Market Insights: Wednesday, December 17th, 2025

Market Overview
US stocks fell sharply on Wednesday as renewed concerns about AI funding and capital intensity reignited a broad tech-led selloff, pushing major indices decisively lower. The Nasdaq slid 1.81%, accelerating losses into the close as pressure built across semiconductors and large-cap technology, while the S&P 500 dropped 1.11% and the Dow lost 0.47%. The catalyst for the move was a Financial Times report indicating that Oracle’s roughly $10 billion data center project has lost backing from private lender Blue Owl Capital, refocusing investor attention on how aggressively AI infrastructure spending is being financed and whether demand will ultimately justify the scale of that investment. The report amplified existing unease around rising leverage, off-balance-sheet structures, and the sustainability of AI capex at a time when revenue visibility remains uneven. Oracle shares slid sharply and dragged the broader AI complex with them, reigniting selling pressure across megacap tech. The renewed weakness comes as markets continue to parse a noisy November jobs report and look ahead to Thursday’s CPI release for clearer guidance on the Fed’s path in 2026. Fed Governor Chris Waller added to the debate by suggesting the central bank may still have room for 50 to 100 basis points of cuts, even as inflation risks remain unresolved. Outside of tech, risk aversion showed up in flows toward defensive assets, with gold surging toward fresh records. Overall, Wednesday’s tape reflected a market that has shifted firmly into risk-off mode in the near term, with AI funding concerns, rising volatility, and key inflation data looming as investors reassess whether the year-end rally can be salvaged.

SPY Performance
SPY suffered a decisive breakdown on Wednesday, opening at $679.08, failing quickly, and selling off persistently throughout the session to an intraday low of $671.20 before closing near the lows at $671.34, down 1.11% on the day. Trading volume reached 93.40 million shares, again well above average and confirming that the move lower was driven by active selling rather than thin liquidity. Early attempts to stabilize above $680 failed almost immediately, and once that level was lost, sellers maintained control for most of the session. The drop carried SPY cleanly below the $675 area and through the 50-day moving average, which slowed the decline but did not stop it. The close near the session lows signals that bears now control the near-term narrative, with SPY firmly below the $685 level where bulls regain full control and below $680, the line that has separated bullish from bearish momentum for the past two weeks.

Major Indices Performance
Wednesday’s losses were broad-based, though once again led by technology. The Nasdaq fell 1.81%, reflecting renewed pressure across AI, semiconductors, and megacap growth names. The S&P 500 dropped 1.11%, tracking SPY’s breakdown and confirming that weakness extended well beyond a single sector. The Dow declined 0.47%, holding up relatively better due to its lower tech exposure but still participating in the risk-off move. The Russell 2000 lost 1.12%, highlighting continued concern around smaller-cap sensitivity to tightening financial conditions and slowing growth expectations. The synchronized decline across indices reinforced the sense that Wednesday’s move was not a rotation but a genuine de-risking event driven by funding concerns, rising volatility, and mounting caution ahead of CPI.

Notable Stock Movements
It was a mostly red day across the Magnificent Seven, underscoring the renewed pressure on megacap leadership. Tesla was the lone relative standout, managing a modest gain of 0.19%, while the rest of the group traded lower in sympathy with the broader AI unwind. Oracle led the downside after the report on lost data center financing reignited worries about AI capital spending models. Semiconductor names were hit hard as well, with investors reassessing near-term demand visibility and funding risks across the AI supply chain. Outside of tech, Netflix stood out as one of the few large-cap names holding up better, while most growth and cyclical stocks struggled to find footing as selling pressure remained steady throughout the session.

Commodity and Cryptocurrency Updates
Commodities and crypto sent mixed but telling signals about risk sentiment. Crude oil rose 2.83% to $56.69, bouncing modestly and staying above the key $56 level that our model continues to flag as critical. While further downside remains possible, holding above $56 keeps the door open for a move back toward $60 and potentially $70 if demand and supply dynamics cooperate. Gold surged 0.95% to $4,373, pushing deeper into record territory as investors flocked to safe-haven assets amid equity weakness and rising uncertainty around inflation and policy. Bitcoin fell 2.05% but held above $85,900, signaling a cooling in speculative appetite without a full breakdown in crypto’s broader uptrend.

Treasury Yield Information
The 10-year Treasury yield edged up slightly by 0.07% to close near 4.152%, remaining below the 4.5% threshold that typically creates more persistent headwinds for equities. In our framework, yields above 4.8% begin to meaningfully pressure risk assets, and a sustained move above 5% has historically coincided with deeper equity corrections. At 5.2%, our model suggests the probability of a 20% or greater correction rises sharply. Wednesday’s modest uptick in yields was not the primary driver of the selloff; instead, equity weakness was driven by valuation concerns, AI funding risks, and rising volatility. Still, with CPI ahead, yields remain a critical variable that could quickly shift sentiment if inflation surprises.

Previous Day’s Forecast Analysis
In Tuesday’s newsletter, we projected SPY’s maximum range for Wednesday between $674 and $686 and emphasized that the near-term edge was tilting toward the bears as long as price remained below $680. We warned that failure to hold $678–$680 would open the door to a retest of $675 and potentially $670, while reiterating that the longer-term trend remained bullish above $640. The roadmap stressed caution on longs unless support clearly held and favored shorts on failed bounces into resistance, particularly near $680 and above.

Market Performance vs. Forecast
Wednesday’s price action validated the bearish scenario outlined in the prior forecast. SPY failed to hold above $680 early, broke through $675, and continued lower to close near $671, well within and ultimately below the lower end of the projected range. The loss of $680 emboldened sellers exactly as anticipated, and while the 50-day moving average near $675 briefly slowed the decline, it did not prevent a close near the lows. The inability to reclaim key resistance levels confirmed that bears have seized short-term control, even as the broader bull trend remains technically intact above $640.

Premarket Analysis Summary
In Wednesday’s premarket notes posted at 7:43 AM, SPY was trading around $681.31, with a bias level set at $680.50. The plan called for cautious upside attempts toward $683–$685 as long as price held above the bias, while warning that a break below $680.50 would likely lead to consolidation toward $678 and possibly $674 if selling accelerated. We explicitly noted hesitation on the upside and advised caution on aggressive longs absent sustained buying pressure.

Validation of the Analysis
The session unfolded in line with the risk framework laid out premarket. SPY briefly traded above the bias but failed to attract follow-through, and once $680.50 gave way, selling pressure persisted throughout the day. The downside extension exceeded the initial consolidation targets, reflecting stronger-than-expected bearish conviction driven by AI-related headlines. The failure of the 50 DMA to hold on a closing basis reinforced our repeated warnings about its uncertain durability on repeated tests.

Looking Ahead
Attention now turns squarely to Thursday’s CPI and Unemployment Claims, which will be critical in shaping expectations for the Fed’s 2026 policy path. Friday’s Final GDP and Core PCE will further refine the macro picture. With SPY closing near the lower boundary of its bull channel from the April lows, incoming data have the potential to either stabilize sentiment or accelerate the downside. Absent a positive catalyst, markets may remain under pressure as investors reassess risk into year-end.

Market Sentiment and Key Levels
Sentiment has shifted decisively toward caution. SPY’s close near $671 places it below the $675–$685 range that defined the prior two weeks and signals a near-term bearish regime. Resistance now sits at $672, $675, $677, and $680, with $675 and $680 expected to act as heavy overhead supply on any bounce. On the downside, support rests at $670, $664, and $662. A sustained break below $670 opens the door to a faster move toward the low $660s, while bulls need a close back above $675 to regain balance and reenter the prior range.

Expected Price Action
Our model projects SPY’s maximum range for Thursday between $665 and $681, with the Put side dominating in an expanding band that signals trending price action with intermittent chop. Bears control the near-term narrative after Wednesday’s close near the lows, and any bounce toward $675 or $680 is likely to be sold on the first attempt. If SPY fails to hold $670, downside risk increases toward $664 and $662. Conversely, a successful defense of $670 followed by a reclaim of $675 would be the first sign that sellers are losing momentum.

Trading Strategy
Given the current environment, we favor a defensive and tactical approach. For shorts, failed bounces into $675 or $680 offer attractive risk-reward, with downside targets at $670, $664, and $662. For longs, we prefer patience, looking for cautious entries near $670 or lower only if clear signs of stabilization emerge, with tight risk controls. Volatility has picked up, with VIX rising 6.92% to 17.62, still neutral but trending higher, which argues for smaller position sizes, defined risk, and disciplined exits. Until CPI provides clarity, trading what you see and respecting key levels remains paramount.

Model’s Projected Range

SPY’s projected maximum range for Thursday is between $665 and $681, with the Put side dominating in an expanding band that signals trending price action with intermittent chop. The market moved lower today, falling more than 1%, with SPY closing down 1.10% at $671.40 and finishing near the lows of the session. Volume was once again significantly above average. Overnight, bulls pushed price back above $680 into the open, but the move failed quickly. Once the market opened, selling was persistent throughout the day. While the downtrend lacked momentum, the close near the lows gives bears control of the near-term narrative. Price is well below $685, the level where bulls regain full control, confirming a bearish near-term shift. We warned that failure to hold $680 would embolden bears, and that scenario has now played out. Despite this, the longer-term trend still favors bulls, keeping the broader battle intact. Overnight, a failure to hold $670 opens the door to $664 and then $662. If bulls manage even a dead cat bounce and hold above $670, they will attempt to reclaim $675, though we expect the first and possibly second tests to be sold. Bulls need a close above $675 to regain balance and reenter the $675–$685 range that has defined the past two weeks. External catalysts such as CPI could change conditions quickly, so remain alert to geopolitical headlines and trade what you see. The 50 DMA at $675 slowed today’s decline but failed to stop it, reinforcing our view that durability on future tests remains uncertain. Today’s action reduces the odds of a Santa Rally, though it does not eliminate the possibility. Resistance for Thursday sits at $672, $675, $677, and $680, while support rests at $670, $664, and $662. Gains above $680 should be capped by heavy resistance, while a break below $667 could send price toward $662 quickly. The broader trend remains bullish above $640, but bulls have lost their near-term edge. Bears are now in control, so absent a catalyst, we prefer shorts near $675 and cautious longs near $670 as the market remains under pressure. Crypto fell today, as did all MAG stocks except Netflix, a combination we have warned could pressure equities if sustained. The VIX rose 6.92% to 17.62, remaining neutral, though acceleration toward 20 would signal increasing risk. SPY closed near the lower boundary of its bull trend channel from the April lows, with support near $668. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a Bearish Trending Market State with SPY closing well below MSI support turned resistance. There were extended targets into the close and for much of the afternoon session. The 50 DMA at $675 slowed the decline today as the MSI was rescaling lower all day but basically got stuck on the last rescale just before noon as SPY tested the 50 DMA. It appeared that SPY might rally given there were only a few extended targets below, but that was not to be and as soon as extended targets started printing again, SPY moved to the day’s lows just above $671. Overnight the MSI rescaled higher to a narrow bullish state but without any extended targets, at the open, the MSI started to rescale lower and the day ended with the MSI forecasting lower prices for Thursday with resistance at $673.07 and higher at $675.10.
Key Levels and Market Movements:
On Tuesday we stated, “Absent an external catalyst, a repeat of today is likely with sideways to down price action,” and noted, “If $678 fails, SPY likely drops to $675 and then $670,” while also adding, “If $678 fails and does not recover quickly, we favor shorts below that level or on low-volume bounces back into $680.” With this context, and with the MSI opening in a narrow bullish state with SPY just above $680, we initially looked for a long off MSI support to see if price might attempt another test of $685. That setup never materialized, and the MSI rescaled into a ranging state, which is a condition we generally avoid trading. Sticking to our plan, once price broke below $678, we entered short and set T1 at MSI support at $676.90. That target was hit quickly, and the MSI began to rescale lower. We then set T2 at MSI support at $675.10, which was also reached without much resistance. Given that $675 aligns with the 50 DMA, we did not expect significant follow through, but with our stop moved to breakeven, we held the remaining 10% of the position to see if price could reach the premarket level of $674. SPY did trade to that level, and with the MSI continuing to rescale lower and extended targets printing, we stayed with the trade until a textbook failed breakdown appeared just before noon. At that point, we took final profits at $673.25 and called it a day. The market really did look like it wanted to rally but the range was very narrow from about 10 am until 1 pm so given we had a green trade in the books, we ended the day early, one and done, thanks to  having a clear plan, maintaining patience and discipline, and staying aligned with MSI signals, market structure, and our broader trading framework. The MSI continues to prove its reliability as the cornerstone of our trading process.
Trading Strategy Based on MSI:
Thursday has CPI, which makes it a true 50/50 day where anything can happen. SPY could rally $10 and then drop $5, or do the opposite, so traders must be prepared for volatility. Absent an external catalyst, the market is likely to attempt a bounce off the day’s lows and retest $675. We believe the first test of $675 will fail, so we favor shorts from this level and even as high as $678. The bulls must defend $670 on any overnight test or the bears will press lower. If $670 fails, SPY is likely to drop to $664 and then $662. If $670 holds overnight, the bulls will attempt another push above $675, but that level is again likely to be sold. Crypto and most MAG stocks fell today, which could mark the beginning of an unwind that leads to a more serious market pullback. That said, the long-term bull trend remains intact above $640, but in the near term we favor the bears as long as price remains below $678. Any test of $685 continues to be a strong short candidate. As always, stay alert to macro risks and be prepared to trade what you see in the coming days. Failed breakouts and failed breakdowns continue to offer the highest-probability setups, so remain flexible, avoid trading during Ranging Market States, and ensure all trades are fully aligned with MSI signals. 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 $672 to $675 Calls while buying $676 to $693 Calls indicating the Dealers’ desire to participate in any rally on Thursday, should SPY break above $675. The ceiling for tomorrow appears to be $675 although Dealer positioning could change that significantly. To the downside, Dealers are buying $671 to $565 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying displaying little concern that prices could move significantly lower on Thursday. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Friday:
Dealers are selling SPY $682 to $710 and higher strike Calls while buying $672 to $682 Calls indicating the Dealers’ desire to participate in any relief rally by Friday. The ceiling for the week appears to be $690. To the downside, Dealers are buying $671 to $565 and lower strike Puts in a 5:1 ratio to the Calls they’re selling/buying, reflecting a market that is showing some concern about lower prices. 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
Into Thursday, we recommend treating rallies as suspect until SPY can reclaim and hold above $675. Focus on failed bounces near resistance for short opportunities and remain cautious with longs unless $670 holds convincingly and price stabilizes. With CPI and Unemployment Claims ahead, volatility could increase quickly, so keep size moderate, respect stops, and stay flexible. Let the data and the market’s reaction guide positioning rather than preconceived bias.

Good luck and good trading!