Trading The Close Market Recap - 10/02/2025: Markets at Crossroads: SP

The market continues its relentless march higher, with the S&P 500 notching another all-time high. Yet, beneath the surface of a seemingly straightforward green day, a more complex narrative is unfolding. The session began with a strong gap up, only to see sellers dominate the entire morning before an afternoon float erased the losses and pushed the indices positive. In this afternoon's Trading The Close show, Pro Trader Drew Dosek of Verified Investing unpacked the day's intricate price action, revealing critical resistance levels and technical divergences that suggest the market's upward path may soon face a significant test.

The Anatomy of an Intraday Reversal

To understand where the market might be heading, it's crucial to first understand how it behaved today. The morning sell-off wasn't a panic-driven plunge. Instead, it was a slow, methodical grind lower. As Drew explained, the nature of this decline was a key tell for experienced traders.

"We had selling, stair-step down three candles, another stair-step down four candles, stair-step down, and then we started declining at a diagonal angle. If you guys recall, I talk about this a lot, that diagonal angle of decline usually results in a bounce."

This is a critical distinction in price action analysis. Aggressive, high-volume selling often looks like an "elevator down," with large, decisive red candles. A more structured decline forms clear bear flags—sharp drops followed by weak bounces—that resolve lower. The slow, diagonal bleed seen this morning lacked the conviction of a true bearish move. It signaled seller exhaustion rather than seller dominance, creating the perfect conditions for the afternoon reversal. This type of price action often traps inexperienced traders who short into the weakness, only to be squeezed out as the market floats back up on low participation, just as it did today.

Major Indices Test Critical Boundaries

While the S&P 500 closed at a new high, a closer look at the charts of the major indices reveals that they are all pushing up against significant, long-term resistance levels. This is not a time for complacency; it's a time for careful observation.

On the SPDR S&P 500 ETF (SPY), a powerful, long-term inclining trendline drawn from the lows of August 2022 and December 2024 has become the market's immediate battleground. Today, the SPY gapped above this trendline—a typically bullish event that should have acted as a launchpad. Instead, sellers immediately pushed the price back below it. When the market rallied in the afternoon, this same trendline acted as a precise ceiling, rejecting the advance. While the price action is still considered bullish consolidation, this failure to hold above a key breakout level is a warning sign. The next major resistance target sits higher at 6,762.5, but the market must first prove it can conquer this trendline.

Meanwhile, the tech-heavy Nasdaq 100 (QQQ) is showing signs of potential exhaustion. While it has ample room to run to the top of its massive parallel channel near 662.81, a bearish divergence is forming on the daily Relative Strength Index (RSI). This occurs when price makes a new high, but the momentum indicator fails to do the same, suggesting the underlying strength of the rally is waning. This doesn't guarantee a top, but it does increase the probability of a pullback before any further advance.

Semiconductors: The Unquestioned Market Leader

If there is one area of the market showing undeniable strength, it is the semiconductor sector. Drew has long identified the VanEck Semiconductor ETF (SMH) as a leading indicator, and its performance today reinforces that view. While the broader market struggled intraday, the SMH gapped higher and never looked back, not even coming close to retesting its underlying trendline.

The fundamental narrative driving this strength is clear: the global build-out of AI data centers. This secular trend is creating massive, sustained demand for high-performance chips. As Drew noted, "All these AI data centers being bought out are being built, and all these contracts [are] being secured to fill those data centers with a boatload of computer products."

The technical picture is just as powerful. The SMH has been consolidating since June, and the recent breakout in September has been explosive. This price action is forming a massive potential bull flag pattern. A measured move target from this pattern points to a staggering potential upside target of $412.44. While Drew cautioned that such a move would not happen in a straight line and would involve pullbacks along the way, the chart clearly signals that institutional money continues to flow aggressively into this space. The next major resistance hurdle to watch is $358.26.

The AI-Fueled Rally in Smaller Caps

The fervor for AI is not limited to the mega-cap names. It's creating explosive moves in smaller, more speculative companies that are carving out niches in the AI ecosystem. Drew highlighted two such companies, Applied Digital (APLD) and Symbiotic (SYM), whose charts illustrate both the incredible opportunity and the inherent risk in this theme.

Applied Digital, a Dallas-based company involved in high-performance computing and AI applications, has a technically beautiful chart. After breaking out of a multi-year parallel channel, it pulled back to a key support level at $21.46. This pullback, which Drew described as "minor," was a stomach-churning 18% drop over just a few days. From that low, the stock rocketed 35% higher before hitting resistance. This extreme volatility underscores a key lesson: in these high-beta names, what looks like a buying opportunity can feel terrifying in the moment. With analysts targeting the stock to go as high as $40 to $45, Drew’s analysis suggests that pullbacks remain buying opportunities for those with the appropriate risk tolerance.

Symbiotic, which focuses on robotics and AI integration, shows a similar pattern of a breakout, retest, and powerful rally toward its previous all-time highs at $64.14. The next resistance level lies at $69.54. For both APLD and SYM, the message is consistent: these stocks are in high demand, but their meteoric rises make them susceptible to sharp, painful drawdowns. Investors must be prepared for volatility and avoid chasing extended moves.

A Tale of Two Tech Giants: Tesla and Netflix

Nowhere is the market's complex state more evident than in the charts of two of its most-watched stocks: Tesla and Netflix. Both are presenting traders with directly conflicting technical signals, creating a puzzle that requires patience to solve.

Tesla (TSLA) suffered a significant 4.95% drop today, creating a bearish engulfing candle on its daily chart. This is a classic short-term reversal signal that often precedes further downside. However, zooming out reveals a completely different picture. Tesla is in the process of carving out a mammoth inverse head and shoulders pattern, a powerful bottoming formation. The measured move target from this pattern projects a move not just to old highs, but to new all-time highs at an astonishing $512.97. This long-term bullish outlook, supported by the company's future in robotics, is in direct conflict with the short-term bearish price action. For now, key support levels to watch on any further weakness are $424.13, $395.17, and the most conservative entry zone near $381.37.

Netflix (NFLX) is in an even more precarious, minute-by-minute battle. The stock recently broke down from a bearish head and shoulders pattern, a move that was confirmed with further selling today. This pattern gives a measured move target well below $1,000, at $951.65. However, just as the bearish case seemed sealed, the price slammed into a critical, long-term inclining trendline dating back to November 2021. Buyers stepped in aggressively at this level, pushing the stock well off its lows to form a bottoming tail candle. The stock is now teetering directly on the pattern's neckline at $1,176.43. A close back above this level could negate the entire bearish setup. Netflix is at a true inflection point, and its next move could have significant implications.

Bitcoin Breaks Out, Oil Breaks Down

Beyond equities, major moves are happening in cryptocurrencies and commodities. Bitcoin has officially broken the neckline of its inverse head and shoulders pattern, triggering a bullish signal that points to a potential long-term target of $127,459. The breakout is helping lift the entire crypto space, providing a tailwind for related stocks like Coinbase (COIN), which surged 7.48% today.

In the energy sector, a multi-month standoff has finally been resolved. U.S. Oil decisively broke its long-standing support trendline, a level that has provided countless bounces. With the floor finally giving way, the next logical support target comes into play around the $59.50 level. The breakdown signals a significant shift in the supply/demand dynamic that has governed the oil market for months.

Conclusion: Navigating a Market at a Crossroads

The market stands at a fascinating crossroads. The headline price of the S&P 500 paints a picture of serene strength, yet the underlying technicals reveal a landscape fraught with tension. Major indices are testing critical long-term resistance, divergences are appearing, and bellwether stocks are flashing conflicting signals. At the same time, the powerful secular trend of AI continues to fuel incredible strength in semiconductors and related smaller-cap stocks, providing a powerful engine for the bull market.

This is an environment that rewards discipline and patience. Chasing extended moves is a dangerous game, while waiting for price to pull back to clearly defined support levels offers a higher probability of success. The coming days will be critical in determining whether the market can absorb the overhead resistance and push higher, or if the warning signs will manifest in a much-needed pullback. By focusing on the key levels outlined in today's Trading The Close Market Recap, traders can be prepared to navigate the path ahead with clarity and confidence.