My Trading Game Plan Revealed - 10/07/2025: S&P 500 Critical Resistanc

As the market opened this morning, S&P futures caught a bid, climbing steadily on what appears to be a wave of optimism. In this morning's My Trading Game Plan, Gareth Soloway, Chief Market Strategist at Verified Investing, suggested this upward momentum is likely tied to hopes of a resolution to the looming government shutdown. While the market reacts to headlines, the charts are telling a more nuanced story, presenting critical resistance levels that could define the next major move.

Today, we'll dive deeper into the key levels on the S&P 500, analyze a potential breakout pattern in the U.S. dollar, and uncover the growing number of warning signs flashing in the semiconductor sector. We'll also explore the dangerous concept of "air pockets" in an overextended market and why a disciplined, chart-based approach is the only way to navigate the noise.

The S&P 500's Two-Factor Resistance Test

The S&P 500 is currently pushing into a critical resistance zone defined by two distinct technical factors. This confluence creates a high-probability area where sellers may emerge, and bulls will need to prove their conviction. The two levels to watch are precise and incredibly close to one another.

First is the high of Friday's "topping tail" candle, located at 6,751. A topping tail is a bearish candlestick pattern that forms when price rallies significantly during a session but closes near its opening price, leaving a long upper wick. This signals that sellers overwhelmed buyers at the highs. A daily close above this level would invalidate its bearish implication.

As Gareth explained, understanding these invalidation points is crucial for objective analysis. "Every bearish indicator, just like every bullish indicator will have a point where it is negated. And it's important for us as technicians to always know where that point is, because we can react then… Emotion takes over. When we have specific reasons or factors that negate it, it gives us a very clear-cut signal."

Just above that, at approximately 6,760, lies a multi-year trend line that has acted as both support and resistance since 2023. This creates a tight, 10-point window of major resistance. The market can negate the topping tail by closing above 6,751 but still fail at the trend line. A confirmed close above 6,760 would be needed to signal a continuation of the uptrend toward the next level of resistance. Until then, discipline dictates that these levels must be respected as formidable barriers.

Is the U.S. Dollar Coiling for a Major Move?

While equities capture the headlines, the U.S. Dollar Index (DXY) is quietly forming a pattern that could have significant cross-asset implications: an inverse head and shoulders. This classic bottoming pattern consists of a left shoulder, a lower head, and a right shoulder. However, the pattern holds no predictive power until it is confirmed.

Confirmation comes with a breakout above the "neckline," which currently sits at approximately 98.60. Many traders make the mistake of anticipating the pattern's completion, but as Gareth cautioned, patience is paramount. "Head and shoulders literally mean nothing until they're triggered. It's nice to see the pattern, it gives you something to watch, but so many people jump the gun before it's triggered… probabilities only start to heavily take over once you break that neckline."

Should the DXY achieve a daily close above 98.60, a measured move can be calculated by taking the distance from the low of the head to the neckline and projecting it upward from the breakout point. This calculation gives a potential target of approximately 101 on the DXY. A strengthening dollar would create headwinds for multinational corporations and commodities, making this a critical chart for all investors to monitor.

A Warning on Yields and Economic Reality

The 10-year Treasury yield continues to be a focal point for the market. On the weekly chart, yields are holding above a key support trend line. However, the price action suggests this support may be weakening. The more times a trend line is tested, the more likely it is to break. The current consolidation, which resembles a small bear flag, statistically favors a downside move in yields.

But a drop in yields isn't automatically the bullish signal many assume it to be. The reason for the decline is what truly matters. A drop driven by cooling inflation and a stable economy is positive for equities. However, a drop driven by a contracting economy is a major red flag.

Gareth clarified this crucial distinction: "If the reason for the drop in interest rates on the long end is because the U.S. economy is collapsing… a drop in yields will be met with selling in the stock market versus buying in the stock market." This is a vital piece of context. If we see yields break down while economic data deteriorates, it could signal a flight to the safety of bonds, an environment where risk assets like stocks typically perform poorly.

Red Flags Waving in the Semiconductor Sector

The semiconductor space, a market leader for months, is now flashing numerous bearish signals. Yesterday's analysis of AMD provided a textbook example of a successful short trade. Gareth identified the $227.00 USD level as key resistance, and the stock hit it perfectly before dumping to a low of $205.00 USD.

Today, the AMD chart remains weak. The double top resistance held, and the massive red reversal candle from yesterday signals that institutional money was aggressively selling into the rally. The stock is now forming what appears to be a bear flag, a continuation pattern that suggests further downside is likely.

This is where the discipline of chart analysis becomes invaluable. Social media is filled with extreme predictions, but the charts offer a probabilistic roadmap. As Gareth stated, "Verified Investing's mantra is ‘no BS, just charts’… The key is how do we ignore that and all the crazy FOMO or FUD that's in the market and focus on what is the most likely outcome based on probabilities, and that's where the charts come in."

The weakness is not isolated to AMD. Across the sector, warning signs are appearing:

NVIDIA (NVDA): Price is coiling in an increasingly tight wedge pattern. This indicates a massive move is imminent, but the direction is unknown. A breakout could target north of $200.00 USD, while a breakdown could send it back to $150.00 USD.
Micron (MU) & Intel (INTC): Both semiconductor stocks printed bearish topping tail candles yesterday.
Seagate (STX) & Western Digital (WDC): Both showed significant bearish reversals, opening higher and closing near their lows.

These technical signals are compounded by questionable fundamentals, such as the AMD-OpenAI deal where AMD is effectively issuing warrants to finance the demand for its own chips. In a roaring bull market, such news is overlooked. But these are the types of underlying cracks that can lead to major corrections when sentiment eventually shifts.

The Danger of "Air Pockets" in Parabolic Stocks

When a market runs for months without a meaningful correction, it creates a dangerous condition Gareth refers to as "air pockets." Stocks that go vertical without building support levels along the way are incredibly vulnerable to sudden, sharp declines on any piece of negative news.

The poster child for this phenomenon is AppLovin (APP). After being added to the S&P 500, the stock rocketed from a close of $490.00 USD to $750.00 USD in a near-straight line. Yesterday, news broke in the final 10 minutes of trading that the SEC was investigating the company. The result? The stock plummeted 20% in minutes, erasing nearly the entire rally in a single day.

This is a stark warning for the broader market. "When you have a market that is so extended without any sort of corrective pullbacks… it creates air pockets," Gareth warned. "If you get bad news on any stock that has been going up nonstop in the last couple months… the downside isn't gonna be like 3%, it's probably gonna be 15, 20%, very quickly." Investors holding parabolic names should be aware of this risk, as the lack of underlying support can lead to catastrophic drops.

Key Asset Analysis: From Tesla to Gold

Tesla (TSLA): The stock recently printed a "reversal engulfing candle," a pattern even more bearish than a topping tail. While the prior breakout from a wedge pattern was bullish and played out perfectly, the chart's current dominant signal is bearish as long as price remains below the high of that engulfing candle.
Apple (AAPL): Apple continues to trade within a clean parallel channel. While it's too extended to consider buying, the chart suggests a potential move to the top of the channel around $280.00 USD, which would present a high-probability shorting opportunity based on historical precedent.
Bitcoin (BTC): Yesterday, Bitcoin perfectly tagged the first major upside target at the $126,200 to $126,300 USD level. This price point corresponds to a trend line connecting the 2017 and 2021 highs. As a technician, this line must be respected as major resistance. A confirmed break above would target the next parallel line around $130,000 USD.
Gold (XAUUSD): Gold is pushing toward the top of its parallel channel, targeting the psychologically significant $4,000.00 USD level. This move is the culmination of a breakout from a massive inverse head and shoulders pattern identified back in 2022-2023, which has resulted in a 100% gain from the $2,000.00 USD breakout level.
Natural Gas (UNG): Natural gas is hammering on a key resistance zone. A breakout here would be significant, with a technical target of around $4.20.

Conclusion: Trust the Charts, Not the Hype

The current market is a fascinating mix of headline-driven optimism and underlying technical warnings. While the S&P 500 challenges major resistance, the semiconductor sector is showing widespread weakness, and parabolic stocks are sitting on dangerous "air pockets."

In this environment, the disciplined, probability-based approach of technical analysis is more critical than ever. It allows traders to cut through the noise of social media hype and the often-late-to-the-party analyst upgrades. As Gareth noted, the upgrade of AppLovin to an $800.00 USD price target just before it collapsed 20% is a perfect example of why investors must do their own analysis. By focusing on the charts, respecting key levels, and understanding the probabilistic nature of the market, traders can navigate any environment with logic and confidence.