My Trading Game Plan Revealed - 02/09/2026: Bear Market Bounce, Dow 50,000 Trap and China Cuts Treasury Buying

Following a volatile session on Friday that saw the S&P 500 and Nasdaq rally approximately 2%, markets have opened the new week with a pullback. While the uninitiated might view Friday’s surge as a definitive return to bullish form, seasoned technicians recognize a different pattern at play. In this morning’s episode of My Trading Game Plan, Gareth Soloway, Chief Market Strategist at Verified Investing, dissected the anatomy of "rip-your-face-off rallies" and why they are often hallmarks of bear markets rather than the start of new bull runs.

The Anatomy of a Bear Market Bounce

One of the most counterintuitive aspects of market behavior is the intensity of rallies during downtrends. As Gareth noted, when markets are in a true bull cycle, price action often consists of small, grinding days higher—a steady ascent. Conversely, bear markets are characterized by sharp, violent moves in both directions.

To illustrate the current technical environment of the S&P 500, Gareth utilized a "ball drop" analogy that perfectly encapsulates the physics of market momentum:

"Just like a ball, when you drop a ball… and it hits, and you get a bounce. That's your biggest bounce. It hits again, smaller bounce, smaller bounce, smaller bounce until you break lower. That's exactly what markets do."

Currently, the S&P 500 is exhibiting this exact behavior relative to the trendline from the April lows. Each subsequent test of resistance results in a slightly weaker bounce, indicating that buyer exhaustion is setting in. The index remains stuck below major technical resistance, and a potentially ominous pattern is forming on the daily chart: a Head and Shoulders top.

If the market curls over from here and breaks the neckline of this pattern, it would signal the next major leg down in equities. While the S&P 500 has pierced 7,000 and the Nasdaq has traded above 25,000, the technical damage on the charts suggests that the path of least resistance remains to the downside, despite the occasional explosive rally designed to trap bulls.

The Dow’s 50,000 Trap: Psychology and Exit Liquidity

A critical development occurred on Friday when the Dow Jones Industrial Average pierced and closed above the 50,000 mark. While financial media outlets celebrated this milestone, Gareth warned that major round numbers often serve as psychological traps rather than buy signals.

The Dow, comprised of only 30 stocks and generally more defensive in nature, ran directly into a major trendline at this 50,000 level. The convergence of a technical resistance line with a massive psychological number creates a scenario ripe for institutional distribution.

"It creates a narrative spin… You turn on CNBC, Dow breaks 50,000. What does that do? It cycles through emotionally to investors and says, wow, the Dow, this is great. The markets are great. Put more money in, AKA exit liquidity."

This phenomenon highlights the divergence between retail sentiment and institutional action. When headlines are most euphoric about a milestone like 50,000, smart money often uses the influx of retail buying to offload positions. The inability of the Dow to break through the resistance trendline going back to 2023, despite the hype, suggests a probability of a drop.

Macro Forces: China, Treasuries, and the Dollar

The catalyst for Monday’s pre-market weakness stems from a significant geopolitical and macroeconomic development: reports that China has instructed its banks to reduce purchases of US Treasuries.

This move has profound implications for the US economy. As one of the largest holders of US debt, a reduction in buying pressure from China forces US interest rates to float higher to attract other buyers. Higher yields act as a gravitational force on equity valuations and increase borrowing costs across the economy.

The Dollar’s Fibonacci Precision

Interestingly, the US Dollar (DXY) took a hit on this news, dropping as the market digested the implications of reduced Treasury demand. However, the technical setup on the Dollar prior to this drop was nothing short of textbook perfection.

Following a sharp decline, the Dollar had staged a relief rally. Gareth had previously advised traders to watch the 50% to 61.8% Fibonacci retracement zone as a likely reversal point. True to the principles of technical analysis, the Dollar’s bounce stalled exactly at the 61.8% retracement level before rolling over.

"This is why you use Fibonacci because, again, it works so well. It doesn't work always, but, again, it gives you an insight into what's likely coming."

Despite the short-term volatility, the long-term bias on the Dollar remains bearish due to the ongoing trend of de-dollarization. As nations diversify away from the greenback—often into assets like gold—the structural support for the Dollar continues to erode.

Economic Data on the Horizon

Traders must navigate a minefield of data this week. Due to the short government shutdown, the non-farm payrolls report was postponed and is now scheduled for release on Wednesday morning. This report is particularly significant as the January numbers typically include revisions for the entire previous year (2025), potentially altering the narrative on labor market strength.

Following that, Friday brings the CPI (Consumer Price Index) data. With commodities like oil up 15% in January, alongside rises in gasoline, copper, and silver, input costs have risen significantly. If the data is reported accurately, we should see an uptick in inflation, which would further complicate the Federal Reserve's position and pressure risk assets.

Stock Specifics: Navigating Earnings and News

While the indices face headwinds, individual stock selection remains a trader's market. Gareth highlighted several names seeing significant action:

HIMS: A Day Trade Opportunity

HIMS plummeted over 20% following news regarding patent issues with Novo Nordisk on a weight loss drug. While the headline is negative, the technicals suggest an overreaction. The stock is approaching a major support level around $17.25. For disciplined day traders, this level represents a potential area to "nibble"—taking a small starter position for a bounce, with plans to dollar cost average if it dips lower.

Monday.com and Workday: Software Under Pressure

Monday.com reported earnings and sold off, approaching a potential double bottom play at $73.50-$74. If it pierces this level, it would technically be making new lows, but the support zone offers a defined risk/reward setup. Similarly, Workday has gapped lower, with a gap fill target at $142-$143 offering a technical level for a potential long entry.

Oracle: The Contrarian Bull Case

Amidst the carnage in software stocks, Oracle stands out as a strong technical setup. The stock is currently bouncing off a long-term trendline dating back to September 2022. "The bearish sentiment is so bearish that I call it being bullish. When you get that flip… essentially all the sellers are out, and then smart money starts to say, let's start nibbling." The technical target for a snapback rally in Oracle sits between $170 and $177.

Bitcoin: The Tale of Two Timeframes

Bitcoin presents a fascinating case study in the conflict between micro and macro technical patterns. Understanding the difference is crucial for determining strategy based on your trading timeframe.

The Micro Pattern (Short-Term Bullish): On the shorter timeframe, Bitcoin has formed a large green candle followed by consolidation. This "inside bar" action creates a bull flag—a pattern that typically resolves to the upside. This suggests a potential near-term move back toward $80,000 or even $85,000, provided the lows of the flag hold.

The Macro Pattern (Long-Term Bearish): Zooming out, however, reveals a different story. Even a rally to $80,000 would keep Bitcoin within a larger downward trend channel. The macro path of least resistance remains lower.

This dichotomy illustrates why traders must define their time horizons. A swing trader might play the micro bull flag for a quick gain, while a long-term position trader might view the same rally as a selling opportunity within a macro downtrend.

Commodities: Gold, Silver, and Energy

The precious metals complex is showing divergence, with Gold acting as the primary safe haven while Silver consolidates.

Silver: Following a massive drop, Silver has entered a range-bound phase. While range trading can be profitable (buying support, selling resistance), the chart is forming a bear flag. If the support of this range breaks, the measured move target is significantly lower, potentially reaching $50-$54 per ounce.

Gold: Gold remains the preferred asset for safety, especially given the de-dollarization narrative. However, if it breaks its current lower range, a drop to $3,900 is likely, with major institutional support sitting at $3,500.

Energy: Oil remains bullish as long as it holds the $61.50 level. Natural Gas, however, has formed a bearish inside bar pattern, with support at $2.75.

Conclusion: Avoiding Paralysis by Analysis

In a market flooded with indicators, news headlines, and conflicting narratives, it is easy for traders to suffer from "paralysis by analysis." Gareth’s closing message emphasized the power of simplicity.

"It's all over complicated. Everyone else out there, they're using a zillion different indicators… Just look at the charts. Learn to read the charts. Learn what the candlesticks are telling us."

By stripping away the noise and focusing on price action, trendlines, and probability, traders can navigate both bull and bear markets with clarity. Whether it is the Dow at 50,000 or the Dollar at a 61.8% retracement, the charts provide the roadmap; it is up to the trader to follow it with discipline.