My Trading Game Plan Revealed - 01/12/2026: S&P Wedge Breakout, Fed Probe Weakens Dollar, Gold Soars

Good morning and welcome to your companion guide for this morning’s My Trading Game Plan. As usual, today’s episode featured Gareth Soloway, Chief Market Strategist at Verified Investing, and today he unpacked a market teetering on the edge of a major move. Over the weekend, news broke that the Department of Justice is investigating the Federal Reserve, a development that strikes at the very heart of the U.S. financial system's perceived independence.

This isn't just a political headline; it has profound implications for the U.S. dollar, the bond market, and by extension, every asset class from equities to precious metals. As the dollar falters, gold and silver are soaring, signaling a potential crisis of confidence. Meanwhile, the S&P 500 is being squeezed into an ever-tightening pattern that promises explosive volatility by the end of the month. Let's dive into the charts and data to understand what’s really happening.

The Great Squeeze: A Market on the Verge of a Breakout

The S&P 500 is currently caught in a technical pattern that demands every investor's attention: a massive wedge formation that is rapidly approaching its apex. Price action has become increasingly compressed, creating a powder keg of stored energy that is set to unleash a powerful directional move.

As Gareth explained this morning, this compression is like a force of nature in the markets. “Remember, think about it like a toothpaste tube. As price gets squeezed… it either has a big breakout or a big collapse to the downside. That's what's going to happen here, folks. There's no doubt about it.”

This technical setup means that by the end of January, the market will be forced to choose a direction. The stakes are incredibly high.

• The Bullish Scenario: A decisive breakout above the upper trendline, currently just above the 7,000 level, could trigger a significant market melt-up. This move could propel the S&P 500 towards targets of 7,500 or even 8,000 in 2026.
• The Bearish Scenario: A breakdown below the lower orange trendline would signal the start of a major corrective phase. This move could mirror the sell-off seen in 2021, potentially leading to a 10% to 20% decline. The first major stop on such a move would be the 6,100 level, which represents the significant former highs before the 2025 sell-off. This level would now act as critical support.

While data and probabilities may favor one outcome over the other, a disciplined technician must always prepare for both. As Gareth advises, “As a technician, I must always be looking at both sides of the coin, right? You got to look at the side that's the most likely to occur. That's generally where I'm going to position my own portfolio, but then I also must look at the other side because I need to know my worst case scenario on those trades.” This dual-sided analysis is the cornerstone of professional risk management.

A Crisis of Confidence: The Fed, The Dollar, and Yields

The catalyst for much of today's market turmoil is the news of a DOJ investigation into the Federal Reserve. While the specifics of the investigation are noteworthy, the larger, more systemic issue is the erosion of the Fed's independence. A central bank perceived as being subject to political pressure loses credibility on the global stage.

This has a direct and immediate impact on the U.S. dollar. “What this tells the world,” Gareth stated, “is that the U.S. financial system is no longer as stable as it used to be… and that is something that will continue to degrade the U.S. dollar.”

Why? Because foreign nations holding U.S. dollars and debt will accelerate their diversification into other assets. This isn't a hypothetical future event; it's happening now. The U.S. Dollar Index chart shows an ominous bear flag pattern forming just above a critical long-term support trendline that dates back to 2008. A break below this level could trigger a rapid and significant decline in the dollar's value.

Many mistakenly believe a weaker dollar is an unqualified good, assuming it will boost U.S. exports. However, the U.S. is still a net importer. A weaker dollar means the cost of everything from avocados from Mexico to shirts from Vietnam goes up. As Gareth bluntly put it, “a weaker dollar is going to bleed through to inflation. And I'm starting to see that if the dollar starts to break down… inflation is going to go back north of 5%, maybe even back to 7 to 10%.”

This dynamic also threatens to ignite the bond market. The 10-year Treasury yield has been consolidating in a tight bull flag pattern, signaling a potential move higher. If foreign investors lose confidence in the U.S. financial system, they will demand higher interest rates to compensate for the risk of holding U.S. debt. They might say, "we're going to demand a 7% interest rate instead of a 3% or 4% interest rate." A breakout in long-term yields would create significant headwinds for the economy and the stock market.

Precious Metals: The Flight to Safety Is On

As confidence in the fiat system wanes, capital is flowing into the oldest and most trusted forms of money: gold and silver. The price action in the metals markets today is a direct reflection of the concerns surrounding the Fed and the dollar.

Gold is surging, pushing to a new high and attempting a major technical breakout. The key level to watch is a daily close above $4,585 USD. A confirmed close above this price would signal the start of the next major leg up. The upside target is not an arbitrary number. Using a parallel channel analysis, a measured move from the current breakout point projects a target near the $5,000 USD to $5,100 USD level.

Silver is exhibiting similar strength, breaching its previous high and testing a critical trendline. A confirmed breakout here would be equally significant, with technical analysis pointing to a potential long-term target of around $100 USD per ounce. This is calculated by taking a parallel of the lower channel and extending it from the previous major high. Depending on the timing, that trendline projects to the $99 USD to $100 USD range.

The message from these markets is clear. As Gareth summarized, “the metals are running because the U.S. financial system is essentially seeing a crumbling event.” Investors are seeking refuge in hard assets as the foundations of the current financial order show signs of strain.

Divergence in the Digital and Industrial Worlds

In a fascinating and telling divergence, while gold and silver are soaring on safe-haven demand, Bitcoin is not participating. This is a critical observation for anyone who subscribes to the "digital gold" narrative.

“Bitcoin is not rallying, and this is important, guys, I can't stress this enough,” Gareth warned. “Gold is going up, because the financial system is under attack, silver, same thing. Bitcoin is not, that's not good.”

For Bitcoin to fulfill its promise as a store of value, it needs to demonstrate that quality during times of financial stress. Its failure to rally today, while not conclusive, is a point of concern. The chart reinforces this caution, showing a large bear flag pattern. A break below the $88,000 USD support level would trigger this pattern, opening the door to a potential decline toward the $70,000 USD area.

Meanwhile, the inflationary pressures signaled by the weak dollar are being confirmed by industrial commodities. Copper is trading at all-time highs, a clear indicator of rising input costs that will eventually trickle through to consumer prices. Even energy is showing strength, with oil confirming a technical breakout last week.

Navigating Headline-Driven Stock Moves

Amidst the major macro themes, several individual stocks are making significant moves on company-specific news.

Walmart (WMT) is rallying on news of an AI partnership with Alphabet (Google). However, the rally is approaching a key technical resistance level around $120 USD. This price point represents a confluence of previous high pivots, making it an attractive area for a potential day trade short.

Capital One (COF) is experiencing a major sell-off, down approximately 8% this morning. The drop comes after the president announced a proposal to cap credit card interest rates at 10%. While this may sound beneficial for consumers, the unintended consequences could be severe. Credit card companies would likely be forced to cancel cards for anyone with medium-to-low credit scores, as the 10% cap would not cover the associated risk. “Anyone with medium to low credit, they will literally lose access to the credit markets,” Gareth explained. This news highlights how policy headlines can dramatically impact specific sectors. In contrast, American Express (AXP), which caters to a higher-credit clientele, is down only about 3.5%.

Conclusion: Clarity Through Chaos

The market is at a rare and critical juncture. The S&P 500 is coiled for a massive move, the U.S. dollar is under systemic pressure, and precious metals are signaling a significant flight to safety. Add to this the impending start of earnings season, with giants like JPMorgan and Taiwan Semiconductor reporting this week, and the stage is set for a period of extreme volatility.

Navigating this environment requires a disciplined, objective approach. By focusing on the clear language of the charts and grounding our decisions in probability, we can cut through the noise of headlines and narratives. The patterns unfolding across asset classes are providing a roadmap. The key is to listen to what the charts are saying, respect the key technical levels, and manage risk with unwavering discipline. The weeks ahead will be wild, but for the prepared trader, they will be filled with opportunity.