Trading The Close Market Recap - 10/07/2025: Topping Tails Signal Pull

The markets flashed warning signs today as a wave of red swept across the major indices. While the declines were modest, a more subtle and potentially significant technical pattern has begun to emerge: the daily topping tail. As Pro Trader Drew Dosek of Verified Investing detailed in this afternoon’s Trading The Close, these bearish signals are appearing on numerous key charts, suggesting that near-term downside could be on the horizon.

This technical pressure is unfolding against a new and unsettling narrative backdrop for the market’s darling sector. News that Oracle lost $100 million renting NVIDIA’s latest chips has cast a shadow over the AI gold rush, forcing investors to ask a critical question: when will the astronomical costs of AI translate into tangible profits?

The $100 Million Question: Cracks in the AI Narrative

For months, the market has been fueled by an almost insatiable appetite for anything related to artificial intelligence. The build-out of data centers and the demand for high-powered semiconductor chips have propelled stocks to dizzying heights. Today, however, a dose of reality hit the market when it was reported that tech giant Oracle lost a staggering $100 million simply renting NVIDIA’s Blackwell chips. This single data point has begun to shift the conversation from boundless potential to economic reality.

As Drew Dosek explained on the show, this raises serious concerns about the long-term viability of the current AI business model. The costs are not a one-time expense; they are exponential and recurring.

“When you're having all these AI data centers being built out, once they're finalized and once they do get all those chips installed, those semiconductor chips are going to only last about three to five years because they're going to be worn and used tremendously. So, these AI data centers are going to need to recycle these semiconductors, in essence, buy new ones every three to five years, the cost of which is going to be astronomical, let alone the power cost.”

This fundamental challenge is now causing investors to pause. If a company as large and established as Oracle is struggling to find a profitable path, what does that mean for the rest of the industry? This uncertainty was reflected in the price action of related stocks, with names like Onto Innovation (ONTO) seeing a huge plunge on the back of concerns about eroding AI margins. The market is beginning to demand proof that this technological revolution can generate sustainable revenue, and until that proof materializes, stocks in the sector may face significant headwinds.

A Chorus of Topping Tails Signals Caution

While the AI narrative is shifting, the charts are sending their own clear message. A "topping tail" is a candlestick pattern that occurs when a security trades significantly higher during a session but closes near its opening price, leaving a long upper shadow or "tail." This pattern indicates that buyers attempted to push prices higher but were overwhelmed by sellers, representing a rejection of higher prices and a potential reversal.

Today, this pattern is not isolated to a single stock but is appearing across multiple major indices, creating a chorus of caution. As Drew noted, “there's some daily topping tales appearing on charts all over the place. So that does typically imply we should see near-term downside.”

Let’s examine how this is playing out across the market:

S&P 500 (SPY): The SPY chart presents a complex picture. While it has been in a state of near-term bullish consolidation, a hidden topping tail from a few days ago remains in control. The index has failed to close decisively above it, suggesting that selling pressure is lurking just below the surface. Even if it pushes slightly higher toward resistance at 676.84, the risk of rejection remains elevated.
Semiconductors (SMH): Often viewed as a leading indicator for the broader market, the SMH ETF is flashing a particularly stark warning. The weekly chart shows a prominent topping tail after a multi-week rally, implying downside pressure. This signal carries extra weight as it has pushed the index back below a key inclining trendline, with the next major support level sitting at $332.40.
Small Caps (IWM): The small-cap index also has a topping tail that remains firmly intact. Today’s 1.07% decline brought the IWM down to a gap fill level, which provided temporary support. However, if this selling pressure continues, the next logical target is the bottom of its parallel channel, down at $238.25.

The widespread appearance of this bearish pattern suggests that the market’s recent strength is being tested, and sellers are becoming more aggressive at higher levels.

When Technicals Foretell the Future: The Ford Story

Every so often, the market provides a perfect case study of how technical analysis can foreshadow a fundamental event. Today, that case study was Ford. The stock came under heavy selling pressure after news broke that a fire at its aluminum supplier, Novellus, would delay production into 2026. While this news appeared to be a sudden, unexpected catalyst, the chart was already telling a story of impending weakness.

Ford’s stock had rallied directly into a major, long-term trendline that dates back five years to the lows of April 2020. This trendline had previously acted as support and, once broken, flipped to become resistance. The price action was rejected precisely at this level just before the negative news was released.

“Interesting how the technicals were pointing to something happening with Ford's manufacturing, revenue, et cetera, when price action hit this trend line, and that's exactly what happened.”

This is a powerful lesson for traders. Chart patterns reflect the collective psychology and positioning of all market participants. The rejection at this critical technical level indicated that, for whatever reason, sellers were overwhelming buyers. The fundamental news simply provided the narrative to explain the price action that the chart had already predicted. For Ford, the next key support levels to watch are $11.13 USD and $10.62 USD.

Precious Metals Shine While Bitcoin Stumbles

Amid the uncertainty in equities, precious metals continued their impressive run. Gold pushed to new all-time highs, steadily marching toward the psychologically significant $4,000 USD level. This milestone is likely to act as major resistance, as many long-term investors will be tempted to take profits. Platinum has been even more explosive, with a powerful weekly chart breakout forming an inverse head and shoulders pattern that targets a move to $2,005 USD.

In stark contrast, Bitcoin experienced a sharp rejection. The cryptocurrency’s price action has been dominated by a large parallel channel for nearly a year, and its recent rally was stopped cold at the top end of this channel. The rejection was clean and decisive, reinforcing the power of this technical structure.

This divergence is telling. While gold and platinum are acting as safe-haven assets, Bitcoin is behaving like a risk asset, selling off alongside the tech-heavy Nasdaq. For Bitcoin, the next minor support lies at $119,553 USD, while major resistance remains the top of the parallel channel around $125,000 USD.

Finding Opportunity in the Carnage

Even on a red day, disciplined traders can find opportunities by looking for extremes in sentiment and price. Two stocks highlighted today, DraftKings and HubSpot, offer compelling examples of potential setups born from heavy selling.

DraftKings (DKNG): The sports betting company has been under relentless pressure due to rising competition from prediction markets like PolyMarket. The selling has been so intense that the daily Relative Strength Index (RSI), a measure of momentum, has plunged to an extremely oversold reading of 14.87. Levels below 30 are considered oversold, making this a truly rare extreme. The stock is approaching its April lows, a level that many other popular stocks have not revisited. For contrarian investors, this deep pessimism and extreme oversold condition could present an opportunity to accumulate shares for a potential rebound, perhaps leading into the high-traffic Super Bowl season. Key support levels are at $32.23 USD and $27.18 USD.

HubSpot (HUBS): This software company was also hit amidst the tech selloff. However, its chart reveals a subtle bullish signal. As the stock price made a new low, closely retesting its August bottom, the RSI made a higher low. This is known as a bullish divergence, and it suggests that the downward momentum is waning. This pattern can often precede a bounce. A potential short-term swing trade could be structured around this area, with a clear stop-loss if the price breaks below the recent low of $417.57 USD.

Conclusion: Heeding the Market's Warning

Today’s market action was a crucial reminder that trends do not last forever. The emergence of a skeptical narrative around AI profitability, combined with a flurry of bearish technical signals across major indices, demands a more cautious approach. The topping tails on the SPY, SMH, and IWM charts are not guarantees of a market crash, but they are clear warnings that selling pressure is building.

Traders and investors should now be focused on key support levels, such as the long-term trendline on the QQQ at 603.33. A break of such levels could usher in a deeper correction. At the same time, opportunities may arise in beaten-down names showing signs of extreme pessimism or bullish divergence. By remaining disciplined, managing risk, and listening to what the charts are saying, traders can navigate this shifting landscape and position themselves for what comes next.