GAME PLAN REVEALED: 08/13/2025

The market’s reaction to yesterday’s economic data was a spectacle of bullish conviction. With the S&P 500 surging 1%, investors seemingly embraced the headline CPI number as a green light for imminent Federal Reserve rate cuts. However, as Gareth Soloway, Chief Market Strategist at Verified Investing, detailed in this morning's GAME PLAN, a deeper dive into the data and the charts reveals a far more complex and fascinating picture. While the market celebrates, underlying inflation metrics and signs of consumer stress are sending subtle but crucial warnings.

Today, we’ll expand on the key themes from the show, exploring the disconnect between market sentiment and economic reality, the critical evolution of the S&P 500’s technical landscape, and specific trade setups that highlight both immense opportunity and cautionary tales of corporate behavior.

The Rate Cut Euphoria: Is the Market Seeing What It Wants to See?

Yesterday's market rally was fueled by the Consumer Price Index (CPI) report. On the surface, the data appeared to support the narrative of cooling inflation, which in turn solidifies the case for the Fed to begin cutting interest rates. This sentiment has become so powerful that the market is now pricing in a near-certainty of policy change.

"The market is now basically saying as close to 100% chance of a rate cut in September, 99.9% chance. I don't know if I've ever seen that, folks, this far in advance..."

This staggering probability, as shown by the Fed Watch Tool, indicates that investors have made up their minds. They are looking past recent cautious commentary from Jerome Powell and are laser-focused on a sequence of rate cuts beginning in September and potentially continuing through October and December.

But why the conviction? The devil is in the details of the CPI report. A massive 9.5% monthly drop in gasoline prices was the primary driver that muted the headline inflation number. As Gareth pointed out, when you strip out volatile food and energy prices to look at the core CPI, the data actually showed an uptick in inflation. This is a critical divergence. While the market rejoices over cheaper gas at the pump, inflation in other areas of the economy remains stubbornly persistent.

This phenomenon highlights a core principle of market psychology: markets often believe what they want to believe. For now, the narrative of impending rate cuts is overpowering the nuances of the data. This leads to a powerful trading mantra Gareth emphasized: "Price is truth. It doesn't matter what you or I think... We have to trade what is there." While the underlying data may suggest long-term caution, a trader must respect the current bullish momentum driven by rate cut expectations. The market may have a "come to Jesus moment" down the line, but for now, the path of least resistance has been upward.

S&P 500 Technicals: The Bear Flag Is Dead

For weeks, a potential bear flag pattern on the S&P 500 has been a central point of technical discussion. This pattern, which typically signals a continuation of a prior downtrend, suggested a high probability of a market pullback. However, yesterday's powerful rally changed everything.

The S&P 500 closed decisively above the high of the flagpole, a technical development that formally negates the bear flag pattern. This is a pivotal moment that requires traders to adapt their thesis.

"I am a steward of the charts and aka the probabilities. But once a bear flag is negated, it's negated. It just is... You can't just hold on and say, 'oh well, the bear flag is, I'm just going to continue to believe in the bear flag.' Like it is, it just isn't there anymore."

This commitment to objectivity is what separates professional analysis from emotional hope. With the bear flag invalidated, the focus shifts to the next significant technical feature: a parallel trend line that has previously acted as staunch resistance. The market closed directly on this line yesterday. A confirmed close above this line would signal a firm breakout and open the door to a new upside target.

Gareth identified this next major resistance level by drawing a trend line connecting the lows from October 2023 through the subsequent bottoms. A retrace to this trend line, the "scene of the crime" from the April collapse, would target the $6,600 to $6,700 level on the S&P 500. While this represents a relatively modest 3% move from current levels, it marks the next major battleground where bulls and bears will clash.

A Consumer Warning Shot: The Story of Cava

While the broad market indices grind higher, individual earnings reports are telling a more granular and sometimes troubling story about the health of the economy. No report was more telling today than that of Cava (CAVA), the popular fast-casual restaurant chain.

The stock plummeted over 23% in the pre-market after the company did something for the first time in its history: it lowered its growth forecast. The reason for the downgrade is a canary in the coal mine for the broader economy. The CEO noted that consumers frequenting their stores are becoming "much more wary."

This isn't an isolated incident. It's part of a pattern Gareth has been tracking, which he describes as a "slow train wreck" in the economy.

"It used to be just the lower income, now it's middle income inclusive is starting to feel the pinch of a slower economy and inflation. And eventually the way this works is it's like a wildfire. It starts in the lower income and slowly it spreads up."

A year ago, McDonald's warned that its lowest-income customers could no longer afford to eat there. Now, Cava and Chipotle are signaling that the squeeze is moving up the economic ladder to the middle-income consumer. This is a tangible sign that the wealth effect from the stock market is not trickling down, and persistent inflation is eroding purchasing power for a growing segment of the population.

For traders, this creates a compelling setup. Gareth identified a major technical level on Cava at $57.50. This price corresponds to a major pivot high from 2022-2023 and the breakout point from which the stock previously launched higher. A retrace to this "scene of the crime" could offer a high-probability swing trade opportunity if the stock reaches that level in the coming days.

Anatomy of a "Shady" Trade: The Circle Dilution

Yesterday's GAME PLAN provided a textbook example of a successful, high-probability day trade. Gareth identified the $187 to $188 level on Circle (CRCL) as a key resistance zone based on the earnings gap fill. The stock rallied directly to that level and sold off for the rest of the day, delivering a fantastic profit for those who took the trade.

The story, however, didn't end there. What happened after the market closed is a stark lesson in corporate behavior and the risks faced by retail investors.

"After hours yesterday, you know what happened...? They announced they were selling 10 million shares on the open market, essentially diluting shareholders... Who do you think knew about that information when it gapped up and sold off all day?"

This is a classic case of information asymmetry. The company enjoys a positive earnings reaction, allowing insiders and institutions to potentially distribute shares at elevated prices. Then, after the close, they announce a dilutive stock offering that harms the very shareholders who just bought in on the "good news." This action, Gareth argued, is "shady behavior" that should be called out. It leaves retail investors who chased the morning gap-up underwater by 10% or more, holding the bag. This incident serves as a powerful reminder to be wary of chasing parabolic earnings moves and to understand the games that can be played behind the scenes.

Finding the Next Big Move: From Hidden Gems to Epic Breakouts

While some stories are cautionary, the GAME PLAN is also about identifying alpha. Yesterday, Gareth highlighted 3D Systems (DDD) as a "sleeper hidden gem play." The stock, available in the pre-market around $1.80 to $1.85, subsequently exploded, running over 30% to a high of $2.42. This success demonstrates the power of identifying overlooked stocks with the potential for explosive moves.

Looking forward, Gareth has identified another potential "epic breakout" setup in the KWEB, the Chinese Internet ETF. This fund, which tracks giants like Alibaba and Baidu, has been building a powerful technical base.

"This is one of my favorite chart setups for an epic breakout. China stocks looking more and more bullish to me. I do think money rotation is going to find them."

The key level to watch is $38. A confirmed breakout above this price could unlock a massive move of 20%, 30%, or even 40% as capital potentially rotates out of crowded domestic tech trades and into beaten-down international markets. This setup is a pure swing trade idea based on a multi-month consolidation pattern poised for a major resolution.

Crypto and Commodities Check-In

• Bitcoin (BTC): The crypto king is creeping higher with the risk-on sentiment but remains capped by a key technical level. The topping tail high at $123,200 to $123,300 is the line in the sand. Until Bitcoin secures a daily close above that level, a greater than 50% probability of a rollover remains.
• Ethereum (ETH): Showing immense strength, Ethereum is approaching a confluence of resistance, including a measured move target and its all-time highs. This area is a prime candidate for profit-taking and a potential double-top formation.
• Solana (SOL): A beautiful parallel channel is guiding Solana higher. The next major resistance test is projected at the top of this channel, around $214 to $215.
• Gold & Oil: Gold is consolidating in what could be a bearish flag pattern below resistance at $3,415. Oil continues to look weak, with $60 per barrel remaining the near-term downside target.

Conclusion: Trading the Market You Have, Not the One You Want

Today’s market is a fascinating paradox. Bullish sentiment, fueled by the promise of rate cuts, is driving indices higher. Yet, beneath the surface, warning signs are flashing—from sticky core inflation to a weakening middle-income consumer.

Navigating this environment requires the discipline to trade what the chart presents, not what one’s economic opinion might suggest. It demands the adaptability to discard a thesis, like the S&P 500 bear flag, when the evidence changes. It requires the patience to wait for price to come to your pre-defined levels, as with Cava and CoreWeave, and the awareness to recognize when corporate actions, like those of Circle, reveal the hidden risks of the game.

As the battle between bullish hope and underlying economic friction continues, a clear-eyed, probability-based approach grounded in technical analysis remains a trader's most powerful weapon.