Market Insights: Friday, August 29th, 2025

Market Overview

Stocks stumbled on Friday, snapping their winning streak as inflation concerns resurfaced following a closely watched PCE report. The Nasdaq led the decline, falling 1.15%, followed by a 0.6% drop in the S&P 500 and a 0.2% dip in the Dow. The retreat came after July’s “core” PCE index, the Fed’s preferred inflation gauge, rose 0.3% month-over-month and 2.9% year-over-year, both matching expectations but still well above the Fed’s 2% target. While the data didn’t surprise, it reinforced worries that sticky inflation may delay the Fed’s pivot to rate cuts. Adding to the gloom, consumer sentiment dropped to a three-month low, with survey participants citing renewed fears of rising prices. Despite the pullback, all major indices ended August in the green, with the Nasdaq notching its fifth straight monthly gain and the S&P 500 and Dow posting four-month winning streaks, their longest since 2024. Small caps also joined the rally, with the Russell 2000 adding 6% for its fourth straight monthly rise. However, as traders look ahead to September, seasonal weakness looms. Historical trends, thin retail participation, and rising volatility often make it the toughest month for markets. The broader bullish trend remains intact, but Friday’s slide punctuated by a rough day for Big Tech and Nvidia in particular, signaled a potential shift in tone heading into next week’s heavy macro calendar.

SPY Performance

SPY fell 0.60% to close at $645.05, pulling back from Thursday’s record high after briefly attempting another push higher at the open. It opened at $647.47 and made an early high at $647.83 before reversing hard, slipping to a session low of $643.14. The ETF battled back late but still ended below key support levels, now turned resistance. Volume climbed to 66.78 million, well above average, signaling meaningful selling interest ahead of the long weekend. With SPY closing near its session low and just under a critical level, short-term sentiment has cooled, even though the broader trend remains intact.

Major Indices Performance

The Russell 2000 was Friday’s best performer, though it still declined 0.57%, reflecting broad-based selling across equities. The Dow shed 0.2% while the S&P 500 gave up 0.6%, and the Nasdaq led losses with a 1.15% drop driven by weakness in Big Tech. Inflation data was the major driver, with the PCE index confirming that price pressures remain sticky. That, combined with a dip in consumer sentiment, pushed risk assets lower and increased uncertainty about the Fed’s next move. Defensive sectors held up better than cyclicals, while tech stocks dragged on the indices, underscoring the market’s sensitivity to macro developments and rising interest rate concerns.

Notable Stock Movements

It was a red day for the Magnificent Seven, with six of the seven names closing lower. Nvidia led to the downside with a sharp 3%+ loss, continuing its post-earnings slide as concerns about its China business and slowing data center growth weighed. Tesla also saw significant selling pressure, while Apple, Microsoft, Meta, Amazon, and Netflix all ended in the red. Alphabet stood alone, gaining 0.64% and offering a rare bright spot among the mega caps. The weakness in this critical group highlights growing investor caution as valuation concerns and inflation data re-enter the spotlight.

Commodity and Cryptocurrency Updates

Crude oil slipped 0.94% to close at $63.99, extending its pullback and continuing to trade in a weakening trend. Our model still anticipates a drop toward $60 in the coming months as global demand softens. Gold surged 1.19% to finish at $3,515, reflecting a flight to safety amid inflation concerns and late-month volatility. In crypto, Bitcoin dropped 3.60% to close just above $107,800 as risk-off sentiment gripped the market. Ethereum and other altcoins also saw heavier selling as traders trimmed speculative positions.

Treasury Yield Information

The 10-year Treasury yield ticked up 0.50% to 4.228%, rising for a second day as sticky inflation data fueled expectations of a more cautious Fed. Yields remain elevated but below the danger zone; however, should they break above 4.5% or climb toward 4.8%, equity markets could face stronger headwinds. A move above 5% would likely trigger a deeper correction of 20% or more. For now, the modest rise reflects a market reassessing the pace and timing of rate cuts.

Previous Day’s Forecast Analysis

Thursday’s forecast anticipated SPY would trade in a tighter band between $645.50 and $652 with a bullish lean, favoring long setups above $645. The model called out upside targets at $650, $653, and $655 while warning that a failure to hold $645 could bring a drop toward $644 or even $640. The strategy emphasized caution around resistance levels and advised tightening stops due to the looming PCE data. The VIX reading at 14.43 underscored the low-volatility environment, supporting the idea of controlled trading unless disrupted by a surprise inflation print.

Market Performance vs. Forecast

SPY’s actual performance diverged from Thursday’s bullish expectations. The ETF opened at $647.47, just above the model’s $645 threshold, and briefly pushed higher before sellers stepped in aggressively. The session low of $643.14 undercut key support levels, and SPY closed at $645.05, just above the prior forecast’s lower boundary. The expected range of $645.50 to $652 proved slightly too optimistic, and the upper resistance levels went untested. Short trades from above $647 worked best, especially after the rejection near $648. While the broader bullish trend remains intact, Friday’s action underscored the importance of respecting macro catalysts and using tight risk management near resistance.

Premarket Analysis Summary

In Friday’s premarket analysis posted at 7:14 AM, SPY was trading at $647.11 with a bias level at $648.55. The model leaned toward downside consolidation, warning that strength beneath the bias would likely be sold. It highlighted $646, $645, and $643.50 as key downside targets while advising short entries on rejections from the bias. If SPY found support below $645, long setups back toward the midrange could emerge, but upside was expected to be limited. The model also cautioned against aggressive long trades without a strong rally above the bias.

Validation of the Analysis

Friday’s market action validated the premarket analysis with impressive accuracy. SPY tested just beneath the bias level at the open, peaking at $647.83 before reversing sharply. The selloff swiftly broke through the downside targets of $646 and $645, reaching as low as $643.14 before stabilizing. This confirmed the premarket strategy to favor selling strength under $648.55 and targeting the lower end of the range. Traders who followed the guidance had a clear path to profit on both the rejection at the bias and the follow-through to support levels. The analysis once again demonstrated its value in providing a clear and disciplined framework for intraday execution.

Looking Ahead

Markets are closed Monday for the Labor Day holiday, but Tuesday brings the PMI report, followed by a packed week of economic data including Wednesday’s JOLTS numbers and Thursday’s ADP payrolls. Friday's jobs report is the marquee event and could reset market expectations for the Fed. Given today’s inflation data and late-day volatility, these upcoming releases will be crucial in determining whether SPY can reclaim momentum or if a September pullback begins to take shape. Traders should prepare for renewed volatility and manage risk carefully heading into next week’s trading.

Market Sentiment and Key Levels

SPY closed at $645.05, a notable drop from Thursday’s high, and sits right at former support now acting as resistance. Sentiment remains cautiously bullish in the longer term but has shifted to neutral near-term as key support levels were tested and broken during the session. Immediate resistance is at $648, $650, $652, and $654. On the downside, support now lies at $642, $640, $637, and $635. A break below $640 could usher in a sharper retracement to $635 or even $630, while bulls will attempt to defend $643 overnight and retest recent highs. The uptrend remains intact, but caution is warranted as momentum weakens.

Expected Price Action

Our AI model projects SPY to trade between $640 and $650 on Tuesday, slightly widening the range and suggesting more two-way trading with intermittent trends. The bias has tilted bearish, especially after Friday’s inflation-driven selloff. If SPY breaks below $640, expect a test of $637 and possibly $635. However, if bulls defend $643 and push through $648, we could see another run at $650 and potentially $652. Actionable intelligence suggests a cautious stance heading into Tuesday, with key levels likely to serve as battlegrounds. Momentum is slowing, and September’s seasonality may start to weigh on sentiment.

Trading Strategy

Traders should focus on short setups below $645 with targets at $640, $637, and $635. Long trades remain viable above $643, but with limited upside unless SPY reclaims $648 with strength. Resistance at $648, $650, and $652 will be tough to clear without a bullish catalyst. Use tight stops on long trades given the rising volatility, and be ready to switch directions if SPY breaks below $640. With the VIX up 6.44% to 15.36, risk is climbing, and traders should trim position sizes, avoid overexposure, and manage trades closely. Tuesday’s price action may set the tone for the rest of the week so be ready to react accordingly.

Model’s Projected Range

SPY’s projected range for Tuesday sits between $638.50 and $650.75, with the Call side dominating in an expanding band that suggests choppy price action with intermittent trending periods. PMI is due out Tuesday, but the market will likely pause until Friday’s jobs report, which has the potential to materially move markets. PCE today showed sticky inflation, and with consumers increasingly concerned about the economy, SPY sold off 0.6% while QQQ dropped 1.18%. After the initial decline, by 10 AM the market slipped into sideways chop as most participants prepared for the last long weekend of summer. Overnight, SPY dipped to $646.50, but by the open it had begun to recover, opening at $647.24 and appearing to shake off inflation concerns, though that didn’t last long. Within minutes, heavy sell orders hit and SPY broke the prior day’s lows as bulls failed to defend $645; they eventually regained their footing, but SPY still fell to $643.14 before closing at $645.05, right at major support now turned resistance. While the day felt worse than it was, strong volume favors further losses next week, even as bulls still control the broader trend. Absent a catalyst, the bulls want to defend $643 overnight, and failure to do so would open the door to $640 and possibly $637; a breakdown through $637 could accelerate losses, slowing at $635 but likely reaching $630, below which little support exists. If bulls can hold $643, however, they will attempt to repair the damage done today and retest prior highs, with $660 still required to confirm the breakout. Failure to reach $660 would suggest a near-term top, especially with September’s reputation for negative returns making a shift in market dynamics plausible. With Tuesday’s expanding but still relatively narrow range, two-way trading is favored. Resistance is expected at $648, $650, $652, and $654, while support lies at $642, $640, $637, and $635. Since reclaiming $585, SPY has remained in a steady uptrend supported by dip buyers, though today all Mag stocks lost ground except Google, with several names like Nvidia and Tesla dropping more than 3%. If these leaders continue to sell off, the broader market will follow, as the parabolic advance carries rising risk with limited reward. We noted yesterday that our model was flashing early signs of weakness after the first week of September, perhaps that warning is arriving a bit early, and while it is not yet time to fade the trend, quick profit-taking and caution with overnight holds are advised. The VIX rose sharply 6.44% to 15.36, and while September often sees VIX near 20, contango in VXX Futures suggests volatility may actually decline. It’s too early to know whether seasonal weakness or the Futures forecast will prevail. But at this point, if you have not added protection to your long book, you should do so given the coin-toss scenario setting up for September. VIX below 23 reinforces the bullish case, though a breakout above that level could finally spark the long-anticipated 5–10% pullback. For now, SPY closed just above the bull trend channel from the April lows, reaffirming the broader bullish structure. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the day in a very narrow, Bearish Trending Market State, with SPY closing well below MSI support turned resistance. There were no extended targets at the close but they did print for the entire morning session. SPY fell below major support at $645 yet the MSI did not rescale lower. This implies low volume after the initial, rapid drop to the days lows. While the herd was participating in the decline, they too walked away after 1 pm to start their long weekend. Overnight SPY pulled back slightly which saw the MSI rescale to a ranging market state. But by the open, the MSI had rescaled to a very narrow bullish state which was a warning of what would follow. A quick drop in SPY and the MSI rescaled to the current, very narrow bearish state implying the likelihood of sideways to down price action on Tuesday. MSI resistance is now at $646.52 and higher at $646.73.
Key Levels and Market Movements:
On Thursday we wrote, “Friday brings the Fed’s most-watched indicator, PCE, which under normal circumstances would be expected to move the market materially, though with the long weekend ahead, volatility may be more muted,” and noted, “The bulls want to defend $645,” while also stating, “a close below $645 would open the door for bears to attempt a move to $640.” With that context, and with the MSI opening in a very narrow Bullish Trending Market State without extended targets above, we chose to trade with the overnight sell-off and entered short on a triple top at $647.75. We set T1 at the premarket level of $646 given the MSI range was very narrow and less than our $1 minimum profit target, and after reaching T1 quickly, we looked to T2 at the next premarket level of $645 where we expected the bulls to step in. They did not, but we locked in T2 and trailed with a stop at breakeven as SPY fell to the next premarket level of $643.50, where a failed breakdown set up and we exited and reversed long just above this level. With a solid winner already booked, we stayed conservative, locking in T1 and T2 at $645, believing this major support would now serve as major resistance, which proved correct as the market stalled and failed to reclaim the level. We eventually closed our trailer at this level as well and called it a weekend, going two-for-two 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 brings PMI, which may stir things up a bit, though with the jobs report on the horizon the market may drift for a few days before choosing a direction. With the long weekend ahead and markets closed, traders should also be wary of any external news out of the White House that could jolt price action. Absent a catalyst, the session is likely to deliver more sideways, two-way trade with some follow-through from today’s decline. The bulls want to reclaim $645 in an effort to push SPY back toward new all-time highs, potentially as high as $655, while failure to do so would open the door for bears to attempt a move to $640, where they would likely press their luck. For real traction, however, the bears need a break of $635 to generate momentum. The broader structure continues to favor the bulls until major support levels are lost, so we maintain a preference for long setups above $640 while remaining open to shorts on a confirmed break below that level or on a failed breakout above $645. Into the long weekend, the market may move lower to retest today’s lows, where we expect dip buyers to step in. 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 $648 to $660 and higher strike Calls while also buying $646 to $647 Calls indicating the Dealers desire to participate in any rally on Tuesday. Dealers are no longer selling near the money Puts. The ceiling for Monday appears to be $650. To the downside, Dealers are buying $645 to $600 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 Tuesday. Dealer positioning has changed from slightly bearish/neutral to bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $648 to $670 and higher strike Calls while also buying $646 to $647 Calls indicating the Dealers desire to participate in any rally next week. The ceiling for the week is likely $655. To the downside, Dealers are buying $645 to $540 and lower strike Puts in a 6:1 ratio to the Calls they’re selling/buying, reflecting an increasingly bearish outlook for the week. For the week Dealer positioning has changed from bearish to more strongly 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 dropped to $645.05 on Friday as inflation data hit sentiment ahead of the long weekend. Traders should favor short setups below $645 targeting $640, $637, and $635, while keeping an eye on long opportunities if SPY holds above $643 or reclaims $645. The market remains in a broader uptrend, but near-term caution is warranted with volatility ticking up and macro risks increasing. The VIX rose 6.44% to 15.36, signaling growing nervousness. As always, trade with discipline, manage size accordingly, and avoid chasing strength or weakness without confirmation. Review the premarket analysis posted before 9 AM ET to account for any changes in our model’s outlook and in Dealer Positioning.

Good luck and good trading!