My Trading Game Plan Revealed - 02/18/2026: S&P 500 Head and Shoulders Risk, Nasdaq 100 Downtrend, Yields Signaling Recession

In this morning’s My Trading Game Plan show, Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, dissected the latest economic data releases and their muted impact on a market waiting for bigger catalysts. With the Federal Reserve minutes due this afternoon and critical PCE inflation data looming on Friday, the markets are in a state of suspended animation, testing key technical levels while digesting a complex macroeconomic backdrop.

Today’s analysis moved beyond simple price action, diving deep into the psychology of chart patterns, the shifting correlation between bond yields and equities, and the specific trade setups emerging from earnings volatility.

The S&P 500: Anatomy of a Head and Shoulders Pattern

The S&P 500 is currently grappling with one of the most reliable yet complex bearish patterns in technical analysis: the Head and Shoulders. While many traders can identify the general shape, Gareth provided a masterclass on the specific rules that validate or invalidate this formation.

Currently, the index has formed a distinct left shoulder, a higher head, and a right shoulder. Crucially, the pattern adheres to a strict technical rule: both shoulders remain lower than the highest point of the head.

"When you do a head and shoulders, when you see it, that must occur. You must have both shoulders lower than the highest point on the head. If you get a higher high on one of the shoulders, then it is no longer a valid pattern formation."

Yesterday’s price action saw the market pierce the neckline of this pattern, only to rally back and close slightly positive. This defense of the neckline is critical. As long as the market holds this level, choppy sideways action is permissible without breaking the bearish thesis. However, a decisive break of the neckline would likely trigger the next major leg down for the S&P 500.

The Invalidating Level

Professional trading requires looking at both sides of the coin—understanding not just the setup you want to see, but the level at which your thesis is proven wrong. For this specific Head and Shoulders pattern, the invalidation point is the high of the right shoulder.

On the S&P 500 index, this level sits right around 7,004. A daily close above this level would negate the Head and Shoulders pattern. However, Gareth cautioned that negating the pattern does not automatically flip the market to a bullish bias. To achieve a true bullish breakout, the index would need to clear the major resistance block between 7,060 and 7,100—a zone defined by the 2021 bull market high and the subsequent rejections.

The Nasdaq 100: Gap Fills and Trend Definitions

While the S&P battles its neckline, the Nasdaq 100 provided a textbook example of why "gap fills" are among the most potent tools in a trader's arsenal. Yesterday, the tech-heavy index dropped approximately 1.3% early in the session, falling precisely into a gap fill level.

"As soon as it tagged gap fill, what did it do? It bounced. Let this be reinforcement to us that as a trader, gap fills both to the upside and the downside can be great trading opportunities."

Despite the bounce, the broader structure of the Nasdaq chart has shifted. Technical analysis is ultimately the study of trends, and the definition of a downtrend is a series of lower highs and lower lows.

In the short term, the Nasdaq has transitioned from a period of making higher highs to a sequence of lower lows and lower highs. This structural shift suggests that the path of least resistance remains to the downside, even if short-term bounces—like the one off the gap fill—occur. The expectation remains for a potential "dead cat bounce" followed by an eventual break to the downside.

The Macro Shift: When Bad News Becomes Bad News

A profound shift is occurring in the relationship between treasury yields and the stock market, a dynamic that Gareth highlighted as critical for investors to understand. For the past several years, the market operated under a specific paradigm: lower yields were bullish for stocks because they implied cheaper borrowing costs and Fed liquidity.

That correlation is flipping. We are entering a phase where lower yields are being driven by weakening economic data rather than just inflation optimism.

"Now we're seeing that lower yields are being accompanied with weaker economic data… The challenger job cuts numbers, the jolts data showing less job openings, jobless claims are starting to inch up."

This shift signals that the bond market is pricing in a recessionary environment. When yields fall because the economy is stalling, it is no longer a tailwind for equities—it is a warning siren.

The Crisis of Data Integrity

Compounding this macro difficulty is the eroding trust in government economic data. Gareth pointed out the massive revisions to non-farm payrolls, noting that over the last two years, nearly 2 million jobs initially reported have been revised away.

"We have to go on the assumption that until proven otherwise, every number reported is eventually going to be revised down… It really creates this distrust in the system."

For traders, this necessitates a more independent approach. Relying solely on headline numbers is dangerous when those numbers are subject to drastic revisions months later. Instead, price action and technical levels becomes the only source of "truth" in the market.

Earnings Volatility: Precision Levels in Palo Alto and Analog Devices

Earnings season continues to create significant price dislocation, offering opportunities for traders who wait for price to come to their specific levels rather than chasing momentum.

Palo Alto Networks (PANW)

Palo Alto Networks dropped over 8% following its earnings report, bringing it into a zone of interest. Gareth identified a specific day-trading level between $142 and $144. This level is derived from historical pivot lows—areas where the stock has bounced significantly in the past.

However, a crucial distinction was made between a day trade and a swing trade. While $142-$144 is attractive for an intraday bounce, the "rule of multiple hits" suggests caution for a longer-term hold.

"Any time in technical analysis you hit a line multiple times, the bounces usually get shallower… By the fourth time, the fifth hit of that, it's smaller bounces. And the smaller the bounce, the more likely eventually sellers are going to flush it through."

For a swing trade entry, patience is required to wait for lower levels, potentially around the gap fill and pivot high near $105.

Analog Devices (ADI)

On the flip side, Analog Devices surged on earnings, driven by AI-related optimism. The stock is trading in "uncharted territory" or price discovery mode, making resistance harder to identify. In these scenarios, traders must use trendline projections to find potential reversal points.

By connecting recent pivot highs on the daily and weekly charts, a trendline resistance level emerges around $361-$362. Given the stock's extended run—seven consecutive up weeks—this level presents a viable risk/reward setup for a day trade short, betting on a pullback after an extreme move.

Tactical Opportunities: Garmin, SolarEdge, and Fiverr

The morning analysis also covered several other movers, applying strict technical discipline to filter out low-probability setups.

Garmin (GRMN): The stock is pushing up on relatively light volume. The technical target for a short position is the gap fill zone between $248 and $250. The $250 level is particularly potent as it represents a "psychological even number" resistance combined with a technical gap fill.

SolarEdge (SEDG): Despite being up on earnings, the stock remains decimated, trading around $42 after hitting lows of $15. Gareth advised against shorting here, noting that the stock is too beaten down and could be subject to a short squeeze.

Fiverr (FVRR): The stock is getting crushed, down nearly 20% and entering price discovery to the downside. Finding support in a freefall requires looking at long-term monthly charts. A potential, albeit high-risk, level exists around $9.75, derived from major historical pivots.

Commodities and Crypto: The Inflation Hedge Outlook

Bitcoin: The cryptocurrency continues to hold steady, forming a classic bull flag pattern. In the near term, the bias remains bullish, suggesting a potential continuation of the upward move.

Gold and Silver: Precious metals are currently bouncing after recent pullbacks. Gold remains stuck between resistance and support. Silver, while bouncing today, has a technical target lower, with Gareth anticipating an eventual move down to the $50-$54 range.

Oil: Despite recent weakness driven by economic concerns, the bias remains long on oil. Geopolitical risks, particularly regarding Iran, provide a floor for prices, and the technicals suggest upside potential remains.

Natural Gas: The commodity continues to languish in the lower end of its range. The strategy here is patience—waiting for a flush to the $2.80 level to initiate a long position, rather than chasing it in the middle of the range.

Conclusion: The Psychology of the "Real" Trader

Perhaps the most valuable takeaway from today's session was the emphasis on trading psychology. Novice traders often seek to confirm their own biases, looking for news or patterns that support their existing positions. Professional traders, however, actively look for the invalidation point.

"Real traders are always looking at both sides. They're looking at the risk, and they're looking at the reward… You have to be ready to understand when your thesis breaks."

Whether analyzing the invalidation level of the S&P 500's Head and Shoulders pattern or waiting for the fourth hit of support on Palo Alto Networks to fail, the key to longevity in the markets is not predicting the future, but managing probability and risk.

As the market awaits the Fed minutes and Friday's PCE data, the disciplined approach involves respecting the technicals: support is support and resistance is resistance until proven otherwise. By focusing on logic and charts over hype and narratives, traders can navigate the volatility with a clear, probability-based game plan.