, with initial filings for unemployment benefits increasing to 235,000, above the 225,000 expected. Continuing claims also ticked up slightly. Meanwhile, the Fed minutes released earlier in the week reinforced that sticky inflation remains a central concern, despite a split within the Fed over the path of rates. Manufacturing activity offered a bright spot, with the S&P Global Composite PMI hitting a three-year high at 55.4, up from 55.1 in July. Still, the combination of weak earnings reactions, labor market uncertainty, and rising yields has left markets in a defensive crouch.
Walmart’s results didn’t help sentiment. While the retailer raised its full-year outlook thanks to strength in low-price categories, quarterly profit came in shy of expectations. Shares slid more than 4%, capping off a mixed week for the retail sector. With Powell set to speak Friday, the market is bracing for potential fireworks. Traders are also watching political developments, as President Trump has publicly pressured the Fed and called for Governor Lisa Cook to resign, though she stated firmly she will not step down. All eyes now turn to Jackson Hole to gauge the Fed’s next move.
SPY Performance
SPY fell 0.40% to close at $635.55 after a sluggish session that stayed rangebound for most of the day. Opening at $636.28, the ETF saw an early high of $637.97 before slipping to an intraday low of $633.81. The modest rebound into the close wasn’t enough to lift sentiment, as SPY marked its second straight red day. Volume dropped to 49.60 million shares, notably below average, reflecting uncertainty and indecision ahead of Friday’s major Fed speech. The lack of conviction on both sides made for a slow session with limited opportunities.
Major Indices Performance
The Dow was the day’s top performer, rising 0.34% as defensive plays and selective bargain hunting offset broader weakness. The Russell 2000 added 0.21%, showing modest strength in small caps. In contrast, the Nasdaq slipped 0.34%, dragged once again by tech underperformance. The S&P 500 fell 0.4%, notching its fifth consecutive loss. While economic data sent mixed signals with jobless claims ticking up and PMI improving, the broader market reaction was cautious. Defensive sectors outperformed while growth names lagged, reinforcing the market’s wait-and-see posture ahead of Jackson Hole.
Notable Stock Movements
It was another red day for most of the Magnificent Seven, with Alphabet the lone gainer, adding 0.22%. Tesla and Meta led to the downside, each falling over 1%. The group has struggled to gain traction amid growing concerns that tech valuations may be ahead of fundamentals, especially as rate hike fears resurface. Alphabet’s resilience stood out, but overall sentiment remained negative as investors continued rotating out of high-growth names. If this trend persists, a deeper pullback in tech could be on the horizon.
Commodity and Cryptocurrency Updates
Crude oil rose 1.13% to $63.42, continuing its rebound despite concerns over demand and economic growth. The long-standing target of $60 remains a magnet for the model, which expects that level to be tested later this year. Gold slipped 0.17% to $3,382, consolidating recent gains amid low volatility. Bitcoin took a bigger hit, dropping 1.79% to close above $112,320, as risk appetite remains subdued across asset classes. The bounce in crude underscores continued dip buying, while gold and crypto appear to be digesting recent moves in anticipation of Friday’s Fed speech.
Treasury Yield Information
The 10-year Treasury yield climbed to 4.325%, a 0.63% increase that reflects renewed rate anxiety. While yields remain below the red-alert threshold of 4.5%, the market is clearly uneasy with any signs of upward momentum. A move above 4.8% could trigger widespread equity selling, and anything near 5% would likely force a major repricing of risk assets. For now, yields are hovering in a danger zone, and Friday’s Powell commentary could determine whether they break higher or reverse.
Previous Day’s Forecast Analysis
The prior forecast projected SPY to trade between $630.50 and $642.25, with a bearish bias unless bulls could reclaim $640. Key support was outlined at $633 and $630, with upside targets at $640 and $644.50. The model emphasized the importance of defending $633, warning that a break could open the door to deeper losses. Long trades were favored only on strength above $642 or failed breakdowns near $633, while short setups were preferred on weak rallies into resistance. The VIX was climbing, and traders were advised to stay nimble with smaller positions.
Market Performance vs. Forecast
SPY opened at $636.28 and traded in a tight range between $633.81 and $637.97, finishing at $635.55. This landed squarely within the model’s projected range and followed the outlined path almost exactly. The intraday low tested the $633 level from the prior forecast, and while the bounce wasn’t as powerful as Wednesday’s, it still demonstrated that dip buyers remain active. There were limited opportunities for longs given SPY never reclaimed $640, but the early breakdown below $637 created room for short trades targeting $635 and $633. The forecast again proved highly reliable, giving traders precise levels to operate from.
Premarket Analysis Summary
In today’s premarket analysis posted at 7:35 AM, SPY was trading at $637.20 with a bias level set at $637. The model leaned bullish above that level, expecting a move to $639 and possibly $641.50. If SPY fell below $637 and couldn’t recover, the model called for downside targets at $636, $633.50, and $630. The note warned that while dips were being bought, the market was getting harder to trust, and early profit-taking on long setups was encouraged. It anticipated increasing flexibility in intraday moves as traders prepared for Friday.
Validation of the Analysis
Thursday’s session validated the premarket analysis with precision. SPY opened just under the bias level and quickly slipped to test the $633.81 low—just above the $633.50 downside target. Despite a brief bounce, the ETF couldn’t break higher than $637.97, failing to hold above the bias and confirming the bearish lean. The range was narrow as expected, with little follow-through in either direction. Traders who heeded the caution to take quick profits and not overstay positions were rewarded, as the lack of conviction made for frustrating chop. Once again, the premarket levels proved critical for intraday execution.
Looking Ahead
All eyes now turn to Friday’s Jackson Hole speech from Fed Chair Jerome Powell, which has the potential to sharply move markets. While Thursday brought some important economic data, the real fireworks are expected Friday. With no material economic news slated until Thursday of next week, Powell’s comments could set the tone for days. Traders should be prepared for a wide range and trending action on Friday, especially if the Fed’s message surprises.
Market Sentiment and Key Levels
SPY closed at $635.55, a clear sign that markets remain under pressure and sentiment is leaning bearish. Support now sits at $633, $630, and $625, levels that must hold to prevent a deeper pullback. On the upside, resistance is building at $636, $641, $643, and $645. The bulls will attempt to defend the $633 area to position for a potential bounce, but failure there could spark a breakdown toward $625. With the VIX rising and the Fed set to speak, volatility could ramp quickly. Until clarity arrives, markets are stuck in a cautious wait-and-see mode.
Expected Price Action
Our AI model projects SPY to trade between $630 and $643 on Friday, a significantly wider range that points to trending price action. The bias leans bearish, as SPY remains below key resistance at $640. If $633 fails, look for downside targets at $630 and $625. On the flip side, a break above $641 would signal strength and open the path toward $645 or higher. This forecast is actionable intelligence designed to help traders navigate volatility. Friday’s range expansion suggests increased movement, and traders should focus on how SPY behaves at the extremes.
Trading Strategy
With SPY closing at $635.55 and the VIX jumping 5.86% to 16.61, volatility is heating up. Short setups are favored on weak rallies into $636 or $641, targeting $633 and $630. Long trades should be considered only on strong moves above $641 or failed breakdowns near $633 that reverse quickly. If $625 fails, lower levels are possible. As always, failed moves around key levels are high-probability setups. Smaller positions are recommended, with tight stops in case of sharp reversals. Volatility remains manageable under 23, but the risk is rising fast. Remain flexible and prepared.
Model’s Projected Range
The model projects SPY’s maximum range for Friday between $625.50 and $644, with the Put side dominating in a wide and expanding band that suggested trending price action on Friday. The range has expanded significantly, reflecting Fed Chair Powell delivering comments at Jackson Hole which may or may not move the market. After drifting slightly lower overnight, SPY opened just above $636 in no man's land, not low enough to find material support or high enough to move substantially lower. As such, the day was as projected with nothing but chop and sideways price action in a very narrow band. Once again at the lows of the day at $633.85, just above the prior day’s lows, dip buyers stepped in and supported a reversal which left SPY closing the day down 40 basis points at $635.55. The bulls continue to display their strength as the market awaits tomorrow. Another small red day which is still, nothing to be overly concerned about. Volume was low which also added to the day’s choppiness. Today’s economic reports were a mixed bag with an increase in unemployment claims but a rise in PMI. As a result, the market did nothing but stay in its confused state. Heading into tomorrow, the big event is Fed Chair Powell speaking at Jackson Hole. Clearly the market seems to think this will move the market materially with an $18 projected high to low range on SPY. That is extremely large, translating into an almost 200 point potential move in the S&P. As such, expect heavy trending price action on Friday. Overnight the bulls will attempt to defend $633 to set up the coin flip on Friday where the market could move either way. It may also do nothing whatsoever. Like yesterday, a failure at $633 could open the door to $630 and potentially $628 to $625. Below $625 there is little to hold up the market. A successful defense, however, could push SPY back toward $642. Resistance is expected at $636, $641, $643, and $645, above which supply will likely cap further gains. Support for tomorrow rests at $635, $633, $630 and $625. Since reclaiming $585, SPY has remained in a persistent uptrend with dip buyers stepping in almost every time. Mag stocks once again fell today but only slightly. Tesla and Meta were the largest losers down over 1 percent each. We continue to advise watching if this rotation out of tech continues for another week or so. If it continues, it is highly probable the market will begin a steeper sell-off as the bears put their paws on the gas. We continue to view the recent parabolic advance as high risk and low reward, favoring quick profit-taking, avoiding overnight holds, particularly as signs continue to point to a potential correction between September and mid-October. The VIX rose 5.86 percent to 16.61, which should begin to concern traders. While volatility below 23 remains broadly supportive of equities, a breakout above that level could spark the widely anticipated 5 to 10 percent pullback. SPY closed well below the bull trend channel from the April lows which also is somewhat ominous. Our model is waiting for tomorrow’s close to decide if the channel should be redrawn.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI ended the day in a Bearish Trending Market State, with SPY closing in the upper half of the range. During the regular session the MSI spent virtually the entire day in its current state after rescaling lower in the premarket. There were no extended targets the entire day indicating the herd was sitting out today’s market action. As such SPY moved from MSI support to resistance all day. In its current state, the MSI is forecasting a likely retest of the day’s lows, perhaps overnight, but little else which will change the current, tight trading range. We stated yesterday “Big up followed by big down = big confusion which is the hallmark of a ranging market” which is exactly what SPY delivered today. MSI support is currently $633.85 with resistance at $636.40.
Key Levels and Market Movements:
On Wednesday we wrote, “expect the markets to trend both higher and lower overnight in a Ranging MSI state, which could carry into Thursday,” and noted, “The bulls will do all they can to defend today’s lows, which we expect to hold on the first test.” We also stated, “We continue to favor long setups above $632, while remaining open to short opportunities on a confirmed break below $632 or a failed breakout near $640.” With that context, and with the MSI opening in a Bearish Trending Market State, we waited for price to reach a level we could lean on to enter short. That came just after the open at MSI resistance at $636.40, with our first target at support near $633.85. While price initially moved in our favor, it didn’t reach our target and instead set up a textbook failed breakdown, which had us move our stop to breakeven, just in time to avoid the bounce that scratched us out. We do not normally move a stop to breakeven so quickly but when a reliable reversal pattern emerges, caution is advised. The MSI then shifted to a ranging state, and price moved to the day’s highs at $638, a level we weren’t interested in trading. Later, SPY returned to MSI resistance and formed a triple top just before noon, so we re-entered short at $636.40, again targeting $633.85. After a slow grind, T1 was hit, followed by another failed breakdown at support. We flipped long just below $634 with a target back at resistance, which hit, and we exited in full, knowing the day was going to be choppy and rangebound. One scratch and two single-target trades made us a few bucks on a day that, in hindsight, likely wasn’t worth trading. But a green day once again, thanks to 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:
Friday brings Fed speak, which many expect will move the market decisively, so we recommend trading what you see. Without that catalyst, the bulls are likely to defend $633 again in an effort to push SPY toward $642 or even $645. A drop below $632, however, opens the door to $625 and could mark the beginning of a steeper correction. The expanding range suggests potential for heavy trending action, so aligning with the MSI trend will be key to capturing outsized gains. With another close below $640, the bears remain active, and a break of $632 would likely accelerate downside momentum. That said, the broader structure still favors the bulls despite today’s low-volume dip. For sentiment to meaningfully shift, the bears would need a decisive break below $625, which would raise the risk of a 10% or greater correction. Until then, we continue to favor long setups above $632, while staying open to shorts on a confirmed break below that level or a failed breakout above $640. 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 $643 to $655 and higher strike Calls while buying $636 and $642 Calls indicating the Dealers desire to participate in any rally on Friday. The ceiling for tomorrow appears to be $645. To the downside, Dealers are buying $635 to $545 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 tomorrow. Dealer positioning is unchanged from bearish to bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $644 to $665 and higher strike Calls while buying $636 to $643 Calls indicating the Dealers desire to participate in any rally next week. The ceiling for the week appears to be $650, although $647 looks like material resistance. To the downside, Dealers are buying $635 to $540 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
With SPY closing below $636 and the VIX rising sharply to 16.61, traders should remain cautious heading into Friday’s critical Fed event. Short setups are favored on weak rallies into $638 or $641, with downside targets at $635, $633, and potentially $625. Long trades should only be considered if SPY convincingly reclaims $641, targeting $643 and $645 or on a loss of $633 and recovery above on a failed breakdown. Risk management is essential with volatility on the rise. Wider stops are required tomorrow so scale down and avoid overexposure. Friday’s trading could be highly directional, and discipline will be key. 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!
