Market Insights: Monday, August 25th, 2025
Market Overview
Stocks edged lower Monday as Wall Street took a breather following last week’s powerful rally, with the Dow falling over 300 points from its fresh record high and investors shifting focus to upcoming earnings from Nvidia. The pullback came as the US dollar strengthened and profit-taking set in after Friday’s surge sparked by Fed Chair Jerome Powell’s dovish Jackson Hole remarks. The Dow closed down 0.77%, the S&P 500 lost 0.4%, and the Nasdaq slipped 0.22%. While Powell’s signal that rate cuts could begin as early as September remains a powerful tailwind, the market showed signs of exhaustion as traders turned cautious ahead of major tech earnings and key economic data later in the week. Nvidia, reporting Wednesday, stands as a key litmus test for market sentiment. The chipmaker has seen its stock nearly double since April and is expected to post strong results, with analysts projecting $1.01 in EPS on $46.13 billion in revenue. The outlook for core PCE inflation on Friday, forecasted to rise to 2.9%, adds another layer of potential volatility. While Friday's rally reestablished bullish momentum, Monday's decline suggests the market is entering a digestion phase ahead of critical catalysts.
SPY Performance
SPY dipped 0.43% to close at $642.51 in a quiet session that marked a sharp contrast to Friday’s explosive rally. After opening at $644.04 and briefly pushing as high as $645.29, SPY reversed course and slid to an intraday low of $642.36 before settling slightly above that level. Volume came in well below average at 47.75 million shares, reflecting a lack of urgency ahead of the week’s economic data and earnings reports. Despite the modest pullback, SPY remains in an uptrend, but Monday’s action hinted at some early-week profit-taking as traders assessed whether Friday’s breakout can be sustained. With volatility still low, the move looked more like consolidation than a reversal, but bulls will need to defend key levels in the coming days.
Major Indices Performance
The Russell 2000 led the decline Monday, falling 1.05% as small caps struggled amid reduced appetite for risk. The Dow lost 0.77%, pulling back from its Friday record high, while the Nasdaq and S&P 500 slipped 0.22% and 0.4%, respectively. The tone was notably more cautious after Friday’s broad-based rally, and the absence of fresh economic news gave traders little reason to press long positions. Monday’s dip was largely seen as digestion, not a rejection of Powell’s dovish shift. However, with Nvidia earnings and PCE inflation data on deck, the market remains sensitive to any surprises that could challenge the bullish narrative.
Notable Stock Movements
The Magnificent Seven were split to start the week, with Meta, Microsoft, Apple, and Amazon all finishing in the red. Tesla, Nvidia, and Google fared slightly better but failed to reignite last week’s momentum. Tesla, which led on Friday, traded flat, while Nvidia held firm ahead of its much-anticipated earnings report. The subdued action in big tech reflects a cautious pause rather than a rotation out of growth. Traders are watching for signs of leadership to reassert itself, with Nvidia’s report on Wednesday seen as the most important catalyst for the sector this week.
Commodity and Cryptocurrency Updates
Crude oil jumped 1.76% to settle at $64.78, continuing a slow grind higher despite the broader market’s hesitation. Our model continues to expect a retracement toward $60 before year-end, but recent strength in risk assets has kept oil prices afloat. Gold dipped 0.23% to $3,410, consolidating last week’s gains as the dollar firmed and traders turned their attention to upcoming inflation data. Bitcoin fell 2.26%, closing just above $110,200, while Ethereum and other major cryptos also pulled back. The crypto weakness came as rate-cut expectations paused and risk sentiment stabilized, though the longer-term trend remains constructive.
Treasury Yield Information
The 10-year Treasury yield ticked up 0.52% to 4.282%, inching higher as the bond market retraced some of Friday’s move. While yields remain below red-alert levels, any renewed push toward 4.5% or beyond could challenge equity valuations. At current levels, the market still appears comfortable, but traders are keenly aware of the risk that yields may climb again if inflation or growth data surprises to the upside. As always, 4.5% remains a major line in the sand for equities, with 5.2% signaling deeper correction risk.
Previous Day’s Forecast Analysis
Friday’s forecast projected a range between $641 and $650.75 with a bullish bias and emphasized the importance of SPY holding $643 to maintain momentum. The model warned of a possible fade if that level broke. Monday’s session opened above $644 but failed to hold, slipping below the key $643 area and eventually closing at $642.51. This confirmed the caution embedded in Friday’s forecast, which suggested that traders take profits quickly and expect digestion. While no major reversal occurred, the modest pullback aligned with the model’s expectation of a choppy, two-way session following a major breakout.
Market Performance vs. Forecast
The forecast range of $641 to $650.75 held perfectly, with SPY opening at $644.04 and closing near the lower end of the band. The rejection at $645 and pullback to $642.51 confirmed the model’s read of a market in pause mode. As noted in the projected range, tight price action with a bullish tilt was expected, and Monday’s drift lower fit that framework. Despite the red close, bulls remain in control unless SPY breaks below $638, which was clearly marked as the level where downside momentum could build.
Premarket Analysis Summary
Monday’s premarket analysis had SPY trading at $643.47, with a bias level set at $644.15. The model leaned slightly bearish under that level, suggesting weakness could extend toward $642.65 or $640.65, while highlighting the potential for renewed buying interest near those zones. Upside targets were $645 and $646.15, with a possible extension to $648.65 on heavy buying. The cautious stance proved prescient as SPY briefly tested $645 before retreating. The forecast correctly anticipated both the struggle to sustain Friday’s highs and the increased likelihood of long setups if prices approached lower support.
Validation of the Analysis
The premarket analysis was spot-on in outlining the difficulty of pushing through the bias level at $644.15. SPY opened slightly above it, touched $645.29, and then reversed, confirming resistance and validating the call for a choppy day with a bearish lean under the bias level. Traders who followed the model’s call to fade strength or look for long entries lower had ample opportunity, especially as price hovered near the first downside target at $642.65. Once again, the premarket roadmap provided actionable insights and effective trade levels.
Looking Ahead
With no major economic data on Tuesday or Wednesday, markets may remain rangebound until Thursday’s GDP and unemployment claims, followed by Friday’s crucial PCE inflation report. Nvidia’s earnings Wednesday after the close are likely to determine whether tech can resume leadership or whether a short-term pullback is due. The recent rally remains intact, but its continuation hinges on both macro data and company earnings delivering. Traders should expect increased volatility starting midweek and stay nimble until key resistance levels are either broken or firmly rejected.
Market Sentiment and Key Levels
SPY closed at $642.51, dipping below Friday’s close but remaining within the model’s uptrend structure. Support for Tuesday is seen at $641, $639, $635, and $633, while resistance sits at $645, $648, $650, and $652. Bulls need to reclaim $643 early in the session to resume momentum toward new highs, while a breakdown below $638 could invite heavier selling. Despite Monday’s decline, sentiment remains bullish so long as SPY trades above $638, and the VIX’s rise to 14.79 still supports higher equity prices so long as volatility remains below the critical 23 threshold.
Expected Price Action
The model projects SPY to trade between $641 and $646 on Tuesday, with a slight bullish tilt despite the narrowing range and today’s slight pull back. The Call side continues to dominate, suggesting resistance may be tested again if bulls can defend early weakness. SPY needs to clear $645 to push higher, with upside potential toward $648. A rejection near resistance, however, could trigger a retest of $641 or even $639. If $638 fails, a deeper pullback could ensue, but without a clear catalyst, the path of least resistance still favors higher prices. The bulls must continue to defend dips and prove that last week’s rally wasn’t a one-day event.
Trading Strategy
Despite Monday’s dip, the low-volatility environment continues to favor long setups, especially on dips into $641 or confirmed breakouts above $645. Traders should target $648, $650, and $652 if strength resumes. Shorts should only be considered on a failed breakout near $645 or if SPY breaks and holds below $638, targeting $635 or $633. With volume dropping and economic data still ahead, tighter stops are advised, and quick profit-taking remains prudent. Avoid chasing extended moves and watch for failed move setups around resistance or support for the most reliable entries.
Model’s Projected Range
The model projects SPY’s maximum range for Tuesday between $640.50 and $648, with the Call side dominating in a narrowing band that suggests choppy price action. The projected range continues to tighten after Friday’s huge rally. Overnight SPY retraced some of those gains, opening just above $644 and trying to push higher to test Friday’s highs, but it fell short, topping out at $645.29 before rolling over. From there SPY gave back the entire move off the overnight lows to finish the day down 43 basis points. Tight, mostly sideways trading was expected after such a big move higher, and that’s exactly what played out until the final minutes. Volume was well below normal, but with it being the last week of summer heading into a long weekend, that kind of action was no surprise. There is little economic news scheduled until Thursday, and as we said Friday, the market will likely take some time to digest gains before moving materially higher. SPY still needs to reach $660 to confirm the breakout, otherwise probabilities lean toward failure at this level with a retracement in September. For Tuesday we expect more two-way trade with a bullish tilt, with bulls looking to get back above $643 to set up new highs. A failure there would likely test $641 and $639, while bears need a close below $638 to gain any real traction. Should a selloff unfold, below $632 there is little support to catch the market. Resistance is expected at $645, $648, $650, and $652, while support sits at $641, $639, $635, and $633. Since reclaiming $585, SPY has remained in a steady uptrend with dip buyers stepping in almost every time. Mega-cap stocks were mixed today, though many of the big tech names moved higher, and as long as they continue to attract capital, the market should follow. While the recent parabolic advance remains high risk with limited reward, that just means profits should be taken quickly and overnight holds avoided. Long setups remain favored over shorts until major support is lost. The odds of a September or October correction continue to fade and the long-awaited retrace may not materialize this year. Even though one or two rate cuts don’t qualify as a full Fed easing cycle, the market may treat them as such, translating into higher stock prices. Pundits are still calling for a correction, but for now it’s better to stay with the trend until it’s clearly broken. The VIX rose 3.94% to 14.79, which still supports higher prices as volatility below 23 remains a tailwind for equities, though a breakout above that level could spark the long-anticipated 5–10 percent pullback. SPY closed above the bull trend channel from the April lows, reaffirming the bullish structure.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI ended the day in a wide, Bearish Trending Market State, with SPY closing mid-range. In the premarket with SPY retracing some of Friday’s gains, the MSI rescaled lower several times but never printed any extended targets below. As such by the open, SPY was back to moving higher. But the MSI rescaled to a wide Ranging Market State which indicated no trend was likely and that is exactly what SPY did…it ranged virtually the entire day, reaching the highs at the upper end of the MSI below resistance and falling to MSI support. Then a late in the afternoon, the MSI rescaled lower to a narrow bearish state and then to a wider bearish state, setting up SPY’s close just below major support at $643. In its current state, the MSI is forecasting lower prices on Tuesday, likely retesting today’s lows where we anticipate dip buyers will remerge once again. MSI support is currently $642.35 with resistance at $643.32.
Key Levels and Market Movements:
On Thursday we wrote, “Monday has no scheduled news, and without an external catalyst, the session is expected to see some follow-through from Friday's move, drifting higher while consolidating gains” and noted, “The bulls are likely to defend $643 in an effort to push SPY toward new all-time highs.” We also stated, “we continue to favor long setups above $641, while remaining open to shorts on a confirmed break below that level or on a failed breakout above $646.” With that context, and with the MSI opening in a narrow Bearish Trending Market State without extended targets below, we looked for an opportunity to go long at MSI support. That chance came quickly just after the open, and we entered long on a test and hold of support at $643.75. MSI resistance was less than $1 away and we never take a first target closer than that, so we went to the premarket report and set T1 at $645, which was reached by 11:30 am. With a narrow, choppy trading day expected, we moved our stop to breakeven to guard against reversal and then set T2 at MSI resistance at $645.53. Just after 12:30 pm SPY set up a less-than-perfect failed breakout at $645.25, so we exited and reversed short at $645.15, setting T1 at MSI support at $644.15, just over $1 from entry, and T2 at the premarket level of $642.65. As the MSI later rescaled lower, it provided a closer second target at $643.47, and late in the session SPY reached that level, allowing us to trail with the premarket support level in mind as a final target. With our stop at breakeven, the trade carried no risk, and just before the close SPY sold off sharply to the premarket level, where we exited at $642.65 and called it a day. We knew the bulls would defend $643, so this approach made the most sense for protecting profits. We ended the day two for two with solid gains on a session when most traders likely lost money or at best broke even, 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:
Tuesday has no scheduled news, and without an external catalyst the session is expected to bring more sideways action with some follow-through from Friday’s rally. The bulls want to defend $643 in an effort to push SPY toward new all-time highs, potentially as high as $650, while a close below this level opens the door slightly for the bears, who will attempt to push price overnight to $641. At that level they may press their luck, but for the bears to gain real traction SPY must first close below $641 and then break $632 to generate momentum. The broader structure continues to favor the bulls, and for sentiment to shift meaningfully 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 $641, while remaining open to shorts on a confirmed break below that level or on a failed breakout above $645. 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 $656 and higher strike Calls while buying $644 Calls indicating the Dealers desire to participate in any continuation of Friday’s rally on Tuesday. Dealers are no longer selling at the money Puts. The ceiling for Tuesday appears to be $648. To the downside, Dealers are buying $643 to $615 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying displaying little concern that prices could move lower on Tuesday. Dealer positioning is unchanged from slightly bearish/neutral to slightly bearish/neutral.
Looking Ahead to Friday:
Dealers are selling SPY $647 to $665 and higher strike Calls while buying $644 to $646 Calls indicating the Dealers desire to participate in any continuation of the rally this week. The likely ceiling for the week is $650. To the downside, Dealers are buying $643 to $540 and lower strike Puts in a 4:1 ratio to the Calls they’re selling/buying, reflecting a bearish outlook for the week. For the week Dealer positioning has changed from slightly bearish/neutral 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 at $642.51 marks a healthy consolidation following Friday’s rally. Long trades remain favored above $641, especially if $643 is reclaimed early. Targets include $645, $648, and potentially $650. Shorts should only be considered on a failure at resistance above $645 or a confirmed breakdown below $638. Use tighter stops and scale out of positions quickly in this low-volume, low-volatility environment. Monitor Nvidia earnings and PCE inflation data later in the week, as they may reset expectations for rate cuts and determine whether the rally has staying power. Check the premarket report before Tuesday’s open to adjust for any overnight developments or shifts in dealer positioning.
Good luck and good trading!
