My Trading Game Plan Revealed - 12/01/2025: Market Risk-Off After Japan Yield Spike, AI Risk Signals, and Technical Sell-Off

The Thanksgiving holiday lull has come to an abrupt end. As institutional traders returned to their desks this morning, the light-volume rally of last week evaporated, replaced by the sharp selling pressure that characterized the market prior to the break. In this morning’s My Trading Game Plan, Gareth Soloway, Chief Market Strategist at Verified Investing, broke down the catalysts for the sell-off and revealed how technical analysis provided a clear warning sign days in advance. From spiking Japanese bond yields to alarming developments in the AI sector, the market is flashing signals that every investor needs to understand.

The Post-Holiday Reality Check

Last week’s market action was a classic example of a holiday-driven, low-volume drift higher. As Gareth warned, this type of price action can be deceptive. With major institutional players on vacation, retail investors were left to drive the market, often buying dips and creating a sense of false security. The real test always comes when the institutional money returns.

"They take the whole week off of Thanksgiving. They come back and they go right back to what was happening prior to that week, which was selling pressure, essentially relying on the retail investor to buy the dip and push the markets up."

This morning, that test failed. The S&P 500 opened down sharply, gapping down approximately 42 points at the open. The return of institutional volume brought with it a return to the prevailing trend: risk-off. This dynamic underscores a critical lesson for traders—context is everything. A rally on light volume during a holiday week carries far less weight than price action during a normal trading environment. The professionals were waiting, and their return has decisively shifted the market’s tone.

Japan's Yield Spike: The Ripple Effect

A primary catalyst for the overnight futures sell-off was a dramatic move in the Japanese 10-year government bond yield, which spiked to new multi-decade highs not seen since the 2008 financial crisis. This move signals a more hawkish stance from the Japanese central bank and has profound implications for global markets.

Japan's economic situation is precarious, with a debt-to-GDP ratio of a staggering 240%. For context, the United States, often cited for its high debt levels, sits at around 130%. When a country is this heavily indebted, rising interest rates create immense pressure on its ability to service that debt. Investors, growing nervous about this risk, are demanding higher yields to compensate them for holding Japanese bonds. This creates a feedback loop where the market itself may be forcing the central bank's hand.

"This is telling you that they may have even lost control. So in my opinion, I think yields are going up and the Japanese central bank has no choice but to probably raise rates to keep pace with this."

This isn't just a problem for Japan. In a globally interconnected financial system, a significant move in one major bond market sends ripples everywhere. As yields rise in Japan, it puts upward pressure on yields in other countries, including the United States. This explains the paradoxical situation where the U.S. 10-year yield is also moving higher, even as the market prices in a Federal Reserve rate cut in less than two weeks. The global bond market is signaling that sovereign debt risk is a growing concern, and that can override the actions of a single central bank.

When Technicals Tell the Future

While the headlines point to Japanese yields, the charts of the major U.S. indices were already flashing bright red warning signs. The recent 5% bounce from the lows, which created a wave of euphoria among many investors, was, from a technical perspective, simply a retest of critical resistance levels.

On the weekly chart of the S&P 500, the index remained firmly below a major parallel resistance line that has capped previous rallies. Zooming into the daily chart, the precision of the rejection was stunning. There was a gap that needed to be filled, which often acts as a magnet for price. On Friday, in the final 10 minutes of the shortened trading day, the S&P 500 tagged that gap fill perfectly before closing. That level also coincided with a key Fibonacci retracement level, creating a powerful confluence of resistance. The subsequent sell-off was a textbook technical rejection.

The tech-heavy Nasdaq 100 (QQQ) told a similar story. A clear parallel channel had defined the recent highs. The market broke below the channel’s support line, confirmed the breakdown, and then rallied right back to the underside of that broken trendline. This is a classic "retest and fail" pattern. For a technical analyst, this was not a signal of a new bull run, but rather a bounce within a larger corrective move.

"While a lot of investors were getting euphoric again… it wasn't again based on technicals and charts and data. It was just a bounce for now… in technical analysis, you respect the level until proven otherwise."

This principle is the bedrock of disciplined trading. Human nature tempts us to make assumptions and project our hopes onto the market. Technical analysis forces us to remain objective, respecting established levels of support and resistance until the market proves they are no longer valid.

AI's Foundation: Cracks in the Silicon

The semiconductor and AI sectors, the darlings of the market for the past year, are showing signs of significant stress. NVIDIA, the sector leader, has broken down from a key upsloping parallel trendline, signaling a potential move down towards the $150 level.

More concerning, however, are the fundamental issues bubbling beneath the surface. Famed short-seller Jim Chanos recently highlighted an alarming practice: new cloud companies are using NVIDIA's AI chips as collateral for loans. This sounds reasonable until you consider the depreciation schedule.

"An AI chip today loses 90 percent of its value in two years… Could there be an issue here? Could this ever go wrong? …this reminds me of the financial crisis in terms of real estate."

Gareth’s comparison to the 2008 financial crisis is not hyperbole. In 2008, banks were lending against real estate assets whose values were wildly inflated and destined to collapse. Today, we may be seeing a similar dynamic where loans are being secured by assets—AI chips—that are essentially worthless in a very short time frame. This creates a hidden, systemic risk within the financial system. If the borrowers default, the lenders are left holding collateral that has depreciated by 90%. This, combined with what Gareth described as "suspect" shuffling of money between major AI players to create the appearance of demand, paints a troubling picture for the entire sector.

The chart of the SMH (VanEck Semiconductor ETF) provides a stark historical parallel. Twice before, when the SMH stretched 102% above its 200-week moving average, it was followed by a collapse of 40-45%. It recently hit that exact 102% extension level again. The writing appears to be on the wall.

Bitcoin's True Correlation

For years, proponents have argued that Bitcoin is an uncorrelated, safe-haven asset. Market action continues to prove otherwise. As risk assets sold off overnight, so did Bitcoin. It is behaving not as a flight to safety, but as a high-beta risk asset.

More importantly, Bitcoin has consistently acted as a leading indicator for the broader stock market. In 2017 and 2021, Bitcoin topped out four to six weeks before the S&P 500. In the current cycle, the same pattern has emerged. Bitcoin’s earlier peak and more significant decline are signals that institutional money is de-risking across the board. The bounce last week, like the stock market’s, was driven by retail enthusiasm while the big money was away. Now that institutions are back, the selling has resumed. Gareth remains steadfast in his eventual target of $73,000 to $75,000 for Bitcoin.

Silver's Stunning Breakout

Amidst the sea of red, the precious metals complex is a beacon of strength, with silver leading the charge. Silver has staged an incredible breakout, surging through a major triple-top resistance level around $54 and trading near $58 per ounce. This move demonstrates a profound lack of trust in the traditional financial system.

For traders, this breakout creates new key levels. The old resistance at $54 now becomes the first line of major support on any pullback. Below that, a beautiful upsloping trendline provides a secondary support zone around $52.50. While the move is powerful, Gareth is eyeing an upper channel trendline near the $60 mark as a potential area to initiate a short-term trade, anticipating a natural pullback after such an explosive move.

Gold, while not as explosive as silver, is also showing strength. It is attempting to confirm a breakout from a wedge pattern, which would open the door to a retest of its all-time highs. A double top at those highs is a distinct possibility, but a confirmed break above would usher in a new, powerful leg up, with Gareth noting that a move towards $5,000 USD is likely, whether it happens this month or in early 2026.

Conclusion: Navigating a Market at a Crossroads

The market is currently being pulled in multiple directions. A hawkish turn in global bond markets is creating headwinds, while deep-seated issues in the high-flying AI sector are raising serious valuation and systemic risk concerns. At the same time, a flight to safety is fueling incredible moves in assets like silver.

In this complex environment, a disciplined, data-driven approach is more critical than ever. The technicals provided a clear roadmap for the current sell-off, and they will continue to illuminate the path forward. Key levels in financials like JP Morgan, commodities like crude oil and natural gas, and leading indicators like Bitcoin will provide the clues. As the market navigates an impending Fed decision and growing global economic strains, sticking to the principles of probability and technical analysis will be the key to not just surviving, but thriving.