GAME PLAN REVEALED: S&P 500 Topping Tail Signals Major Pullback

The market’s bullish momentum has hit a significant wall. Following disappointing earnings reports from market bellwethers Netflix and Tesla, indices are pulling back sharply, confirming the overbought conditions that many technical traders have been watching. In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, laid out a compelling case for a market pullback, highlighting a critical reversal signal on the S&P 500 and identifying key levels across stocks, commodities, and crypto that will define the next major move.

This article dives deeper into the technical evidence, providing context for the current market setup and expanding on the strategic insights Gareth shared.

The Market's Warning Shot: A Major Topping Tail

The most immediate and powerful warning sign for the market appeared on yesterday's S&P 500 chart. After a strong uptrend, the index printed a textbook reversal pattern that demands attention from every trader and investor.

"If we go to the daily chart of the S&P 500, we can clearly see this topping tail that printed yesterday. Topping tails are reversal signals... After an uptrend, if you get a topping tail, it generally signals downside. And you can see that's exactly what's unfolding."

A topping tail, also known as a pin bar or shooting star, is a single-candlestick pattern with profound psychological implications. It forms when buyers push the price significantly higher during the session, only for sellers to emerge with overwhelming force, driving the price all the way back down to close near its opening level. The long upper "tail" or "wick" represents a battlefield where the bulls charged, were decisively defeated, and retreated. It is a visual monument to a failed rally and a shift in control from buyers to sellers.

The S&P 500 E-mini Futures (ES1!) chart shows this playing out in real-time. After a gap down, the market is attempting a minor bounce, but the key levels are now clearly defined. The low of the day, around $4,350, serves as the immediate line in the sand. A break below that level would likely send the index down to test major support at $4,330, a critical pivot point that could open the door to a much more significant correction.

Putting the Rally in Context: Market Symmetry and Pullback Targets

To understand the potential magnitude of this pullback, it's crucial to zoom out and analyze the market's structure. As Gareth emphasized, context is everything. The rally from the October 2022 lows has been immense, tacking on nearly 30%. While impressive, this move is not without precedent, and its similarity to a prior rally offers a powerful clue.

A fascinating analysis of market symmetry on the S&P 500 daily chart reveals that the point move from the 2022 low to the recent 2024/2025 high is nearly identical in magnitude to the massive rally from the COVID low in 2020 to the 2021 high. Both rallies measured approximately 2,446 points. After the first major rally, the market endured a significant bear market correction. The principle of measured moves and market symmetry suggests that after a similarly sized rally, the market is once again due for a substantial pullback.

So, where could the market be headed? Gareth identified a critical long-term trendline on the S&P 500 cash index (SPX) that could act as a magnet for price.

"This is from the October 2022 lows. We connect the lows right through here... We have not come back to touch this line since that point. The question is, are we going to see a move down to this level? As of now, it's around 5,150, 5,160. That would be a pretty significant drop... And I think that's a very high probability over the next month or two."

A retracement to this level would represent a healthy, albeit sharp, correction that would work off the market's overbought conditions and re-establish a technical foundation for the next potential leg higher.

The Dollar's Breakdown and Yields in a Squeeze

Two macro charts are providing crucial information for the broader market narrative: the US Dollar Index (DXY) and the 10-Year Treasury Yield (US10Y).

The Dollar Index has confirmed a major technical breakdown. As Gareth noted, "On the Dollar Index, what we're seeing here is a major bear flag that had formed and it broke down yesterday. We closed below it, and today we're trading further to the downside." A bear flag is a continuation pattern where a brief, upward-sloping consolidation (the flag) follows a sharp decline (the flagpole). The breakdown signals the downtrend is likely to resume. The measured move target for this pattern points to the prior lows around 99.58. A persistently weak dollar is historically a tailwind for hard assets, making it a supportive factor for commodities like gold and silver.

Meanwhile, the 10-Year Yield is coiling in a massive wedge pattern, indicating a major breakout is on the horizon. For now, it's pulling back within the pattern. A break below its immediate trendline support around 4.15% could trigger a larger drop in yields, which might provide some temporary relief for equities. However, Gareth's longer-term Elliott Wave analysis suggests the ultimate break will be to the upside, which would create renewed headwinds for the stock market. The current squeeze in yields is a source of market tension that will resolve with a significant directional move.

Post-Earnings Fallout and Opportunities

This week's earnings reports have created clear winners and losers, providing textbook examples of technical patterns playing out.

Netflix (NFLX): The streaming giant is a perfect case study in post-earnings technicals. After disappointing the street, the stock is following its bearish script flawlessly. A well-defined bear flag that formed prior to the report broke down, and the stock is now heading toward its support targets. The first level of support sits at approximately $1,158, with a more significant level below that at $1,105.
Domino's Pizza (DPZ): In contrast, Domino's saw a huge pop on its earnings report. However, the rally has driven the stock directly into a major resistance level around $495. Traders should be on high alert for a potential reversal or rejection from this zone as profit-takers may step in.
High-Flyers at Risk (COIN & HOOD): Two of the market's recent high-flyers, Coinbase and Robinhood, are flashing warning signs. Coinbase printed a significant topping tail yesterday after a monster run, a clear signal of selling pressure. Robinhood has rallied directly into a major descending trendline of resistance, piercing it briefly before being pushed back below. Both charts suggest these powerful uptrends are losing steam and may be poised for a reversal.
A Value Play on the Radar (VZ): Amid the volatility, Gareth highlighted a potential long-term opportunity in Verizon (VZ). The stock is trading at multi-decade lows, revisiting price levels not seen since 2010. It is now approaching a major trendline support within a large falling wedge pattern. For patient investors, this could present a compelling area to begin building a long-term position for an eventual bounce.

Crypto at a Crossroads

The cryptocurrency market, often a leading indicator for risk appetite, is also at a critical juncture.

Bitcoin (BTCUSD): The king of crypto is showing signs of fatigue. After a topping tail formed about a week ago, Bitcoin has been consolidating sideways in what now appears to be a bear flag. A confirmed break below the flag's support near $116,000 would likely trigger the next leg down, with a target of around $112,000.
Ethereum (ETHUSD): Ethereum is facing its own moment of truth, rallying directly into a major, multi-year resistance trendline around the key psychological level of $4,000. A rejection from this level would be a significant bearish development, likely impacting sentiment across the entire digital asset space.

Commodities: Metals Shine While Energy Weakens

The commodity complex is telling divergent stories, driven by the weak dollar and specific supply-demand dynamics.

Gold (GOLD): Gold remains one of the most constructive charts in the market. It continues to hold beautifully within a bullish channel and above a key uptrend line. This persistent strength suggests a move toward the next major target of approximately $1,349 is still very much in play.
Silver (SILVER): Silver is testing a massive, multi-year resistance trendline. It briefly pierced this level but has since pulled back. This is a critical test. As Gareth noted, "If Silver can get above $39, then it is off to the races. I think Silver could even outperform Gold."
Oil (USOIL): Crude oil is flashing bearish signals. After a sharp drop, it has formed a classic bear flag pattern. A breakdown from this pattern would signal a continuation of the downtrend, with a probable target being a retest of the prior lows around $63.50 per barrel.
Natural Gas (NATURALGAS): Natural gas remains trapped in a wide consolidation range. With price trading in the middle of the range between support and resistance, the prudent approach is to wait for a breakout in either direction to establish a directional bias.

Conclusion: Navigating an Overbought Market with a Clear Plan

The evidence is mounting. From the major topping tail on the S&P 500 to the bearish setups in key stocks and cryptocurrencies, the market is signaling that it is overbought and ripe for a corrective pullback. The breakdown in the US Dollar provides a tailwind for precious metals, but the overall risk-off tone is becoming palpable.

As Gareth concluded, the minimum expectation should be a retracement in the S&P 500 back to its long-term upward-sloping trendline originating from the October 2022 lows. This environment calls for caution, discipline, and a clear strategy. By identifying key technical levels, understanding the macro forces at play, and respecting the warning signs the charts are providing, traders can navigate this challenging period and position themselves for the opportunities that will inevitably arise from the volatility.