GAME PLAN REVEALED: Market Probability, Earnings Analysis & Trading Psychology

In this morning’s GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, walked viewers through his analysis of current market conditions, notable earnings reports, and key trading levels to watch. Today’s article dives deeper into several critical themes from the show, providing expanded context and analysis to help traders make informed decisions.

Market Positioning: Degrees of Probability

One of the most valuable concepts Gareth emphasized this morning was the idea of market positioning as “degrees of probability.” As he explained, markets are never simply “bullish” or “bearish” but exist on a spectrum:

“Always remember folks… the markets are all degrees of themselves. So you have the neutral, the slightly above neutral, slightly bullish, a little bit more bullish, and the very bullish. And then on the downside, you go back to neutral, you have slightly bearish, a little bit more bearish, and very bearish.”

This nuanced approach to market positioning represents a sophisticated framework that many retail traders fail to grasp. Instead of making binary predictions, professional traders assign probability percentages to different outcomes.

In the current market environment, Gareth maintains an 80% bullish bias on the S&P 500 as long as it remains above the key technical level he identified. Should the index close below this level, the bullish bias would decrease to approximately 60% - still bullish, but with a more cautious outlook.

Understanding probability-based trading is revolutionary for many investors accustomed to absolute predictions. This approach acknowledges the inherent uncertainty in markets while still providing a framework for decisive action. It’s why casinos consistently profit despite occasional losses - they operate on mathematical edges that favor them over time.

For traders following this methodology, it means:

Accepting that no setup guarantees success
Managing position sizes according to probability levels
Having clear exit strategies for when probabilities shift
Maintaining emotional discipline regardless of outcome

The higher your probability edge, the more aggressive your position sizing can be. However, even 80% probability setups fail 20% of the time, which is why risk management remains non-negotiable.

The S&P vs. Nasdaq Divergence: A Technical Tale

A fascinating technical divergence emerged in today’s analysis between the S&P 500 and the Nasdaq 100. While both indices have been in uptrends, they’ve reached different technical inflection points:

“The S&P is still 80% bullish right unless it closes back below that line until it fills the gap… Now on the other side, the QQQ is different, it’s neutral.”

This divergence creates an interesting market dynamic. The S&P 500, representing a broader swath of the economy, maintains its bullish bias with a clear upside target. Meanwhile, the tech-heavy Nasdaq 100 has already approached its upside target (gap fill), placing it in neutral territory between support and resistance.

Historical market data shows that such divergences often precede significant market moves. When major indices reach different technical phases simultaneously, it frequently signals a rotation between sectors rather than a uniform market direction. In previous cycles, we’ve seen money flow from high-growth tech names (Nasdaq) into more value-oriented sectors (represented more heavily in the S&P 500) during similar divergences.

This technical disparity offers important strategic considerations for portfolio positioning. Traders might consider:

Balancing exposure between growth and value sectors
Tightening stop losses on tech positions that have already reached targets
Looking for relative strength in S&P sectors that haven’t yet reached technical targets
Monitoring market internals for confirmation of broader market participation

The neutral stance on the Nasdaq following its approach to gap fill serves as a reminder that even in bullish markets, not all sectors move in tandem, and timing entries and exits for different indices requires distinct approaches.

The Labor Market Context: JOLTS Data and UPS Layoffs

Today’s market action takes place against the backdrop of evolving labor market conditions. Gareth highlighted two important data points: the upcoming JOLTS (Job Openings and Labor Turnover Survey) report and UPS’s announcement of 20,000 layoffs.

“At 10:00 a.m. Eastern time, we’re going to get the JOLTS data, the job openings data, and again that to me is an indicator of the health of the labor market… UPS reported earnings this morning… they announced 20,000 layoffs.”

The labor market has been a critical pillar supporting the U.S. economy throughout recent periods of inflation and interest rate hikes. Unlike previous economic slowdowns, the job market has remained remarkably resilient, allowing consumers to maintain spending even as borrowing costs increased.

However, the trend in job openings has been gradually declining since peaking in early 2022, when nearly 12 million positions were open. The expected continued decline in today’s JOLTS report could signal that businesses are becoming more cautious about hiring - often a leading indicator of broader economic shifts.

UPS’s announcement of 20,000 layoffs adds a tangible data point to this narrative. While Gareth correctly noted that 20,000 jobs aren’t enormous in the context of the entire economy, such announcements from major companies often come in waves across industries. Historical patterns show that once large companies begin workforce reductions, competitors and adjacent industries frequently follow suit.

The labor market’s strength or weakness has significant implications for:

Federal Reserve policy decisions on interest rates
Consumer spending and confidence
Corporate earnings expectations
Market sentiment and risk appetite

Traders would be wise to monitor not just the headline JOLTS number but also the quits rate (indicating worker confidence) and layoff figures across various sectors. These metrics often provide early warnings of economic turning points that affect market direction.

Earnings Season Revelations: Key Levels and Setups

This morning’s GAME PLAN covered several notable earnings reports, including NXPI Semiconductors, HIMS, SoFi, and others. Gareth’s analysis demonstrated how to identify potential trading levels using multiple technical factors:

“That would be a multifactor level, right? So you have the 618 at around 1470, which is also that pivot low pivot high area right there. So that would raise the probabilities that that could be a level.”

Earnings season creates some of the most volatile and psychologically intense trading opportunities of the quarter. Price reactions to earnings reports often reflect market expectations more than the actual results themselves - explaining why stocks frequently drop despite “beating estimates” or rise despite disappointing numbers.

Several technical approaches for earnings season trading emerged from today’s analysis:

Multiple factor confluence: The highest probability setups occur when different technical tools (Fibonacci retracements, pivot points, trend lines) converge at the same price level.
Gap fills: Earnings gaps create natural technical levels that often serve as magnets for price action in subsequent days.
Extension measurements: Stocks that make extreme moves on earnings often experience proportional retracements, making Fibonacci tools particularly useful.
Volume analysis: While not explicitly covered today, earnings reactions on high volume tend to create more lasting technical levels than low-volume moves.

What’s particularly valuable about Gareth’s approach is his selectivity. Despite analyzing numerous earnings reports, he identified only a few potential setups that met his criteria. This discipline - waiting for high-probability setups rather than forcing trades - separates successful traders from the crowd.

NXPI’s post-earnings decline, for example, didn’t present an immediate swing trade opportunity at current levels. Instead, Gareth identified 147-148 as a potential swing trade zone - requiring a significant further decline before becoming actionable. This patience and precise level identification allows for planned entries rather than impulsive reactions.

The Psychology of Trading: Humility vs. Hubris

Perhaps the most profound segment of today’s GAME PLAN came when Gareth shared insights from his 26 years of trading experience, particularly regarding the psychological mindset necessary for longevity in the markets:

“The way you tell a real trader from a fake trader is fake traders won’t be humble, they’ll be cocky… A real trader, the market smacks us down and has smacked us down so many times in our life… The market does not let you be cocky. Like the second I get a little cocky, the market will teach me a lesson.”

This observation cuts to the heart of what separates successful career traders from those who flame out after brief periods of success. The markets have an uncanny ability to humble even the most skilled participants, teaching painful but necessary lessons about risk, probability, and emotional control.

The psychological literature on expert performance supports this perspective. Studies of expertise across domains from chess to surgery to trading show that true experts maintain a healthy recognition of their limitations. They’ve developed what psychologists call “calibrated confidence” - they know what they know, but equally important, they know what they don’t know.

By contrast, novices often suffer from the Dunning-Kruger effect, where limited knowledge creates overconfidence. In trading, this manifests as:

Oversizing positions based on “certainty” about outcomes
Ignoring risk management protocols when trades move against them
Attributing successes to skill but failures to bad luck
Seeking confirmation rather than challenging their own analysis

Gareth’s emphasis on humility reveals a profound truth: sustainable trading success requires constant vigilance against overconfidence. The most dangerous periods in a trader’s career often come after strings of winning trades, when the illusion of control is strongest.

This humility-based approach doesn’t mean paralysis or fear. Instead, it creates space for both decisive action and continuous learning. When trades work, humble traders study why; when trades fail, they do the same. This process of refinement contributes to the 70-80% success rates that Gareth suggests are achievable with sufficient study and practice.

Conclusion: The Probability Edge

Today’s GAME PLAN reinforced a central theme that runs through Verified Investing’s approach: trading is fundamentally about probabilities, not predictions. As Gareth noted:

“If you get good enough, you can have probabilities well above what a casino gets. 70-80% win rate is not, in my humble opinion, it is not outlandish to expect, but you have to study this, you have to learn it, you have to train your brain to be non-emotional, logic-based, probability-based.”

This framework represents a profound shift from how most retail participants approach markets. Rather than seeking certainty or following narratives, probability-based trading focuses on identifiable technical patterns, clear risk parameters, and the mathematical edge that emerges over many trades.

The current market environment offers both opportunities and challenges within this framework. The S&P 500 maintains its bullish bias with clear upside targets, while the Nasdaq has reached a more neutral position between support and resistance. Earnings season continues to create volatile moves in individual names, but only select situations offer the multi-factor confluence that signals higher-probability setups.

For traders applying these principles, the path forward involves:

Respecting current technical levels while remaining adaptable to changing conditions
Maintaining appropriate position sizing based on probability assessments
Staying vigilant for emotional traps that lead to overconfidence or fear
Watching key economic data points, particularly around labor markets
Focusing on the process rather than individual trade outcomes

As always, the markets will continue to teach both painful and profitable lessons. Those who approach with humility, technical discipline, and probability-based thinking will be best positioned to survive and thrive through whatever conditions emerge in the days and weeks ahead.