TRADING GAME PLAN REVEALED: Index Trend Lines, Gold Divergence & AI

In this morning’s TRADING GAME PLAN REVEALED, Gareth Soloway, Chief Market Strategist at Verified Investing, navigated a complex market landscape where major indices are clinging to critical support levels. With softening labor market data hinting at future Fed policy and dramatic post-earnings moves in individual stocks, traders are facing a pivotal moment. Today’s analysis goes beyond the headlines, diving deep into the technical standoffs, the powerful lessons from market divergences, and the unwavering discipline required to succeed.

Labor Market Whispers and Fed Implications

The trading day began with a fresh look at the U.S. labor market, a key pillar of the economy that is beginning to show subtle signs of wear. The ADP private sector jobs report came in at 54,000, falling short of the 75,000 estimate and signaling a potential cooling in hiring. This was followed by the weekly jobless claims, which ticked up to 237,000 from 230,000 the previous week.

While these numbers don't scream "recession," they fit into a broader narrative of gradual economic slowing. As Gareth explained, the jobless claims figure remains below the initial warning threshold. "History has shown us that anything below 250,000 is not really a big deal. That's pretty normal. But if we get above 250, then you start going on alert and above 300,000, that's where things get a little bit crazy."

This data, combined with a weak Beige Book report from the Federal Reserve yesterday, strengthens the case for a potential rate cut in September. However, the market is a forward-looking machine, and all eyes will be on tomorrow's more comprehensive non-farm payrolls report to either confirm or challenge this outlook. This economic backdrop sets the stage for the technical drama unfolding across the major stock indices.

The Battle for the Trend Lines: A Multi-Index Standoff

The health of the current market rally is being tested at several critical junctures simultaneously. The S&P 500, NASDAQ 100, and Dow Jones are all engaged in a battle with key, long-term trend lines, and the outcome could dictate the market's direction for weeks to come.

S&P 500's Last-Minute Rescue

The S&P 500 is clinging to a crucial ascending trend line connecting the lows from May, June, and August of 2025. After a sharp drop on Tuesday, the index was in jeopardy. Yesterday’s session saw a dramatic reversal. "Late in the day before that late day surge, it was almost as if someone magically with that power came in and rallied us back up here to the upside to get us to close back above that line." This last-hour surge was a technical "save," preventing a confirmed breakdown and buying the bulls more time. This highlights a core concept in technical analysis: a single close below a key level is a warning, but it requires a second day of confirmation to validate the breakdown.

NASDAQ and Dow Under Pressure

The picture is less optimistic for the tech-heavy NASDAQ 100 (QQQ). It has decisively closed below its parallel trend line, which had provided support on four previous occasions. Yesterday, the index rallied to retest the underside of this broken trend line, which is now acting as minor resistance. While the breakdown is not yet confirmed, the price action is clearly weaker than the S&P 500.

Meanwhile, the Dow Jones Industrial Average has experienced its own version of the last-minute rescue, closing below its key trend line for two consecutive days intraday, only to be saved by the closing bell each time. This creates a fascinating and precarious situation across the market. As Gareth noted, "you can ignore one signal, but can you really ignore three matching signals? That would be more important." If all three major indices confirm a breakdown, it would send a powerful, unified signal that a broader market correction is underway.

Earnings Volatility: Cracks in the AI Bubble?

Earnings season continues to deliver explosive moves, providing both opportunities and cautionary tales. This morning’s movers offered a glimpse into shifting market themes, from a potential crack in the AI narrative to the wild power of publicity.

C3.ai (AI): Once a poster child of the artificial intelligence boom, C3.ai was crushed on its earnings report, sending the stock to multi-year lows. Its decline raises a critical question for investors. "Could the AI bubble be beginning to crack? First up, which was AI, now it's at 52-week multi-year lows. Is it showing us a crack, or is this company specific?" While a bounce may materialize at the technical level of around $13.75, the stock’s trajectory serves as a stark reminder of the hype cycles that can inflate and then decimate sectors.

Salesforce (CRM): Despite decent earnings, weak guidance sent Salesforce tumbling 7% pre-market. For disciplined traders, this creates a potential opportunity not to be chased, but to be stalked. A key support zone between $227 and $229 has been identified as a potential area for an intraday or multi-day bounce.

American Eagle (AEO): In a stunning display of the adage "there's no such thing as bad press," American Eagle Outfitters ripped higher, trading near $17.50 after closing around $13.50. The company directly credited the massive publicity from the recent Sydney Sweeney controversy for its strong performance. This parabolic move sets up potential shorting opportunities for aggressive day traders at the $18.40 level, with a more significant gap fill target much higher at $20.50.

Figma (FIGMA): The recent IPO got a harsh dose of reality, getting trounced after its first earnings report. The stock, which IPO'd at $33 and surged to $143, was trading at $56 pre-market. This brutal decline highlights the risks of buying into hot IPOs after their initial run, as nearly every public buyer is now underwater. The lack of price history makes identifying technical support nearly impossible, serving as a warning to avoid trying to catch a falling knife without clear levels.

A Masterclass in Divergence: Gold vs. The Miners

One of the most powerful lessons from today’s session came from the precious metals sector, where a classic divergence between gold and the gold miners (GDX) created a high-probability trading setup. Gold itself had broken out to new highs and confirmed the move—a seemingly bullish signal. However, the miners were telling a different story.

The GDX ETF was extended after a 30-40% run-up and was flashing a doji candlestick pattern at resistance—a classic reversal signal. Stocks like Newmont Mining had been vertical for nine straight days. This divergence, where the miners failed to confirm the strength in the underlying commodity, was a massive red flag.

This is where trading psychology and contrarian thinking come into play. As the masses cheered gold's breakout, the charts of the miners were screaming for a pullback. "When you're scanning social media and you see everyone jumping on one side of a trade... it's usually, it's honestly the best indicator I will ever get." Acting on this divergence, Gareth took a significant short position in the GDX, a trade that is already proving profitable. The key takeaway is profound: "Shut off your brain, doesn't matter what your brain or your heart feels. You shut it off and then you say, well, what does the chart say on the GDX? Just the chart."

The Discipline of a Winning Trader

The final, and perhaps most important, theme of the day was the unwavering discipline required for long-term success. This was perfectly encapsulated in the discussion around Baidu (BIDU), a stock that has recently broken out above a key down-sloping trend line. The temptation for many is to chase the move, to buy in for fear of missing out.

Gareth’s advice is the opposite, using a simple but effective analogy: "If you go to the store and a gallon of milk is $5... but then next week you come back and it's like $50 a gallon. Are you going to be like, 'oh my god, I have to buy 10 gallons this week'... or are you going to say, 'you know what... I'll wait till next week and see if it pulls back'?"

The professional approach is to wait for a retrace to the "scene of the crime"—the breakout point. For Baidu, this would be around the $91 level. If the pullback never comes, so be it. Missing a trade is infinitely better than chasing a bad entry and taking a significant loss. This mindset is the bedrock of a sustainable trading career. "The discipline that we employ in trading is what makes us a winning trader or a losing trader. Remember that, guys. That's important."

Conclusion: Navigating the Inflection Point

The market stands at a critical inflection point. The coordinated dance of the S&P 500, NASDAQ, and Dow at their respective trend lines will soon resolve, likely setting the market's next major directional move. Softening economic data adds another layer of complexity, potentially paving the way for a more accommodative Federal Reserve.

Amidst this macro uncertainty, the charts provide a clear roadmap. From the potential cracks in the AI narrative to the powerful divergence in the gold sector, the market is offering invaluable lessons. By focusing on technical signals, respecting risk, and exercising the discipline to wait for high-probability setups, traders can navigate this environment with confidence. The ultimate edge lies not in predicting the future, but in reacting to the present with a clear, logical, and disciplined game plan.