TRADING GAME PLAN REVEALED: A 10% Correction Signal for October?

The market continues its relentless march higher, seemingly shrugging off any and all concerns. Yesterday’s rally was fueled by headlines of NVIDIA’s potential investment in OpenAI, a narrative that propelled the major indices forward. However, beneath this bullish surface, a growing number of cracks are beginning to appear. In this morning's TRADING GAME PLAN REVEALED, Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, peeled back the layers of market hype to reveal a fascinating and potentially ominous historical parallel that every investor needs to see.

Reading Between the Headlines

Yesterday's market strength was largely attributed to a single news item: NVIDIA announcing they will invest up to $100 billion USD in OpenAI. While the headline number is staggering, the devil is in the details. As Gareth pointed out, the language is intentionally vague, creating a powerful narrative without a concrete commitment.

“Investing up to $100 billion means they could invest a dollar. They could invest $10, $100, $1 million, $1 billion. It's basically just capped at $100 billion… This is all about the fine print in the markets.”

This type of headline-driven rally, where the market ignores the nuance for the sake of a bullish narrative, is becoming a hallmark of the current environment. It’s a symptom of what Gareth terms “dot-com 2.0,” where speculative fervor overshadows fundamental analysis. We see a similar dynamic playing out in Apple, where the narrative has suddenly and dramatically shifted from months of "no demand for this upgrade cycle" to a frenzy of hype around new iPhone demand. This manufactured excitement, often driven by institutional players needing a new story to chase, is another sign of a market running on fumes rather than foundational strength.

This environment requires extreme caution. When markets react so strongly to non-committal headlines and sudden narrative shifts, it often signals that the underlying bullish conviction is fragile and susceptible to shocks.

The Micron Litmus Test

All eyes will be on Micron Technology after the bell today as they report earnings. The semiconductor space has been the epicenter of the AI boom, and Micron’s results and guidance will be a critical litmus test for the sector's health. The stock has been on an incredible run, rallying 43% since the beginning of September alone, largely on the back of Oracle’s blockbuster backlog announcement.

This explosive move has created a scenario of dangerously high expectations. The market seems to be in a state of “one-upmanship,” where each company is expected to announce an even more astronomical backlog than the last. For Micron, this means anything less than a spectacular, cancer-curing announcement could be met with disappointment.

From a technical perspective, the risk/reward setup appears skewed to the downside. Gareth identified a key multi-year trendline connecting the 2014 and 2024 highs, which projects a potential resistance target around the $174 to $175 USD level.

“If I'm doing a risk reward assessment to me, there's upside on the stock that maybe would be about 5%, maybe 6% to that trend line. And then the downside would be more heavy.”

After a 43% surge in just a few weeks, a significant portion of good news is already priced in. This makes the stock vulnerable to a “buy the rumor, sell the news” event, where even a strong report could trigger profit-taking.

An Epic Parallel: The 1.8x Rebound Factor

The centerpiece of today’s analysis was a stunning historical parallel that provides a data-driven case for a significant market correction in October. By comparing the current market rebound to the one following the 2020 COVID collapse, Gareth uncovered a mathematical relationship that is too precise to ignore.

Here’s the breakdown:

The COVID Collapse & Rebound (2020): The S&P 500 dropped 35.3% during the COVID crash. In the subsequent 114 trading days (approximately six months), it rallied back an astounding 63.3%. The mathematical relationship is that the rebound was 1.8 times the size of the drop (35.3 x 1.8 ≈ 63.5).
The "Liberation Day" Sell-off & Rebound (2024-2025): The S&P 500 dropped 21.33% from its high during the "Liberation Day" sell-off. From that low, the market has now rallied for 115 trading days—an almost identical timeframe to the post-COVID rebound.

Now for the incredible part. If we apply the same 1.8x multiplier to the recent drop, what do we get?

21.33% (the drop) x 1.8 = 38.39%

And how much has the S&P 500 actually rallied in those 115 days? 38.5%. The numbers are virtually identical.

“This type of stuff, you can't make this stuff up. Like if I was a conspiracy theorist, I'd be like, dude, something's going on here.”

This parallel isn't just an interesting coincidence; it has predictive power. What happened immediately after the 114-day post-COVID rebound concluded? The market experienced a sharp, 10% correction. Given that the current rally has matched the prior one in both duration and mathematical proportion, Gareth is now on record with a bold prediction:

“I think we will get a 10% sell-off in October… why wouldn't we potentially see a potential 10% correction in the S&P in October?”

This analysis provides a clear, data-backed thesis for why the market may be perched at a major inflection point, with the end of the quarter potentially masking underlying weakness before a volatile October begins.

Beneath the Surface: A Market Divided

While the S&P 500 and Nasdaq 100 closed higher yesterday, the internals of the market told a different story. The gains were almost entirely due to the strength in two behemoths: NVIDIA and Apple. Meanwhile, other trillion-dollar companies were flashing warning signs. Meta was down, Google was down, and most notably, Amazon suffered a significant technical breakdown.

This is a classic sign of a narrow market, where the health of the entire index rests on the shoulders of just a few mega-cap stocks. This concentration of power is staggering. The semiconductor sector alone now commands a market cap of $10 trillion USD, and just ten companies make up over 50% of the entire Nasdaq 100 index.

“It's great for investors when those stocks are going up, but when you see these big trillion dollar companies start really falling, it's going to get nasty fast because they control so much.”

This lack of broad participation is a major vulnerability. If and when the handful of leading stocks begin to falter, there is very little underlying strength in other sectors to support the market, creating the potential for a rapid and severe decline.

Bitcoin's Six-Week Warning Signal

Adding another layer of caution is a recurring pattern from Bitcoin. Historically, the crypto king has acted as a leading indicator for broader risk assets, topping out just before major stock market peaks.

In 2017, Bitcoin peaked in December. The stock market peaked six weeks later.
In 2021, Bitcoin peaked in November. The stock market peaked six weeks later.

As Gareth noted, we are now approaching the six-week mark from Bitcoin’s most recent all-time high. While history doesn't have to repeat, this consistent lead-lag relationship is a data point that should not be dismissed. Technically, Bitcoin is also at a precarious juncture. After being rejected from a key trendline, it is now consolidating above support that forms the neckline of a potential Head and Shoulders pattern. A confirmed break of this support could trigger a move below $100,000 USD, which would likely send a ripple of fear through all risk assets.

Gold, Silver, and Strategic Positioning

In the commodities space, Gold continues its steady climb but is approaching a significant technical hurdle. A parallel channel drawn from the early 2024 lows projects major resistance around the $3,800 level. While Gareth remains a long-term bull with a target of $6,000 USD, this near-term resistance is a logical place to expect a pause or a shallow pullback. Silver has successfully reached its first target around $44 USD and is showing strength, with a potential path to the $48-$50 USD range if it can break through current levels.

In the Q&A session, Gareth shed light on his own strategy for navigating this complex environment. He is not 100% in cash or 100% short. While he is predominantly positioned for a market downturn, he maintains long positions in select, beaten-down stocks like Pfizer and Keurig Dr. Pepper that offer value and yield. He also utilizes volatility products like the VXX, which has shown unusual strength recently, as a hedge. This balanced but cautious approach underscores the importance of defining your own strategy, whether you are a long-term investor or a short-term swing trader.

Conclusion: Data Over Hype

The market is currently a tale of two tapes. On the surface, headlines and hype are driving key indices to new heights. But underneath, the data tells a more cautious story. A stunningly precise historical parallel suggests a 10% correction could be imminent. Market internals show a dangerous lack of breadth, with the entire rally dependent on a few mega-cap names. And Bitcoin, a reliable leading indicator, is flashing a six-week warning signal.

While the AI bubble can certainly continue to inflate, the risks are mounting daily. For traders and investors, the key is to look past the flimsy headlines and focus on the fine print, the charts, and the data. The evidence suggests that a period of significant volatility may be just around the corner, and those who are prepared will be the ones to capitalize on the opportunities that arise.