Market Insights: Monday, August 4th, 2025
Market Overview
Markets came roaring back Monday, with Wall Street mounting its strongest rally since May as investors shrugged off last week’s sharp declines and jumped back into risk assets. The Dow surged nearly 600 points, gaining 1.3%, while the S&P 500 climbed 1.5%. The Nasdaq led all indices, jumping 1.9% in a broad-based recovery. The rebound was powered by dip-buying across the board, particularly in tech, following Friday’s sharp selloff triggered by weak labor data and fresh tariff concerns.
Much of the strength stemmed from renewed appetite for risk after Friday’s jobs report spooked markets. The disappointing data led President Trump to lash out publicly at the Bureau of Labor Statistics, firing its commissioner and vowing to nominate a new head within days. That political drama, paired with Trump’s sweeping tariff escalation, now extending to major partners like India, Canada, and Taiwan had left markets on edge heading into the weekend. Monday’s relief rally showed that traders, for now, are looking past policy chaos to capitalize on oversold conditions.
Adding to the geopolitical tension, Trump announced on Monday that tariffs on India would be “substantially raised” in response to its continued purchase of Russian oil, accusing the country of subsidizing Moscow’s war effort. Despite this, optimism around upcoming earnings helped support risk appetite. Tesla edged higher after news broke that CEO Elon Musk had been granted 96 million shares worth nearly $29 billion, and investors are looking ahead to reports from Palantir, Eli Lilly, and Disney later this week.
Rate cut expectations are also on the rise. Following the soft jobs data, nearly 90% of market bets are now pricing in a rate cut for September. Traders are recalibrating their outlook amid mounting political pressure on the Fed and signs the economy may be slowing. Monday’s rally didn’t erase last week’s losses, but it did offer hope that bulls aren’t done just yet.
SPY Performance
SPY rebounded 1.52% to close at $631.17 on Monday, snapping back above key support and nearly erasing Friday’s steep drop. The ETF opened at $625.67 and surged early, tagging an intraday high of $631.22 before settling just below it into the close. Volume came in lighter at 66.78 million shares, signaling cautious optimism rather than a full-on conviction rally. Still, reclaiming $625 and breaking through $630 marks a critical shift in tone after Friday’s breakdown. SPY now trades just below its prior all-time highs and has re-entered a familiar bullish posture heading into a light economic week.
Major Indices Performance
The Russell 2000 led the charge Monday, rising 2.15% and showing renewed strength in small-cap stocks after a punishing prior week. The tech-heavy Nasdaq climbed 1.95%, riding strong gains in Nvidia and Meta to post its best day in nearly three months. The S&P 500 added 1.5%, while the Dow gained 1.34%, recovering 580 points. This widespread bounce followed Friday’s macro-driven plunge, driven by renewed rate cut hopes and investors willing to buy the dip. Sector breadth was strong, with growth sectors like tech and discretionary pacing gains while cyclicals and defensives lagged. Despite new tariff headlines, traders are embracing a risk-on tone as earnings season continues.
Notable Stock Movements
It was a green day across the Magnificent Seven, with the sole exception of Amazon, which dipped 1.46% amid lingering concerns from last week’s AWS miss. Nvidia surged 3%, continuing its leadership in the AI space, while Meta and Microsoft closed at fresh all-time highs, further confirming the renewed tech momentum. Apple extended its gains from last week’s iPhone-driven beat, and Tesla edged higher on reports of a massive stock grant for Elon Musk. The group’s strength helped power Monday’s broad market rally, a sign that traders still favor growth exposure when sentiment improves.
Commodity and Cryptocurrency Updates
Crude oil slid another 1.40% to $66.21, continuing its retreat as concerns grow over global demand and geopolitical friction surrounding Russian oil exports. Our model remains confident that oil will move toward $60 in the coming months, viewing this summer rally as both seasonal and unstable. Gold rose 0.78% to $3,426, benefiting from safe-haven flows and a modest decline in real yields. Bitcoin climbed 0.87% to close above $115,200, stabilizing after recent weakness and signaling renewed interest in risk-sensitive digital assets.
Treasury Yield Information
The 10-year Treasury yield slipped slightly by 0.52% to close at 4.194%, easing some pressure on equities following last week’s spike. While still well below the danger zone near 4.5%, yields remain elevated enough to signal caution, especially if upcoming data fails to support a softer rate path. Monday’s move suggests the bond market is beginning to price in more aggressive Fed easing, with nearly 90% of traders now expecting a September cut. However, yields staying above 4% continues to act as a ceiling on equity valuations, even during rebounds.
Previous Day’s Forecast Analysis
Friday’s outlook projected a wide trading range between $615 and $630 with a clear downside bias if SPY failed to hold $620. The model highlighted $620, $615, and $610 as key supports and warned that any breakdown below $620 would accelerate the risk of a move toward $610 or even $600. Conversely, a reclaim of $625 could push SPY back toward $630, though upside was expected to be met with resistance. The bias was strongly bearish going into the session, with a focus on selling failed rallies and staying short under $625. Volatility was expected to remain elevated with strong caution against premature dip-buying.
Market Performance vs. Forecast
Monday’s market action came in just above the projected top-end range, with SPY closing at $631.17 after tagging an intraday high of $631.22. This decisively broke through the $630 resistance forecasted as a major ceiling. The session opened at $625.67, just above the bias level, and quickly rallied past resistance without significant pullbacks, invalidating the bearish case for a move back to $620. The bounce from $625 confirmed the model’s alternate scenario for a reflexive rally toward $630, though the strength and speed of the move slightly outpaced expectations. Traders who followed the guidance to shift bias if $625 was reclaimed were rewarded with a strong trend day favoring long entries. The model’s roadmap correctly highlighted the pivotal nature of the $625 level, and although downside momentum was expected, the swift change in tone was well flagged as a potential reversal point.
Premarket Analysis Summary
In Monday’s premarket analysis posted at 6:55 AM, SPY was trading at $625.67, and the bias level was set at $625. Upside targets were outlined at $628, $630, and $633, while downside levels included $625, $623, and $618. The analysis leaned toward long trades above $625, anticipating a recovery move after Friday’s steep selloff. However, it also warned of potential exhaustion at higher levels and suggested shorts only from obvious stalls. The outlook was cautiously optimistic, emphasizing that as long as SPY remained above $623–$625, bulls had a path higher.
Validation of the Analysis
The premarket game plan worked to near perfection. SPY held firm above $625 all session and rallied straight through each upside target, topping at $631.22. Traders who leaned long on the break above $625 had clear paths to profit, with $628 and $630 acting as textbook pivots that offered clean entries or scale-out zones. There were no meaningful signs of exhaustion during the day, validating the advice to avoid aggressive shorting. The bias level at $625 proved critical, and the premarket call for strength above it guided traders well through the session’s trend. The accurate directional lean and level-specific projections highlight the continued reliability of the premarket roadmap.
Looking Ahead
Tuesday brings the ISM PMI release, the only meaningful economic data point this week. With Monday’s rally setting a bullish tone, all eyes will be on this report for confirmation of ongoing strength—or signs of renewed weakness. A soft reading could revive concerns about demand and spark another defensive turn, especially if paired with more tariff drama. A strong print, however, could reinforce Monday’s move and encourage more upside follow-through. With volatility still elevated and headlines swirling, traders should expect movement in either direction depending on the print.
Market Sentiment and Key Levels
SPY heads into Tuesday trading near $631, just below the critical $632 resistance level. After Monday’s powerful reversal, market sentiment has tilted cautiously bullish, though fragility remains. Resistance levels are now stacked at $633, $635, $638, and $639, with strong sellers likely to emerge between $635 and $641. On the downside, initial support sits at $626 and $624, with a critical floor at $620. Holding above $626 keeps the bullish case alive, while a break below $620 reintroduces risk of a slide to $615 or lower. Bulls have the edge for now, but bears are watching for any exhaustion near resistance to strike again.
Expected Price Action
Our AI model projects SPY to trade between $626 and $633 on Tuesday, a wide yet narrowing band suggesting periods of consolidation inside broader trending action. With Monday’s reclaim of $625 now solidified, bulls control the tape unless $624 breaks decisively. Above $632, momentum could carry price toward $635 or even $638. A shallow dip to $626 would be ideal for buyers to reset before pushing higher. On the downside, if SPY loses $624 and fails to bounce, look for a quick flush to $620, and possibly $615. This is actionable intelligence generated by our AI model, and we advise traders to stay tactical and lean into trend-confirmation rather than counter-trend setups.
Trading Strategy
Long setups remain favored above $626, with upside targets at $633 and $635. A break through $635 could spark an extension to $638, but expect heavy resistance to emerge between $635 and $641. If SPY dips to $626 and holds, traders can consider tactical long entries with tight stops. Short trades should only be considered on failed rallies near resistance or a decisive breakdown below $624, with targets at $620 and $615. The VIX closed at 17.52, down 14.03% from Friday, signaling easing fear but still elevated enough to suggest sharp swings. Traders should maintain reduced position sizes, use wider stops near support, and manage profits proactively on strength.
Model’s Projected Range
The model projects SPY’s maximum range for Tuesday between $624.50 and $635.75 with the Call side dominating within a wide yet narrowing band suggesting trending price action with periods of consolidation. Overnight, markets rallied sharply as dip buyers returned, virtually reversing Friday’s decline and pushing SPY back above the key $625 level, with a close at $631.17, just shy of resistance at $632. Despite a two-day pullback on weak economic data and tariff concerns, the market only shed 3% from all-time highs, and participants once again looked past the headlines to buy the dip. By the open, SPY had reclaimed $625 and surged in the first hour to just below $630. It then moved sideways for most of the session before a late-day push brought it back within striking distance of all-time highs. Since reclaiming $585, SPY has been in a strong uptrend and today reinforced the strength of that trend. While volume was unimpressive and traders should stay open to the possibility of a dead cat bounce, our model sees continued upside on Tuesday and potentially through the rest of the week. Looking ahead to Tuesday, key resistance levels are $633, $635, $638, and $639, with support at $626, $624, $622, and $620. Below $620, limited support remains, making a swift drop to $615 likely. Strong resistance between $635 and $641 is expected to cap upside attempts. Without a major catalyst, bulls will aim to defend any pullback to as low as $620. A failure to hold that level would open the door to a move down to $615 or even $610. The ultra-bullish scenario for Tuesday would be a shallow retracement to no lower than $626, setting up a potential push to $635. However, even a pullback to $620 if it holds, would still favor the bulls. Notably, it was the successful defense of this level overnight that fueled today’s rally. Our model now leans slightly in favor of the bulls, not as strongly as it did early last week, but enough to tilt expectations toward higher prices in the coming days. A break below $600 or a retest of the critical $585 level, long considered a major line in the sand for bulls, now appears off the table for this week. While seasonal volatility from August through October often benefits bears, today’s strong reversal has put SPY back on track to reenter the redrawn bull channel from the April lows. The model has yet to redraw the channel, which implies it still expects higher prices in the near term. Meanwhile, the VIX fell a whopping 14.03% to 17.52. We’ve been recommending VIX Call options for over a week and view this as a solid hedging opportunity for long portfolios that haven’t yet added protection. While a VIX below 23 remains supportive for equities, the current contango structure suggests further upside in volatility. A breakout above 23 could easily trigger the 5–10% pullback we’ve been anticipating and we continue to expect elevated volatility to persist into year-end.
Market State Indicator (MSI) Forecast
Current Market State Overview:
The MSI closed in a Ranging Market State, with SPY closing just above support. There were no extended targets today and the MSI remained in a bearish state for the entire morning session, rescaling to a ranging state around noon. The fact that the MSI did not rescale to a bullish state even after a 1.5% rally and instead rescaled to a wide, ranging state implies our model is unsure if today’s rally is a bounce or an actual reversal of the past two days. To support the bull trend we would like to see the MSI rescale to a bullish state with extended targets above. Until then we suggest viewing today’s reversal with caution. MSI support is currently $629.91 with resistance at $637.52.
Key Levels and Market Movements:
On Friday, we wrote: “while the bulls still hold a slight edge, that advantage flips to the bears if $620 fails,” and added: “Bulls won’t regain full control until $632 clears.” We also noted: “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.” With that context, SPY opened just above $625, a key level the bulls aimed to defend. MSI was in a wide bearish state with no extended downside targets, and with price gapping up overnight just above MSI support, we stepped in and bought at $626.15, targeting MSI resistance at $629.75. It took most of the morning, but the market’s steady rally toward our level signaled we were on the right side of the move. After hitting T1, we looked to premarket levels and set $630 as T2, which was reached shortly after, allowing us to begin trailing. Expecting a strong-trend day and a possible late-day push, we held our final 10% into the close and exited at $631. It was a one-and-done session that paid well, thanks to a clear plan, disciplined execution, and strong alignment between MSI’s directional cues, our broader market model, and key technical levels, a well-structured and highly satisfying way to kick off the week. The MSI remains a cornerstone of our consistent trading process.
Trading Strategy Based on MSI:
Tuesday brings the ISM PMI, which is unlikely to materially shake the market. While it may have some effect, it’s unlikely to derail today’s rally. The market continues to shrug off bad news, though the current administration still presents macro risks, so we recommend staying alert for any developments that could disrupt the rally’s momentum. Our model has shifted to slightly favor the bulls, who need a close above $632 to fully sideline the bears. A pullback toward $626 or lower would likely be bought and could serve as a healthy pause after three days of volatility. Bears, on the other hand, need a clean break of $620 to press their case toward $615, which may act as a temporary floor on the way to $600. A confirmed break below $600 would notably shift the dynamic and make a 9–10% pullback more likely. With MSI in a wide, ranging state, the market appears to be in wait-and-see mode ahead of Tuesday’s session before committing to another major leg higher. As such, we expect a modestly higher market on Tuesday, with a slower, more controlled ascent to help build momentum for a potential push toward new all-time highs. Overall, Tuesday should be a wait-and-see day favoring dip-buying near key support at $626 or $620, while shorts may be considered on a break below $620 or a push above $632, as we anticipate more two-way action throughout the session. 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 $633 to $645 and higher strike Calls while also buying $632 Calls and selling $626 to $631 Puts indicating the Dealers desire to participate in any continuation of the rally on Tuesday. Dealers only sell near to the money Puts when they are convinced the market will move higher. The ceiling for Monday appears to be $635 with the floor at $626. To the downside, Dealers are buying $625 to $575 and lower strike Puts in a 3:1 ratio to the Calls/Puts they’re selling/buying displaying little concern that prices could move lower on Tuesday. Dealers nailed their positioning for today believing a “dead cat bounce” was in order for the day. Dealer positioning is unchanged from slightly bearish/neutral to slightly bearish/neutral.
Looking Ahead to Friday:
Dealers are selling SPY $632 to $650 and higher strike Calls implying the Dealers belief that prices may stagnate this week. The ceiling for the week appears to be $640. To the downside, Dealers are buying $631 to $575 and lower strike Puts in a 3:1 ratio to the Calls they’re selling, reflecting a slightly bearish/neutral outlook for the week. Dealers have maintained their net bearishness for the week with the ratio displaying Dealers holding significant protection. For the week Dealer positioning has changed from bearish to slightly bearish/neutral. 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 has reclaimed the $625 pivot and powered through $630, shifting the short-term trend back to bullish. Long trades are now favored from support at $626 and $624, with targets at $633 and $635. Short trades should be considered only near key resistance zones, particularly at $635 or above, with downside targets at $630, $626, and $624. The VIX fell sharply to 17.52, suggesting calmer conditions, but the risk of volatility spikes remains. Tighten stops on strength and reduce size if SPY loses $624. Watch for breakout failures or breakdown traps to offer the highest-probability setups. 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!
