GAME PLAN REVEALED: 04/30/2025

In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, provided critical analysis on a day dominated by shocking economic data that sent markets plummeting. Today's article explores the significance of the GDP contraction, deteriorating labor market conditions, and how technical analysis identified the market's vulnerability before today's selloff began.

The Economic Shock: Negative GDP and Weakening Labor Market

The pre-market session was rocked by two significant economic reports that caught many investors off guard. As Gareth highlighted in this morning's show:

"GDP was the real shocker here folks, a negative .2% reading on GDP. That's for the first three months of 2025... this is the first three months before the tariffs were even imposed, we had a negative GDP reading."

This unexpected contraction in first-quarter GDP represents a profound shift in the economic narrative. For months, the market had been operating under the assumption that the U.S. economy was slowing but remained resilient. Today's negative reading shatters that perception, raising the specter of an official recession should the second quarter also register negative growth.

What makes this GDP figure particularly alarming is its timing. As Gareth noted, this contraction occurred before the recent wave of tariffs was implemented. The data reflects an economy that was already deteriorating under its own weight, suggesting that the added pressures from trade tensions could accelerate the downturn significantly in coming quarters.

Compounding concerns, the ADP private-sector jobs report showed just 62,000 jobs added versus expectations of over 100,000. This employment weakness creates a troubling economic picture: contracting output combined with a softening labor market. While Friday's non-farm payrolls report will provide additional context, today's data suggests that the foundation of consumer spending—employment stability—may be eroding faster than previously believed.

The market reaction was swift and severe, with futures dropping sharply immediately following the 8:30 AM Eastern data release. By the open, the S&P 500 was set to drop approximately 1.5%, with technology stocks facing even steeper declines.

The Stagflation Warning Signs: Core PCE Inflation Rises

Perhaps most concerning for both investors and the Federal Reserve is evidence of persistent inflation despite the economic contraction. As Gareth mentioned:

"We're seeing the indicators for inflation go up, which is what I've said about tariffs being imposed... inflation is going up, the economy is tanking, and that again is that magic word that I've said to be wary of and be ready to hear—stagflation."

Today's core PCE (Personal Consumption Expenditures) data came in hotter than expected, creating a challenging backdrop for policy decisions. The Federal Reserve typically addresses economic weakness by cutting interest rates, but inflationary pressures complicate this approach. The possibility of stagflation—a toxic combination of economic contraction and persistent inflation—now looms larger over markets.

Historical stagflationary periods like the 1970s showed that traditional asset allocation strategies often fail in this environment. Bonds and stocks can decline simultaneously, leaving investors with few safe havens outside of certain commodities and inflation-protected securities. The potential for stagflation suggests investors should be particularly cautious about portfolio construction in the months ahead.

The bond market's reaction was particularly noteworthy. Despite the negative GDP print, which would typically send yields lower, the 10-year Treasury yield initially moved higher. This counterintuitive reaction could signal deeper concerns about inflation or potential changes in foreign demand for U.S. government debt.

Technical Analysis Vindicated: Gap Fill and Rejection

One of the most remarkable aspects of today's market action was how perfectly it aligned with the technical patterns Gareth had been highlighting in previous sessions. Yesterday, the Nasdaq 100 reached a critical technical level—the gap fill from the "Liberation Day" market drop—and today's decline came immediately after that level was tested.

"Look at the NASDAQ 100... right here was your gap fill. This is basically the close before Liberation Day... Look at how the NASDAQ 100 climbed up, up, up and yesterday it filled the gap. Sure enough, what's happening today? We're trading all the way down here."

This price action demonstrates why understanding technical levels can be so valuable for investors. While many market participants were becoming increasingly bullish as prices recovered over recent weeks, the technical pattern suggested caution was warranted once the gap fill level was reached.

Gareth's anticipation of this technical rejection led to a well-timed short position through QID (the leveraged inverse Nasdaq 100 ETF) for members of Smart Money Stocks and ETFs. This trade exemplifies the value of removing emotion from trading decisions and instead relying on objective technical levels.

Gap fills as resistance points have strong historical predictive power in market analysis. When a stock or index gaps down significantly (as happened on Liberation Day), the top of that gap often becomes powerful resistance during future recovery attempts. The reason is partly psychological—investors who bought near those levels and suffered losses are often eager to sell once they can exit at breakeven. Additionally, algorithmic trading systems frequently target these technical levels for position initiation.

The S&P 500, by contrast, had not yet reached its gap fill level before today's decline began. This differential between indices creates an interesting technical setup moving forward, with the S&P potentially having more upside flexibility should markets stabilize, while the Nasdaq's rejection at resistance suggests a more bearish intermediate-term outlook for technology stocks.

Earnings Season Revelations: Companies Facing Uncertainty

Beyond the macroeconomic data, this morning's show highlighted several significant earnings reports that add texture to our understanding of the current market environment. Three notable examples demonstrate how uncertainty is affecting companies across sectors:

Super Micro Computer (SMCI): The Data Center Warning

SMCI shares plunged approximately 18% pre-market after the company warned that revenue would be 20% lighter than anticipated. As Gareth noted:

"Folks that's not a small miss like 5%, 3%... 20% is epic in terms of a miss, and this is sending ripple effects through technology, specifically semiconductor stocks."

The magnitude of this revenue warning is particularly significant given SMCI's position as a key player in the data center space. As companies plan for economic uncertainty, capital expenditure budgets are often the first to face cuts. The dramatic revenue shortfall suggests businesses may be slashing technology infrastructure investments at a pace not seen since the pandemic's early days.

From a technical perspective, Gareth identified potential support levels for traders to monitor. A day-trading opportunity might emerge around the $25.80 level, where a pivot low coincides with a gap window. For swing traders seeking longer-term positions, the convergence of two trend lines near the low $20s could provide a stronger technical foundation.

Snapchat (SNAP): The Advertising Canary

Snapchat shares dropped 12-13% pre-market despite reporting good earnings results. The catalyst for the decline was management's decision to withdraw forward guidance, citing uncertainty about economic conditions. This move highlights a growing trend:

"A lot of companies are doing this, a lot of companies are saying, 'Guys, we can't give guidance because we don't know what the tariff impact is, what is this going to do to the economy?'"

Snapchat's reliance on advertising revenue makes it particularly vulnerable to economic slowdowns. As companies tighten marketing budgets during periods of uncertainty, digital advertising platforms often see immediate impact. The guidance withdrawal suggests management sees significant risk to future revenue streams, which could portend similar warnings from other advertising-dependent tech companies.

For traders, Gareth identified potential day-trading support around $7.10-$7.00, with much lower levels potentially required for swing trade consideration given the challenging macro backdrop.

Starbucks (SBUX): The Consumer Spending Signal

Starbucks shares fell over 10% following its earnings report, highlighting pressures on consumer discretionary spending. The stock had already formed a technical double top pattern that Gareth had previously identified, which was followed by a textbook rejection and decline:

"Double top, classic example of double top. Notice how it pierced the highs, that's very common. They like to run the stops... So they get those shorts out and then it tanks and goes in that direction."

Starbucks' performance offers important insights into consumer behavior during economic uncertainty. As a premium-priced discretionary purchase, coffee shop visits are often among the first expenses consumers cut when feeling financial pressure. The company's struggles may foreshadow broader challenges for consumer discretionary stocks, particularly those with premium positioning.

From a technical perspective, Gareth identified potential day-trading support at the $75 level, with more substantial swing-trading opportunities potentially emerging around $72 if market conditions continue to deteriorate.

Trading Psychology: Managing Emotions in Volatile Markets

One of the most valuable aspects of Gareth's analysis this morning was his emphasis on psychological discipline during volatile market conditions. As he noted:

"I take out all my emotion... As we were climbing up, you could sense that the bulls were starting to come back and starting to get bullish. The vibe in the markets was changing from fear back to more so greed. But again, if you shut that off and you look at the charts, the charts have a way of guiding us to what is most likely going to happen."

This disciplined approach to trading becomes especially crucial during periods of heightened volatility like we're experiencing now. The human tendency toward recency bias—giving too much weight to recent events—often leads investors to project current trends forward indefinitely. When markets have been rising, this creates excessive optimism; when they've been falling, it generates excessive pessimism.

Gareth's emphasis on objective technical levels provides an antidote to this psychological trap. By identifying key resistance points like the Nasdaq's gap fill level ahead of time, traders can establish objective criteria for position changes rather than being swayed by shifting market sentiment.

This approach is particularly important in the current environment, where Gareth warns we may be experiencing a bear market rally rather than the beginning of a new bull market:

"While I was bullish on the markets up to these gap fills on the S&P and on the QQQ's, obviously hit yesterday, I said this is likely in my opinion a bear market rally where we will go back down, and it fits the criteria to a tee."

Historical precedent supports this caution. As Gareth noted, during both the 2008-2009 financial crisis and the dot-com crash, markets experienced multiple sharp rallies of 10-14% within the context of longer-term bear markets. These countertrend bounces created false hope for many investors before markets ultimately made new lows.

The ability to distinguish between a temporary rally within a bear market and the beginning of a new bull market requires both technical discipline and historical perspective. Today's price action, coming immediately after the Nasdaq 100 reached its gap fill level, suggests the recent bounce may indeed fall into the bear market rally category.

Trading in the New Market Environment: Lower Than You Think

A particularly insightful comment from this morning's GAME PLAN addressed how traders should adjust their thinking in the current market environment:

"We are in a market environment where things will go lower than any of us expect it to go... Remember this is the opposite of the market we were in for the last many, many years, where stocks would go much higher than any of us would ever think. I mean, the runs were just incredible... They work inversely like that, right? They go lower than you think they can go, they go higher than they think when you think they can go."

This observation highlights a critical aspect of market psychology. During extended bull markets, investors become conditioned to "buy the dip" and expect quick recoveries from any selloffs. This conditioning creates a natural tendency to start buying too early when the market regime eventually changes.

For traders considering swing positions in the current environment, Gareth's advice to look for "ridiculously low" levels before establishing positions represents an important psychological recalibration. Just as stocks overshot reasonable valuations to the upside during the bull market, they may similarly overshoot to the downside during bearish periods.

This psychological adjustment extends to level selection for both day and swing trades. Throughout the show, Gareth distinguished between levels that might support brief intraday bounces and those substantial enough for longer-term positions. In nearly every case, his swing trade levels were significantly lower than current prices, reflecting the expectation that bearish momentum could drive prices well beyond typical technical targets.

Commodities Corner: A Mixed Response to Economic Data

The show concluded with a look at several key commodities markets, which showed varied responses to the morning's economic data:

Gold: Defensive Haven Getting a Bid

Gold initially tested the lows of its bear flag pattern before receiving a bounce following the weak economic data:

"Gold was tanking, and then once that data came out on GDP, jobs, and inflation, gold got a bounce."

This response illustrates gold's traditional role as a safe-haven asset during periods of economic uncertainty. While Gareth believes the bear flag pattern may still play out, the immediate reaction to economic weakness demonstrates how gold can attract defensive positioning during times of market stress.

Oil: Technical Pattern Playing Out

Crude oil continued its bearish technical pattern, demonstrating how commodity markets can follow different trajectories even during broader market volatility:

"Oil had the bear flag. Look at it just continue to move lower. So again, another very good call."

Oil's continued weakness despite inflationary pressures in other areas of the economy suggests concerns about demand destruction as economic growth slows. This divergence between oil (declining) and inflation data (rising) creates an unusual dynamic that could complicate both Federal Reserve policy decisions and investment positioning in the months ahead.

Natural Gas: Technical Resistance Confirmation

Natural gas provided another textbook example of technical analysis in action, with prices rejecting at the "scene of the crime" level:

"Natural Gas, there's your scene of the crime hit and now it's starting to get rejected... You had this longer-term support line... break down with confirmation... now it's confirmed below, this becomes major resistance. It goes right up, tags the line, boop, down it comes."

This price action in natural gas demonstrates how former support levels can become resistance once broken—a fundamental principle of technical analysis. The initial breakdown followed by a return to the broken support level (the "scene of the crime") created a high-probability shorting opportunity that played out exactly as the technical pattern suggested.

Conclusion: Navigating the Volatility Ahead

As markets digest today's surprising economic data and significant earnings reports, volatility appears to be returning after a period of relatively calmer trading. This environment creates both challenges and opportunities for traders:

"Suffice it to say, volatility appears to be back, and it should mean great opportunities, not just day trading but swing trading."

The combination of economic contraction, persistent inflation pressures, and technical resistance suggests markets may face significant headwinds in the near term. The probability-based approach Gareth emphasizes becomes particularly valuable during such periods, as emotional decision-making often leads to poor outcomes amid heightened volatility.

For traders following these developments, several key themes merit close attention in the days ahead:

1. Friday's non-farm payrolls and PCE inflation data, which could either confirm or contradict today's concerning economic signals
2. Technical levels on major indices, particularly whether the S&P 500 reaches and reacts to its gap fill level
3. The yield curve's response to conflicting signals of economic weakness and inflation
4. The potential for more companies to withdraw forward guidance amid economic uncertainty
5. Sector rotation patterns as investors reposition for potential stagflationary conditions

As Gareth concluded, the key to success in this environment remains trading "logically based off data and charts"—an approach that proved its value once again with today's market action.