Market Insights: Tuesday, August 26th, 2025
Market Overview
Stocks inched higher Tuesday as Wall Street balanced political drama with anticipation for Nvidia’s earnings. The Dow rose 0.3%, the S&P 500 climbed 0.4%, and the Nasdaq also gained 0.4%, shaking off Monday’s lull. The cautious rally unfolded as investors digested former President Trump’s push to oust Fed Governor Lisa Cook, citing alleged misconduct. Cook has refused to step down, and her attorney plans to sue, setting up a legal battle that could challenge Fed independence. Trump’s comments suggested he expects to soon hold a majority at the Fed, raising speculation about future rate cuts.
Markets were also rattled by Trump’s renewed threats of tariffs on foreign tech products, specifically from countries taxing U.S. digital services. The move stirred fears of worsening trade tensions with the European Union. At the same time, the spotlight turned to Nvidia, which reports earnings Wednesday after the close. The stock edged higher Tuesday, with traders eyeing whether the AI leader can justify its lofty valuation after gaining nearly 34% this year. Despite the swirling headlines, the market’s upward momentum remained intact as investors focused on earnings and macro data due later this week.
SPY Performance
SPY gained 0.42% to close at $645.17, bouncing back from Monday’s mild dip. The ETF opened at $642.11 and hit an intraday high of $645.51 before finishing just off the session’s top. Volume remained light at 46.98 million shares, underscoring a wait-and-see mood ahead of key economic data later this week. Tuesday’s action marked a return to strength after a brief pullback, with bulls reclaiming control in the final hour. SPY continues to trend higher, and while gains were modest, the late-day push back above $643 keeps the rally’s structure intact.
Major Indices Performance
Small caps led the way as the Russell 2000 jumped 0.81%, reflecting renewed risk appetite. The Nasdaq climbed 0.44% thanks to strength in large-cap tech, while the S&P 500 added 0.4%. The Dow trailed slightly with a 0.3% gain. After Monday’s pause, markets resumed their upward drift despite lingering political and geopolitical headlines. Sector-wise, technology and discretionary stocks showed leadership, while defensive areas like utilities and healthcare underperformed. With no economic releases on Tuesday, investors kept their eyes on Nvidia earnings and upcoming GDP and PCE data for cues on direction.
Notable Stock Movements
It was mostly green across the Magnificent Seven, with five of the seven mega-cap tech names finishing in the green. Tesla led the group, extending its rally from last week. Nvidia posted modest gains ahead of its earnings report, while Apple and Amazon added to Monday’s gains. Microsoft and Alphabet were the only laggards, losing 0.44% and 0.64%, respectively. The group’s resilience reflected investor confidence in tech’s leadership ahead of Nvidia’s results. A strong report could reignite momentum across the sector, while any miss may prompt a broader pause in high-flying names.
Commodity and Cryptocurrency Updates
Crude oil tumbled 2.22% to $63.36, reversing Monday’s gains and reigniting concerns about demand softness and rising supply. Our model continues to forecast a pullback to $60 by year-end, and Tuesday’s drop brings prices closer to that target. Gold rallied 0.65% to $3,439, with investors seeking safety amid renewed political tension and a weakening dollar. Bitcoin bounced 1.46% to close just above $111,250, while other major cryptos also rallied. The move came as risk appetite improved and dip buyers returned to digital assets, continuing a longer-term bullish trend in crypto.
Treasury Yield Information
The 10-year Treasury yield slipped 0.40% to 4.258%, continuing a mild retracement of last week’s spike. While yields remain elevated, they are still well below the red-alert 4.5% level that typically challenges equity valuations. With the bond market holding steady, equity bulls remain comfortable—at least for now. However, any move back toward 4.8% or 5% would likely pressure stocks. For now, the easing in yields is helping stocks resume their climb, especially ahead of this week’s GDP and PCE reports, which will shape the inflation and rate-cut narrative into September.
Previous Day’s Forecast Analysis
Monday’s newsletter projected a tight range between $641 and $646 with a slight bullish tilt, favoring long setups above $641 and calling for profit-taking on strength near $645. It highlighted the importance of reclaiming $643 early and warned that a break below $638 could invite heavier selling. The model leaned bullish but warned that without a catalyst, Tuesday would likely be a consolidation day with intermittent two-way trade. Levels to watch were clearly marked, with $645 noted as a resistance trigger for more upside, and $641–$639 as key zones to defend. The strategy emphasized quick profit-taking and avoiding extended overnight holds due to increased headline risk.
Market Performance vs. Forecast
Tuesday’s session played out nearly in lockstep with the forecast. SPY opened at $642.11, dipped to $641.57, then surged into the close to finish at $645.17, just below resistance and comfortably within the projected $640.50 to $648 range. The reclaim of $643 proved critical, with the late-day surge confirming the model’s view that bulls would remain in control if that level held. While the session was mostly sideways early, the closing move above resistance offered upside trading opportunities. Traders who followed the model’s playbook, buying dips near $641 and targeting resistance, had a textbook setup. The forecast once again delivered accurate, actionable insight into intraday levels and market structure.
Premarket Analysis Summary
In Tuesday’s premarket analysis posted at 8:18 AM, SPY was trading at $641.61, with a bias level set at $642.60. The forecast warned of early selling pressure unless SPY could break above that level. Targets were $642.60, $644.10, and $644.65 on the upside, while downside levels sat at $640.10 and $636.60. The model leaned cautious, favoring short trades at rejection zones and waiting for a confirmed shift in momentum. Traders were advised to sell rallies until the bias flipped and to stay alert for potential upside follow-through if SPY reclaimed key levels. The outlook called for mixed signals and recommended patience in the middle of the range.
Validation of the Analysis
Tuesday’s trading validated the premarket analysis perfectly. SPY opened near $642, tested below to $641.57, and then surged through the $642.60 bias level late in the day. The targets of $644.10 and $644.65 were met, with SPY topping out at $645.51. Traders who waited for confirmation above the bias level had clear upside setups, while early shorts at rejection zones likely got squeezed on the afternoon rally. The premarket warning to avoid the middle of the range proved prudent, as most of the day featured sideways action before the closing breakout. Once again, the premarket plan offered a precise and actionable roadmap.
Looking Ahead
Wednesday brings no scheduled economic news, giving the market space to digest recent developments ahead of Thursday’s GDP and unemployment claims and Friday’s PCE inflation report. With Nvidia earnings due Wednesday after the close, markets may stay in wait-and-see mode during the day. Any surprises from Nvidia or shifts in macro expectations could drive significant volatility. Until then, traders should expect continued two-way trading with bullish undertones and remain flexible heading into key catalysts later in the week.
Market Sentiment and Key Levels
SPY closed at $645.17, reclaiming the $643 zone and signaling that bulls remain firmly in control. The current trading structure remains bullish as long as SPY holds above $642. Immediate support is seen at $642, $640, $637, and $635. Overhead resistance now sits at $647, $650, $651, and $655. The VIX dipped to 14.62, a sign that volatility remains subdued and continues to favor higher prices. However, any shift above 23 would be a red flag and could trigger the long-awaited pullback. For now, the trend remains intact, and bulls are clearly in command.
Expected Price Action
Our AI model projects SPY to trade between $642 and $650 on Wednesday. The expanding range signals a growing chance of trending price action, especially with Nvidia earnings on deck and major macro data looming. The model maintains a bullish tilt, with SPY expected to test $647 or even $650 if buying continues. Should SPY break above $651, a surge toward $655 could follow. On the downside, a break below $642 could retest $640 or even $637. If SPY falls below $635, the trend would be at risk. This is actionable intelligence suggesting that traders stay focused on momentum above $643 and prepare to fade failed breakouts. Watch for volatility to increase as the week progresses.
Trading Strategy
Long trades remain favored above $642, especially on dips into $643 or breakouts above $647. Upside targets include $650, $651, and $655. Short trades should only be considered on a failure at $647 or a confirmed breakdown below $640, targeting $637 and $635. Volatility remains low with the VIX at 14.62, favoring dip buys and tight stops. Risk increases ahead of Nvidia earnings and Thursday’s macro data, so smaller position sizing and quick profit-taking are key. Avoid trading in the middle of the range and look for failed moves at support or resistance to trigger new trades. Maintain discipline, especially with volume expected to stay light until headline risk returns.
Model’s Projected Range
SPY’s projected range for Tuesday sits between $640.25 and $651.25, with the Call side dominating in an expanding band that suggests choppy price action with periods of intermittent trending action. The projected range is expanding as we approach Thursday’s GDP and Friday’s PCE release. Overnight, SPY moved lower, breaking below the prior day’s lows. But once again at major support, dip buyers emerged, so by the open, SPY was just above $642. A brief sell-off attempted to retest the overnight lows, and that was it for the bears. The bulls then took over and pushed SPY back above $643, with a late-day surge that pushed SPY to a close at $645.17. While most of the day was tight and mostly sideways, the late-session push put the bears back to their cave as we approach these major economic data releases. Volume was well below normal, but again, with it being the last week of summer heading into a long weekend, that kind of volume is to be expected. There is no economic news tomorrow, so the market is likely to take a pause on Wednesday while it waits for more information to determine its next move. We continue to believe it will be higher, and it’s possible that we see new highs tomorrow, even before the news events on Thursday and Friday. SPY still needs to reach $660 to confirm the breakout; otherwise, probabilities lean toward failure at this level with a retracement in September. For Wednesday, we favor two-way trading with a bullish tilt, with bulls looking to defend any retest of $641 should SPY fall overnight. We see this as a low probability. Instead, our model sees prices holding above $642 and moving higher on Thursday. But a break of $641 will open the door to $639. The bears need a close below $639 to gain any real traction. Below $630, there is little support to keep the market afloat. Resistance is expected at $647, $650, $651, and $655, while support sits at $642, $640, $637, and $635. Since reclaiming $585, SPY has remained in a steady uptrend, with dip buyers stepping in almost every time. Mega-cap stocks were strong today, and as long as they continue to attract capital, the market will 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 are falling with every push higher. The long-awaited retrace may not materialize this year, and while we do not consider one or two rate cuts an easing cycle, the market may treat them as such, translating into higher stock prices. While many pundits are still calling for a correction, it’s better to defer to the trend until it’s clearly broken. The VIX fell 1.15% to 14.62, which 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 narrow, Bullish Trending Market State, with SPY closing mid-range with extended targets. Overnight and into the premarket, SPY moved below Monday’s lows but found support at $641, prompting the MSI to rescale lower into a narrow bearish state. This persisted until after the open, when the MSI shifted to a ranging state and price moved sideways for most of the session. At 2 PM, MSI support held, triggering a sharp rally as SPY surged higher and the MSI rapidly rescaled several times with extended targets above, signaling strong herd participation. The move brought price within a whisper of the all-time high. In its current state, the MSI is forecasting slightly higher prices for Wednesday, with any retrace likely to attract dip buyers. MSI support is now at $644.50, with resistance at $645.72.
Key Levels and Market Movements:
On Monday we wrote, “without an external catalyst the session is expected to bring more sideways action with some follow-through from Friday’s rally,” and noted, “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.” We also stated, “we continue to favor long setups above $641.” 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, and that chance came 15 minutes after the open with a test of MSI support at $641.55, a level we knew would hold. We were long from $642 and with MSI resistance less than $1 above, we went to the premarket report for T1 at $644.10, which represented a fairly large first target but without any other levels to lean on, we set the target and let it work. The MSI rescaled to a ranging state which left us with little to do but watch the day unfold, until 2 PM when SPY started to move higher and the MSI rescaled to a very narrow bullish state with extended targets above. As we always do when the MSI provides a level for us to trade, we moved T1 to the nearest MSI level at $643.80 which came quickly, and then as the MSI rescaled again we set T2 at $644, just a bit higher than T1. Now with a stop at breakeven we let our 10% runner run, and when we hit the premarket level of $644.10 we decided we had enough profit in this trade to close it out and call it a day with just 30 minutes left in the regular session. SPY pulled back to MSI support but we were in profit protection mode and chose to keep what we had earned rather than tempt fate. The long off MSI support worked well into the close but again, when we are solidly green, we do not risk profits. We would rather make consistently than have one big day followed by several losing days. Once again we ended the day profitable, one and one, 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:
Wednesday has no scheduled news, and without an external catalyst the session is expected to bring more sideways action with some follow-through from today’s rally. The bulls want to defend $641 as a worst-case level for tomorrow in an effort to push SPY toward new all-time highs, potentially as high as $650, while a close below $641 opens the door for the bears to attempt a move to $639. At that point they will likely press their luck. But for real traction the bears would need SPY to first close below $639 and then break $632 to generate momentum. The broader structure still favors the bulls, and sentiment would not shift meaningfully unless the bears forced 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 staying open to shorts on a confirmed break below that level or on a failed breakout above $646. 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 $646 to $657 and higher strike Calls indicating the Dealers belief that prices may stall at the current levels heading into Wednesday. The ceiling for Wednesday appears to be $650. To the downside, Dealers are buying $645 to $600 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying displaying little concern that prices could move lower tomorrow. Dealer positioning is unchanged from slightly bearish/neutral to slightly bearish/neutral.
Looking Ahead to Friday:
Dealers are selling SPY $646 to $665 and higher strike Calls indicating the Dealers belief that prices may stall at the current levels heading the end of the week. The ceiling for the week is likely $650. To the downside, Dealers are buying $645 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 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 recovery to $645.17 reinforces the market’s bullish structure and confirms continued buying interest on dips. Long trades remain preferred above $641, with upside targets of $645, $647, and $650. Short trades should be considered only if SPY rejects resistance near $647 or falls below $641, targeting $637 and $635. With the VIX holding at 14.62, traders should maintain smaller positions and tighten stops, especially as we approach Nvidia earnings and Thursday’s macro data. Stay nimble and avoid overexposure. Review the premarket analysis posted before 9 AM ET to adjust for any overnight developments or shifts in positioning.
Good luck and good trading!
