GAME PLAN REVEALED: 05/05/2025

In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, analyzed the market's reaction to a weekend filled with significant news, from Warren Buffett's retirement announcement to OPEC production increases and new tariff developments. Today's article explores the technical significance of the S&P 500 reaching its long-anticipated target, examines the strategic approach to profit-taking that distinguishes professional traders, and provides deeper context on how these weekend developments might shape market dynamics.

The Technical Target Achieved: S&P 500 Gap Fill

Perhaps the most significant technical development highlighted in today's GAME PLAN was the S&P 500's achievement of the gap fill target that Gareth has been monitoring for weeks:

"We talked about where the S&P was going to likely run into major major resistance. And sure enough this gap fill was something that I've highlighted almost in every game plan... for the last probably last two to three weeks I've said 'Guys this market looks like it's going to head higher until we get to about 5675 to 5700.' On Friday we went right there."

This gap fill level represents a pivotal technical juncture for the broader market. Gap fills are powerful technical phenomena that occur when a market returns to "fill" an empty space on the chart where no trading occurred. The particular gap in question was created during the "Liberation Day" market reaction to Donald Trump's election victory in November 2024, creating a significant void on the chart that has served as a natural technical target for the recovery rally.

What makes this achievement especially noteworthy is that the gap fill coincides with other technical factors, creating what technicians call "confluence" - where multiple independent technical signals align at the same price point:

"Not only is it a gap fill but it's a Fibonacci level as well. The confluence of levels here raise the probability that the markets could run into some resistance."

This multi-factor approach to technical analysis represents one of the most powerful tools in a trader's arsenal. When independent technical methods (gap analysis, Fibonacci retracements, trend lines) converge at a similar price level, the probability of that level serving as support or resistance increases dramatically. Research examining the effectiveness of technical levels has consistently shown that areas where multiple factors align demonstrate significantly higher statistical validity as reversal points than single-factor levels.

For the S&P 500, reaching this target prompted a shift in Gareth's technical bias:

"All the way up here I've been bullish on the S&P... once we're at gap fill I actually think the bias now flips to slightly bearish."

This tactical pivot demonstrates a fundamental principle of technical trading: objective levels should guide position changes rather than emotional attachment to market direction. By maintaining a bullish bias throughout the recovery rally but shifting to bearish upon reaching the technical target, Gareth exemplifies how skilled technicians adapt their outlook based on price location rather than narrative.

Beyond the gap fill itself, today's analysis revealed a larger technical structure forming in the S&P 500 - a wedge pattern created by converging trend lines:

"If we go out further notice how these will contract... notice how it forms what would be referred to in technical analysis as a wedge pattern. So a wedge pattern means there are two lines that are converging... at some point in the future we have to either break out or break down."

This wedge formation creates a framework for understanding potential market movements over the coming weeks. Wedge patterns typically resolve with a decisive move in either direction, often with the direction of the breakout establishing the next significant trend. Historical market data shows that the longer a wedge pattern develops, the more powerful the eventual breakout tends to be, as pressure builds within the contracting price range.

For traders applying these insights, several strategic considerations emerge:

1. Reducing long exposure as the target is approached
2. Preparing for potentially increased volatility near this confluence of levels
3. Watching for confirmation signals (such as reversal candlestick patterns) at the target
4. Considering gradual position building in the opposing direction

The psychological component of this technical juncture cannot be overlooked. As markets approach widely-watched technical targets, the collective behavior of traders focused on these levels often creates self-fulfilling price action. This psychological reality underpins much of technical analysis's predictive power.

Netflix and Tariffs: Technical Targets Confirmed by News

One of the most compelling examples from today's GAME PLAN of how technical analysis anticipates price movements before catalysts emerge came in Gareth's discussion of Netflix:

"Netflix folks is dumping after Trump imposed tariffs um on basically any films that are made outside of the country 100% tariffs encouraging uh movie producers to to shoot in the US. Uh but what we see here is more fascinating to me."

The Netflix chart presented a textbook example of technical patterns predicting price action before fundamental catalysts materialize. Before the tariff news emerged, Netflix had already reached a critical technical juncture:

"Look at the Netflix chart the high pivot from 2023 low pivot from 2024 and 2025 and look at this high pivot here and what did we just tag on Friday."

This perfect alignment at a parallel channel resistance level set the stage for a technical reaction regardless of the specific catalyst. The fact that tariff news emerged to drive the stock lower simply provided the fundamental reason for a technically-predicted move:

"By no means do charts tell you what the news is going to be like... it could have been something totally different, but amazingly the charts guide us to expect a pullback and then something magically occurs and creates that pullback... and it's about probability."

This insight cuts to the heart of why technical analysis works, even in an era of headline-driven markets. Technical patterns often reflect the underlying supply-demand dynamics and psychological positioning of market participants before catalysts emerge to make those factors obvious. In Netflix's case, the extreme bullishness and extended move into resistance created a vulnerable technical setup:

"We knew that it was overbought, bulls were way too bullish on the stock which means there's a lack of new buyers, then you're just kind of saying okay well if everyone's saying it's the greatest stock in the world at some point something's going to happen that's going to dent that perception."

This principle extends beyond Netflix to other technical setups highlighted in today's analysis. Multiple charts reaching similar technical junctures simultaneously often precedes broader market moves:

"Notice how the S&P... is up into gap fill Fibonacci level right here as well, it's implying a pullback. And then you have all of these stocks that are into levels... Meta, GE, SMH, I mean just lots of different um essentially sectors are all into these levels."

This sector-wide alignment at technical resistance creates a more compelling case for potential market weakness than any single chart in isolation. When technical patterns across diverse sectors and instruments converge, it frequently signals a significant inflection point for the broader market.

The Meta short position Gareth initiated on Friday exemplifies how to apply these principles in real-time trading:

"A trade I took on Friday uh on a swing trade basis was a short on Meta. Why? Well looking at the parallel here or even just this trend line... For me at least that kind of creates the expectation that we should see some sort of pullback here on the stock."

By identifying a trend line retest from below - a classic "scene of the crime" pattern where former support becomes resistance - Gareth established a high-probability short position. This technical setup, combined with the broader context of multiple stocks reaching resistance simultaneously, created a compelling case for a reversal attempt.

The Weekend News: Buffett, OPEC, and Market Psychology

Beyond technical patterns, this morning's GAME PLAN addressed several significant weekend developments that could shape market narratives in the days ahead:

"Over the weekend we had some news. We had the Warren Buffett big Birkshire Hathaway meeting where he ripped tariffs and talked about potential major catastrophes in the economy. Um overall he is retiring, giving it to another gentleman that was right behind him. And again at 94 years old Warren Buffett is hanging it up."

Warren Buffett's retirement announcement represents a watershed moment for financial markets. As perhaps the most renowned investor in history, Buffett's transition from Berkshire Hathaway's leadership after nearly six decades marks the end of an era. His successor, Greg Abel, has been carefully prepared for this role, but the psychological impact of Buffett's retirement on market sentiment shouldn't be underestimated.

Buffett's comments about tariffs and potential economic catastrophes carry particular weight given his historical record of navigating complex market environments. Throughout his career, Buffett has maintained a remarkably consistent investment philosophy centered on intrinsic value, economic moats, and a long-term perspective. This approach has allowed Berkshire to compound capital at extraordinary rates over many decades.

The "Oracle of Omaha" has survived and thrived through numerous market cycles, including the 1973-1974 bear market, the 1987 crash, the 2000-2002 dot-com collapse, and the 2008 financial crisis. His warnings about economic risks therefore merit serious consideration, even as markets hover near all-time highs.

Another significant weekend development was OPEC's announcement about increased oil production:

"We saw OPEC increasing oil supply. So OPEC plus saying 'Hey we're going to increase production. Oil is dropping today.' Remember we've talked about the bare flag on that chart that had already started to play out."

This production increase contradicts conventional wisdom about cartel behavior, which typically restricts supply to maintain higher prices. Gareth offered a fascinating hypothesis about the strategy behind this seemingly counterintuitive move:

"My theory is number one Trump wants lower oil, but number two I think they secretly understand that there's no way like if they drive oil prices up, the US companies that have, we have so much oil here in the US, they're going to just continue to pump oil and fill that void."

This strategic calculation - that restricting production might simply cede market share to U.S. producers without significantly raising prices - reflects the complex game theory underlying modern oil markets. The shale revolution has fundamentally altered the dynamics of global energy markets, reducing OPEC's ability to control prices through production cuts.

Gareth's analysis suggests a more sophisticated strategy at work:

"The thought process is... they can produce oil at let's say $20 a barrel. In the US it's probably $50 or $60 or whatever it is per barrel. And so by pushing oil down, by them producing more, not only are they selling more but the hope would be is that it makes it unprofitable for US companies to produce as much oil."

This longer-term strategic thinking - accepting lower prices temporarily to potentially damage higher-cost competitors - has historical precedents in commodity markets. Similar strategies were employed during previous oil price wars, most notably in 2014-2016 when Saudi Arabia increased production to challenge the emerging U.S. shale industry.

From a technical perspective, the oil price action continues to follow the bearish pattern that Gareth had previously identified:

"Here was our down move a break below the $65 support which had lasted for a long long time on the charts. And then ultimately the bare flag formation that we've discussed. And again where did we go today? We went right into or kissing major support."

This alignment between fundamental developments (OPEC's production increase) and technical patterns (the bear flag breakdown) creates a particularly compelling case for continued weakness in oil prices. When technical and fundamental factors align in this manner, the probability of the projected move increases significantly.

The Federal Reserve Wildcard: Wednesday's FOMC Meeting

Looking ahead to potential market catalysts, Gareth highlighted the upcoming Federal Reserve decision:

"Wednesday we get to hear from Jerome Powell and the FOMC. The decision will be at 2 PM Eastern time followed by the press conference at 2:30 p.m. Really the press conference is all we care about right?"

The comparison between Fed announcements and corporate earnings aptly captures how markets process these events:

"Basically when you get Federal Reserve announcements it's... essentially the earnings for the Federal Reserve. And I don't mean literally the earnings. It's just the market is going to say 'Okay well we expect them not to cut rates.' So that's essentially what we expect for earnings right? Okay so they're not going to cut rates but what is the guidance?"

This framework helps traders understand why markets often demonstrate counterintuitive reactions to Fed decisions. Just as stocks can drop after "beating" earnings estimates if forward guidance disappoints, markets can sell off after seemingly positive Fed decisions if the accompanying commentary suggests a less dovish stance than anticipated.

Friday's jobs report has already shifted market expectations regarding the timing of potential rate cuts:

"Prior to Friday's jobs report the market had priced in a cut for the June meeting. So not in the May meeting which we're coming into but in the next meeting. After the strong jobs report on Friday the market has now priced in that there will be no cut in June until the July meeting."

This recalibration of rate cut expectations represents a classic example of how economic data influences market narratives between Fed meetings. The stronger-than-expected headline jobs number pushed back market expectations for the first rate cut, even as Gareth noted the pattern of subsequent downward revisions to these initial estimates:

"Remember last month we got a number and then they revised it down about 40,000 jobs. What do they do for this next number? But it does seem and I think we can all agree that the numbers come in strong and then they're like 'Oh wait. It was actually like 30, 40, 50,000 less.'"

This observation about consistent downward revisions raises legitimate questions about the reliability of initial jobs reports. The Bureau of Labor Statistics relies on survey data that captures only a portion of the employment landscape, necessitating subsequent adjustments as more comprehensive data becomes available.

From a trading perspective, Wednesday's Fed decision and press conference will likely serve as the next major catalyst for market direction. After reaching the technical target discussed earlier, the market may consolidate until this event provides the next directional impulse.

The Confirmation Signal: Algorithm Psychology and Technical Discipline

One of the most valuable insights from today's GAME PLAN came in Gareth's discussion of Bitcoin's recent price action and the importance of confirmation signals:

"Bitcoin peaked above the resistance. If you know the confirmation signal that you that I teach you guys in the winning trader series which houses all the knowledge that I have, you can see it closed above didn't confirm and it was essentially a fake out."

This observation cuts to the heart of how modern markets function and why many traders struggle with false breakouts. Without understanding the confirmation requirements that institutional algorithms use to validate breakouts, retail traders often enter positions prematurely:

"Think of the people out there that probably thought it was a breakout. If they don't know the confirmation signal, they don't know what the algorithms are programmed to do. The algorithms are literally programmed folks to fool you."

This insight about algorithmic behavior reflects a fundamental reality of modern market structure. With algorithms now responsible for an estimated 70-80% of daily trading volume, understanding their programmed behaviors is critical for successful trading. These algorithms frequently employ tactics designed to trigger retail stop orders and induce emotional reactions:

"They are programmed to inch above key levels because number one they know that people have stops on their shorts just above those levels. So the the shorts will ultimately get stopped out. It also coaxes in psychologically people to be like 'Oh it broke above that level I got to go long. I'm going to FOMO in right?' And then they just like they're like 'Oh nope. Flip it right back down.'"

The confirmation signal Gareth teaches provides a disciplined approach to navigating these algorithmic traps. By requiring additional validation beyond simply touching a key level, this approach dramatically reduces the likelihood of being caught in false breakouts:

"What I found is that when you confirm a breakout the odds, because remember everything I do is based on probability, the odds decrease dramatically that it's a fake out by algorithms because ultimately it takes too much money once you confirm to really go the other way."

This principle extends beyond Bitcoin to all traded instruments. False breakouts occur in stocks, indices, commodities and currencies - anywhere there's sufficient algorithmic participation to manipulate price action around key levels. By understanding and implementing confirmation requirements, traders create significant edges in avoiding these common traps.

The mathematical logic behind this approach is compelling:

"It gets too far away from the breakout level versus here it was just a tiny little blip above, it doesn't take a lot of money to reject it back down, versus if you confirm and you're up here, it's like okay well how much money are these institutions gonna really deploy to fake people out at that point."

This framework highlights why technical discipline - adhering to specific rules rather than emotional reactions - remains essential for consistent trading success. By understanding the programmed behaviors of algorithms and implementing systematic approaches to confirmation, traders can dramatically improve their probability of success.

Strategic Profit-Taking: The Psychological Edge

Perhaps the most valuable insight for developing traders came in Gareth's explanation of his approach to profit-taking, particularly regarding gold positions:

"This is exactly why you take some off the table right... This is exactly why you take it some off the table, pair back the risk, because you don't know if it's going to bounce. And for all I know it's going to go back up here and I can just reshort gold again because I took that profit and ran."

This incremental approach to position management represents a sophisticated psychological framework that many traders fail to implement. Rather than making binary all-in/all-out decisions, professional traders typically scale out of positions as they move in their favor:

"I didn't get overly greedy and say 'Oh no I'll only exit all three of my trades that were short essentially gold... Instead I said 'You know what. Let's pair it back as we get deeper in the money.' So just in case it doesn't go here I've pocketed some and I can always re-enter. And if it goes down here then I still have one position left."

This approach provides multiple psychological and practical advantages:

1. It allows traders to secure partial profits while maintaining exposure to potential further movement
2. It reduces the emotional impact of watching unrealized gains fluctuate
3. It prevents the common scenario of watching significant gains evaporate while holding for theoretical maximum profits
4. It creates the flexibility to re-enter if the market reverses and creates new opportunities

Gareth emphasized how this approach has transformed his trading results:

"It's honestly revolutionized my trading folks because we all have a tendency to want to maximize. We get greedy and we're always like 'Oh well it can go down to that level and I'm going to hold it there or it's can go up to this level and I'm only going to take profits when it gets there.' And what happens? It almost gets there and then it reverses and we end up with a losing trade instead of a winning trade."

This insight addresses one of the most common psychological traps that derails trading success. The desire to capture maximum profits frequently leads to holding positions past optimal exit points, often resulting in watching substantial gains evaporate or even turn into losses.

By implementing a systematic approach to scaling out of positions, traders can eliminate much of this psychological struggle. The incremental profit-taking creates a positive feedback loop of secured gains while maintaining exposure to potential further movement:

"By legging in but also legging out it really protects and keeps the grind of profits going. At least that's what I found in my trading career."

This "legging out" approach parallels Gareth's similarly incremental approach to building positions, as exemplified by his recent Meta short:

"I did a small position, starter starter position on Meta on the short side with members on Friday. Just basically getting our toe in the water in case it gets fully rejected. And if it goes higher you have other resistance levels... This is a great little resistance level. Pivot high pivot high right there. So that could be an ad level at some point."

By entering positions gradually rather than all at once, traders can improve their average entry prices if the market moves further than anticipated. This approach acknowledges the inherent uncertainty in all market predictions while still allowing decisive action based on technical signals.

Conclusion: Technical Discipline Amid Market Narratives

As markets digest the weekend's developments and approach Wednesday's pivotal Fed decision, the technical framework outlined in today's GAME PLAN provides valuable guidance for navigating uncertain conditions. The S&P 500's achievement of its gap fill target at approximately 5675 creates a fascinating technical juncture - after maintaining a bullish bias throughout the recovery rally, Gareth's shift to a bearish bias at this level demonstrates how skilled technicians adapt their outlook based on price location rather than narrative.

Multiple sectors and individual stocks reaching technical resistance simultaneously adds further weight to the potential for market weakening, while the upcoming Fed decision could provide the catalyst for the next directional move. The weekend's developments - from Buffett's retirement to OPEC's production increase and new tariffs - add fundamental dimensions that could influence market psychology in the days ahead.

For traders applying these insights, several key principles merit emphasis:

1. Confluence of multiple technical factors creates higher-probability trading opportunities than single-factor approaches
2. Confirmation signals dramatically reduce the likelihood of being caught in algorithmic fake-outs
3. Incremental position building and profit-taking typically outperform all-in/all-out approaches
4. Psychological discipline - following objective signals rather than emotions - remains essential for consistent results

As Gareth noted in his conclusion, the launch of the new Smart Money Options service provides additional opportunities for traders to apply these principles in the options market. By focusing on high-probability technical setups and applying disciplined position management, traders can navigate whatever volatility emerges from the week's fundamental developments while maintaining a probabilistic edge.