TRADING GAME PLAN REVEALED: Market Freefall, Key Levels & Bond Warning

The first trading day of September has arrived with a vengeance. After a three-day weekend, markets have opened in a state of freefall, continuing the sharp sell-off that began on Friday. The S&P 500 is down over 1%, and the tech-heavy Nasdaq has plunged more than 1.5%, pushing critical trend lines to their breaking point. In this morning's TRADING GAME PLAN REVEALED show, Gareth Soloway, Chief Market Strategist at Verified Investing, dissected the catalysts behind the market's sudden turn and identified the key technical levels that could signal a much deeper correction.

This article will expand on the critical themes from today’s show, providing deeper context on the semiconductor weakness, the troubling signals from the bond market, the psychological shift from complacency to fear, and the specific trade setups traders should be watching in this new high-volatility environment.

The Cracks in the AI Foundation

For months, the artificial intelligence sector, led by Nvidia, has been the seemingly invincible engine of the market rally. However, the foundation of that strength is now showing significant cracks. As Gareth explained, the initial fissure appeared in an unlikely place: Nvidia’s stellar earnings report.

"Nvidia earnings showed a crack. The data center revenue for Nvidia missed by a fraction. Everything else was golden, but it opened that small crack that when Marvell Technologies, MRVL is the symbol on that, when they reported bad earnings in the same sector, that opened the wound."

This sequence is a classic example of how market sentiment shifts. A minor imperfection in a market leader’s report, even one as small as a fractional miss in a single division, can plant a seed of doubt. That seed was then fertilized by genuinely poor earnings from a sector peer, Marvell Technologies (MRVL). The wound was then salted by Friday’s news that Alibaba is developing a competing AI chip, challenging Nvidia’s dominance. What began as a hairline crack quickly became a gaping wound, and the floodgates of selling opened. This cascade effect demonstrates that in markets, perception and narrative are just as powerful as fundamentals.

Technical Tipping Points: The S&P and Nasdaq on the Brink

The sell-off has driven the major indices to critical technical inflection points that have been months in the making. Both the S&P 500 and the Nasdaq 100 are now testing long-term support trend lines, and a confirmed break could usher in a significant correction.

For the S&P 500, the focus is on a multi-month wedge pattern. The index has tested the lower boundary of this pattern four times, with each test holding as support. However, as Gareth has noted, the probability of a breakdown increases with each successive test.

The situation on the Nasdaq is even more precarious. The index has been trading within a parallel channel, and Friday marked the fifth test of the lower trend line.

"One hit, two hits, three hits, four hits, the fifth hit, which we hit on Friday, was a 60% chance of breaking. Look at where we're trading pre-market. We're way below that line."

With the Nasdaq opening well below this critical support, the immediate focus shifts to the daily close. A close below the trend line would serve as initial confirmation of the breakdown, setting the stage for a potential 5% to 10% near-term correction. A key downside target to watch on the QQQ is the gap fill from August 1st, 2025, at $553.81 USD.

Beyond the Charts: Complacency, Greed, and Geopolitics

The technical breakdowns are not occurring in a vacuum. They are the culmination of weeks of warning signs that market sentiment had become dangerously complacent and greedy. Gareth highlighted several red flags that had his internal alarms ringing long before this sell-off began.

"When you see the VIX getting down towards 14, which shows complacency... We talked about zero day options... that is again, gambler's mentality, right? It goes from smart investing to gambling. And then you look at other factors like valuations and margin. Margin hit its all-time high recently."

These are the classic telltale signs of a market top. A low VIX (Volatility Index) indicates a lack of fear. The explosion in zero-day-to-expiry (0DTE) options volume signals a shift towards short-term, high-risk speculation. Record-high margin debt means investors are borrowing heavily to chase returns, creating a fragile market structure vulnerable to a sudden deleveraging.

This frothy sentiment is now colliding with a wall of uncertainty from both a legal and geopolitical standpoint. A court ruling deeming Trump's tariffs illegal, while pending a Supreme Court review, injects uncertainty into corporate pricing strategies. Furthermore, a weekend meeting between Russia's Putin, China's Xi, and India's Modi is stoking investor fears of a consolidated geopolitical bloc standing in opposition to the U.S. This combination of internal market froth and external macro risk has shattered the market's "perfect fantasy."

A Troubling Signal from the Bond Market

Perhaps the most sophisticated and concerning observation from today's analysis is the anomalous behavior in the U.S. Treasury market. Typically, when fear spikes and markets sell off, investors flock to the perceived safety of U.S. bonds, buying them up and pushing yields down. Today, the opposite is happening.

"The 10-year yield is also getting a bounce... this is a little concerning to see yields going up when fear spikes. Yields should be going down when fear spikes because people run to the safety of bonds. They're not doing that today."

This divergence is a major red flag that Gareth is monitoring closely. It begs the question: why are investors not buying bonds amidst a clear flight to safety? Gareth posited a potential, and unnerving, explanation:

"Are countries maybe, maybe potentially Modi, Xi, and Putin all getting together... maybe this is more of a stand and the markets are worried about these countries like China and and India not being as willing to buy our debt and pushing us to the outskirts."

While this is not a confirmed thesis, it is a critical factor that professional traders must consider. If major foreign buyers are becoming hesitant to purchase U.S. debt, it could have profound long-term implications for interest rates and the U.S. dollar's status. This is a subtle but potentially seismic shift that most retail investors are likely missing.

Key Setups in the Carnage

Even in a sea of red, a disciplined trader focuses on key levels and high-probability setups. Gareth outlined several charts to watch closely:

Nvidia (NVDA): The former market leader is a prime example of the "break, retrace, continue" pattern. After breaking its key uptrend line, it floated back up in a classic retrace before resuming its move lower. Gareth is watching for a potential high-risk day trade long around the $167 USD gap fill, with a higher-probability entry at $164.10 USD. The ultimate near-term target remains the former all-time high from 2024 at around $153 USD.
Semiconductors (SMH): The entire semiconductor ETF is sitting on the neckline of a massive head and shoulders pattern, located at approximately $282.30 USD. A confirmed close below this level would trigger the pattern, opening the door for a measured move down to the $260 USD area. This would align perfectly with more downside for Nvidia.
Palantir (PLTR): This stock is breaking down from a textbook bear flag pattern. After a sharp initial drop, the stock consolidated in a tight upward channel (the flag) before breaking support. The key level to watch is the recent low of $142.50 USD. A break below that level would likely send the stock down to its next major support zone between $125 USD and $126 USD.

Divergence in Safe Havens: Gold, the Dollar, and Bitcoin

In times of turmoil, traders look to safe-haven assets, but not all are behaving as expected. The U.S. dollar is acting as the primary beneficiary, with investors globally running to its safety.

However, gold is showing signs of weakness. Despite the market turmoil, it is forming a potential topping tail on its daily chart after hitting a confluence of resistance from a double top and a long-term trend line. The gold miners (GDX) are even more extended and are approaching a potential shortable level around $65 USD.

Bitcoin is an interesting case. It is holding relatively flat, not selling off with the broader market, which hints at some safe-haven buying. However, it is not yet a confirmed safe haven. Gareth’s view remains that a significant, sustained market dump would ultimately drag Bitcoin down with it. He is patiently waiting for a potential swing trade long opportunity if Bitcoin pierces the $100,000 level in the coming days.

Conclusion: Volatility is Back – A Trader's Market

The market's character has fundamentally changed. The low-volatility, complacent grind higher has been replaced by fear, uncertainty, and sharp, decisive price action. For long-term, passive investors, this is a period of anxiety. But for active traders, this is the environment where opportunities abound.

"Volatility is back and that is what us as swing traders and day traders crave. It means we can make a lot of money."

The key going forward will be the daily close. Where the S&P 500 and Nasdaq close in relation to their broken trend lines will provide critical information for the days and weeks ahead. By focusing on probabilities, identifying multi-factor technical levels, and maintaining discipline, traders can navigate this turmoil and capitalize on the opportunities it presents.