Market Insights: Thursday, December 18th, 2025

Market Overview
US stocks rebounded on Thursday as a cooler-than-expected CPI report helped ease inflation concerns and sparked a relief rally across risk assets, particularly in technology and AI-linked names. The Nasdaq jumped 1.38%, leading the advance as investors rotated back into growth after several bruising sessions, while the S&P 500 gained 0.76% and the Dow added a more modest 0.14%. November’s CPI showed inflation rising 2.7% year over year, with core CPI at 2.6%, both below consensus expectations and reinforcing the narrative that price pressures are continuing to cool. While economists cautioned that recent inflation and labor data may be noisier than usual due to the government shutdown, markets focused on the broader signal that inflation is trending in the right direction. The CPI print followed comments from Fed Governor Chris Waller earlier in the week indicating the central bank may still have room to cut rates in 2026, especially if inflation remains contained and labor market cracks continue to widen. That combination helped revive risk appetite and stabilize sentiment after Wednesday’s AI-driven selloff tied to Oracle’s data center funding concerns. Tech confidence was further boosted by Micron’s strong earnings late Wednesday, which painted a healthier picture of AI-related demand and suggested that fears of an abrupt AI slowdown may be overdone. Outside of traditional tech, Trump Media surged after announcing a $6 billion merger with fusion-energy firm TAE Technologies, a deal viewed as a longer-term bet on AI-driven power demand. Overall, Thursday’s tape reflected a market eager to seize on any evidence that inflation is easing and the AI narrative remains intact, even as investors remain cautious about declaring the all-clear with growth, funding, and policy risks still in play.

SPY Performance
SPY staged a volatile but constructive rebound, opening at $677.59, pushing sharply higher to an intraday high of $680.72, and then retracing much of the move before closing at $676.47, up 0.76% on the day. Trading volume surged to 101.28 million shares, nearly double average, confirming broad participation in the CPI-driven bounce. Price action reflected a classic relief-rally structure: an early surge on favorable data, followed by profit-taking and consolidation as SPY ran into resistance near the $678–$680 zone. Multiple intraday tests of the $675 area held, showing that buyers were willing to defend the 50-day moving average after Wednesday’s breakdown. Despite the gain, SPY remains below $685, the level where bulls regain full control, leaving the broader structure in recovery mode rather than a confirmed breakout.

Major Indices Performance
Thursday’s rebound was broad-based but uneven. The Nasdaq led with a 1.38% gain as megacap tech and AI-linked names recovered sharply from recent losses. The S&P 500 rose 0.76%, tracking SPY’s rebound and reflecting renewed appetite for risk following the CPI print. The Dow added 0.14%, lagging the other indices due to its lower tech exposure but still participating in the upside. The Russell 2000 gained 0.68%, suggesting some stabilization in smaller-cap sentiment after recent pressure tied to growth and funding concerns. The index mix highlighted a tentative shift back toward growth leadership, though not yet a decisive one.

Notable Stock Movements
It was a mostly green session across the Magnificent Seven, underscoring the relief tone in tech. Tesla was again among the leaders, while most other megacap names posted solid gains as investors selectively rotated back into AI and growth exposure. Netflix was the main laggard within the group, slipping 0.83% amid some profit-taking after recent strength. Broader semiconductor and AI-linked stocks benefited from Micron’s upbeat earnings and guidance, which helped counter fears raised earlier in the week about funding and demand for AI infrastructure. The rebound did not erase recent damage, but it did suggest that investors remain willing to re-engage with the AI trade when supported by concrete earnings and easing macro pressure.

Commodity and Cryptocurrency Updates
Commodities and crypto sent a mixed signal but generally aligned with a modest improvement in risk sentiment. Crude oil edged up 0.18% to $55.91, hovering just below the key $56 level that our model continues to flag as pivotal. While crude remains vulnerable to further downside, a sustained hold near this area keeps alive the potential for a rebound toward $60 and possibly $70 if demand stabilizes. Gold slipped 0.28% to $4,361 after its recent surge, reflecting mild profit-taking as equity risk appetite improved, though prices remain near historic highs. Bitcoin fell 0.92% but held above $85,200, suggesting consolidation rather than a breakdown as volatility in traditional markets eased.

Treasury Yield Information
The 10-year Treasury yield dropped 0.84% to close near 4.114%, providing a meaningful tailwind for equities and reinforcing the bullish reaction to the CPI data. In our framework, yields below 4.5% remain supportive for stocks, while moves above 4.8% and especially above 5% create significant risk for equities. At 5.2%, our model suggests the probability of a 20% or greater correction rises sharply. Thursday’s pullback in yields eased near-term pressure on valuations and helped underpin the rebound in tech and growth, though the rate outlook remains highly sensitive to upcoming data.

Previous Day’s Forecast Analysis
In Wednesday’s newsletter, we projected SPY’s maximum range for Thursday between $665 and $681 and emphasized that bears controlled the near-term narrative after the decisive breakdown below $675. We warned that while a bounce was possible, rallies into $675 and $680 were likely to be sold unless supported by a strong external catalyst. CPI was highlighted as the primary risk event capable of shifting sentiment and altering the near-term structure.

Market Performance vs. Forecast
Thursday’s action unfolded squarely within that framework. SPY remained inside the projected $665–$681 range and delivered the type of data-driven rebound we flagged as possible if CPI surprised favorably. Price pushed as high as $680.72 but failed to hold above that level, consistent with our expectation that resistance near $678–$680 would be difficult to clear on the first attempt. The inability to reclaim $685 confirmed that while the bearish edge has weakened, it has not fully disappeared.

Premarket Analysis Summary
In Thursday’s premarket notes posted at 7:54 AM, SPY was trading near $674.32 with a bias level at $674.25. The plan called for cautious upside attempts as long as price held above that bias, while noting that broader market pressure remained intact and that upside progress was likely to stall well before $684 absent an extreme reaction. On the downside, we flagged $672.25 and $670 as key targets if selling resumed.

Validation of the Analysis
The intraday tape validated the premarket roadmap well. SPY held above the $674.25 bias, allowing upside attempts to develop, but stalled near the upper resistance band and failed to sustain trade above $680. Selling into strength and repeated tests of $675 highlighted ongoing indecision and confirmed that the market remains rangebound rather than trending.

Looking Ahead
Attention now shifts to Friday’s Final GDP and Core PCE releases, which will help refine expectations for growth and inflation as the year winds down. With no major catalysts scheduled beyond that, markets are likely to remain sensitive to technical levels, positioning, and any surprise headlines. After Thursday’s rebound, investors will be watching closely to see whether follow-through buying can develop or whether the rally fades back into the recent range.

Market Sentiment and Key Levels
Sentiment has improved modestly but remains fragile. SPY’s close at $676.47 places it back above the 50-day moving average but still below the critical $685 level that signals full bullish control. Resistance for Friday sits at $680, $682, and $685, while support rests at $675, $673, and $670. Holding above $675 keeps the recovery attempt alive, while a break back below $670 would signal that bears are regaining control.

Expected Price Action
Our model projects SPY’s maximum range for Friday between $670 and $685, with the Call side dominating in an expanding band that suggests trending potential mixed with sharp intraday swings. As long as SPY holds above $675, attempts to grind higher toward $680 and $685 are possible, though gains into those levels are likely to face selling pressure. A failure to hold $675 opens the door to $673 and $670, where dip buyers are expected to re-engage.

Trading Strategy
Given the mixed but improving backdrop, we favor a balanced, tactical approach. For longs, we like entries near $675 to $672 on successful defenses, with upside targets at $680 and $685. For shorts, failed rallies into $682–$685 remain attractive, especially if volume fades or momentum stalls. With VIX falling back to 16.39, volatility remains manageable but elevated enough to justify disciplined risk management, smaller position sizes, and a focus on clearly defined levels rather than chasing moves.

Model’s Projected Range

SPY’s projected maximum range for Friday is between $670 and $685, with the Call side dominating in an expanding band that signals trending price action with intermittent chop. The market reversed today after a favorable CPI report showed inflation slowing, and SPY rose 0.76% to close at $676.47, well off the highs and just below major resistance near $678. Volume was close to double average which confirms participation in the day’s move. Overnight the bears attempted to break the prior day’s lows, but that retest was bought again, and by the open price had climbed back near $678, a level we noted would likely hold on the first and possibly second test. Price dipped to $675, pushed back to $678, and was sold again, then on the third attempt finally broke higher to $680.74. That breakout did not hold, and by midday price sold off and retraced much of the rally. SPY tested $675 again and reversed, then repeated that process once more, with the range tightening into the close and ending the day up slightly. A strong move up followed by a strong move down reflects uncertainty, and indecision is typical of a trading range. We therefore expect SPY to continue trading between $675 and $685 until an external catalyst changes the dynamic. With price still below $685, where bulls regain full control, the bears remain active even though their edge has weakened. The slight advantage now favors the bulls, but only because price remains above $640, the level that would shift broader control to the bears. Overnight, a failure to hold $675 opens the door to $673 and then $670. If the bulls can push above $681 overnight, the path toward $685 opens. With no major news scheduled for Friday, traders should stay alert to geopolitical headlines. The 50 DMA near $675 supported dips today, and while today’s action improves the odds of a Santa Rally, it remains a 50/50 proposition. Resistance for Friday sits at $680, $682, and $685, while support rests at $675, $673, and $670. Gains above $685 are likely capped by heavy resistance, while a break below $670 could send price toward $665 quickly. Absent a catalyst, we prefer shorts near $682 and longs near $675 to as low as $672. Crypto fell today, while all MAG stocks except Netflix rallied. As we have warned, simultaneous weakness across both leadership groups would pressure equities. The VIX fell 6.69% to 16.39, returning to neutral, risk-on territory, though a move toward 20 would signal rising risk. SPY closed in the lower third of its bull trend channel from the April lows, with structural support near $669.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a very narrow, Bullish Trending Market State with SPY closing well above MSI resistance turned support. There were no extended targets into the close but for the entire morning session, extended targets were present. This led to the strong rally that reached the day’s highs. But the MSI was not fooled by the herd. The MSI did not rescale all day and stayed in a narrow range after rescaling higher overnight. The narrow range and remaining fixed questioned the day’s rally which in the end turned out to be relatively muted. For Friday the MSI forecasting higher prices but perhaps more of a range with a slow drift to $681 rather than a big push higher. Support is at $674.25 and lower at $673.97.
Key Levels and Market Movements:
On Wednesday we stated, “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,” and noted, “the market is likely to attempt a bounce off the day’s lows and retest $675,” while also adding, “We believe the first test of $675 will fail, so we favor shorts from this level and even as high as $678.” With this context, and with the MSI opening in a narrow bullish state with SPY just below $678, we initially looked for a short on a textbook failed breakdown, but with extended targets printing, we passed on the entry. The first test sold off as expected and reached $675.75. Given the strength overnight, we shifted to a long for a retest of $678 and entered with T1 at the premarket level of $677.25 and T2 at $679.25. T1 was hit quickly, but SPY sold off again from $678 and nearly returned to our entry. We reloaded the long at $676.25, kept T1 at $677.25, and left T2 at $679.25. This time both targets were hit cleanly and price broke above $678. We moved our stop to breakeven and trailed the remaining 10%. The next premarket level was $684.25, but a triple top formed near $681, and with two solid trades already booked, we exited the long at $680.50 and waited for a short setup. By the time extended targets stopped printing, SPY had already fallen to $677, and we passed on shorting mid-move. Price continued lower and tested $675 again, so we took one final trade on a textbook failed breakdown at $675.50, entering long with the same prior premarket targets. Both targets were hit again, and with three trades completed and extended targets no longer printing, we closed our runner on a failure to break $680 and called it a day, as protecting gains takes priority when the plan has already delivered strong results. We were done before 2 pm happy to have three strong winning trades, thanks again 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:
Friday has no scheduled news, and with the holiday week approaching, SPY is likely to shift into more rangebound behavior on lighter volume. OPEX may create volatility on Friday, but next week volume is likely to thin and price action may become listless. The MSI forecasts higher prices for Friday, but we expect pushes toward $680 to be sold and dips toward $670 to be bought. This sets up a true range day where fading both highs and lows makes sense. Overnight the bulls must defend $675 or the bears will press lower. A failure of $675 likely sends SPY to $670, and a break there brings $665 into play. If $675 holds, the bulls will try again to push above $681, though that level is likely to be sold. Crypto fell today while most MAG stocks rose, creating a mixed leadership signal. Both groups would need to weaken together for a deeper market pullback. The long-term bull trend remains intact above $640, and in the near term we give a slight edge to the bulls as long as price holds above $675. Any test of $685 remains 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 $685 to $700 Calls while buying $677 to $682 Calls indicating the Dealers’ desire to participate in any rally on Friday. The ceiling for tomorrow appears to be $685. To the downside, Dealers are buying $676 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 Friday. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $677 to $710 and higher strike Calls while buying $689 to $690 Calls indicating the Dealers’ desire to participate in any relief rally above $689 next week. But by selling ATM Calls, Dealers are also noting they have low conviction that price will rally next week. The ceiling for the week appears to be $685. To the downside, Dealers are buying $676 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 Friday, continue to treat the $675–$685 zone as the primary decision area. Favor cautious longs near $675 on confirmed support and shorts on failed pushes into $682–$685. With key inflation data behind us and limited catalysts ahead, expect continued range trading and remain disciplined, flexible, and focused on reacting to price rather than predicting direction.

Good luck and good trading!