Trading The Close Market Recap - 10/13/2025: Relief Rally Fails to Fix S&P/Nasdaq Breakdown; Bonds Signal Risk

The market staged a significant relief rally today, clawing back roughly half of Friday's losses after geopolitical trade threats were walked back over the weekend. While bulls welcomed the bounce, the underlying technical picture remains precarious. In this afternoon's Trading The Close show, guest host and Chief Market Strategist at Verified Investing, Gareth Soloway, broke down the critical trendlines that major indices failed to recapture, the ominous signals from the bond market, and the speculative fervor that gripped certain sectors.

Today's analysis goes beyond the headlines to explore the fragile foundation of this rally and the key levels that will determine whether this is a dead-cat bounce or the resumption of the uptrend.

A Concerning Signal for the Economy

The catalyst for today's rally was a de-escalation of trade tensions between the U.S. and China. After the S&P 500 dropped less than 3% on Friday, both administrations quickly softened their rhetoric. While this provided an immediate boost to equities, Gareth Soloway pointed out the troubling long-term implication.

"What that does is it sends the market a signal, a clear signal that if there's any downside in the market, the administration and the Chinese government will back off on threats or action on policies… that's concerning that the economy both in China and the U.S. can't take more downside."

This dynamic creates a moral hazard for markets. It suggests that policymakers are so sensitive to even minor stock market declines that they will avoid necessary but potentially painful economic policies. For traders, this creates a short-term "put" from the government, where any significant dip is likely to be met with policy reversals. However, for long-term investors, it raises a critical question: if the global economy is so fragile that it cannot withstand a 3% market correction, what happens when a real economic shock occurs? This backdrop of fragility makes the technical picture even more important to watch, as the charts may be signaling weakness that policymakers are trying to paper over.

The Yellow Flag: A Breakdown Without Confirmation

Both the S&P 500 and the Nasdaq 100 experienced significant technical damage on Friday, breaking below key multi-month trendlines. Today's rally, while strong, failed to repair that damage. Both indices closed below their respective broken trendlines, leaving the market in a state of technical limbo.

Gareth described this situation not as a confirmed breakdown, but as a "yellow flag of caution." This is a crucial distinction for traders. A broken trendline is a warning, but it requires confirmation—typically another daily close below the line or a move below the low of the breakdown day—to signal a high-probability move lower.

"We are still technically in a warning zone. Anything below this trend line recapture is still warning. It's kind of basically like a yellow flag. It's not a red flag… but it is a yellow flag of caution for us as traders and investors."

This is where a probability-based mindset becomes essential. According to Gareth, an unconfirmed break like the one we have now puts the odds at roughly 50/50 or perhaps 60/40 in favor of the downside. It's a warning, but not yet a call to action. However, if the breakdown were to be confirmed, the probability of further downside would jump to 80%. Conversely, if the S&P 500 and Nasdaq can manage a daily close back above their broken trendlines, the bullish bias would be re-established. Tomorrow's session is therefore paramount in determining whether this yellow flag turns green (reclaiming the trend) or red (confirming the breakdown).

When the Cat's Away: A Retail-Driven Frenzy

An important piece of context for today's rally was the closure of the U.S. bond market. As the old Wall Street adage goes, "when the cat's away, the mice will play." The absence of the institutional bond traders—the "cat"—often leaves the market to more retail-driven—"mice"—speculative behavior.

This was evident in today's money flow. While mega-cap tech stocks like Nvidia saw a modest bounce, the real fireworks were in highly speculative, smaller-cap names.

• Bloom Energy (BE): +26%
• Aquo (AQ): +16%
• Rigetti (RGTI): +25%

Rigetti, a supercomputer stock, has been on an absolutely parabolic run, soaring from $15 USD in early September to $55 USD today. While these moves are exciting, they are also incredibly dangerous. Gareth used Rigetti as a prime example of professional trading discipline versus amateur chasing.

"As a trader, I'm never going to be buying and chasing. Like that's for whoever wants to chase and play Russian roulette, more power to you… When it's this extended on the chart, I'm always looking at the counter trend move at these points."

Instead of buying into the vertical move, he will be watching Rigetti tomorrow for intraday reversal signals, such as a topping tail, to initiate a potential short-term day trade. This highlights a core principle of professional trading: don't chase parabolic moves. The risk/reward is heavily skewed against you. The real test for the broader market will come tomorrow when the bond market reopens and institutional capital fully returns. Will they validate today's speculative rally, or will they use the bounce to sell into strength?

Ominous Signals from Bonds and Banks

While the bond market was quiet today, its price action from last week sent a clear warning. The 10-Year Treasury Yield recorded its first weekly close below a critical long-term trendline. This is a significant development. Falling yields are not a sign of a booming economy; they are a sign of slowing growth and a flight to safety.

This technical breakdown in yields suggests the bond market is pricing in further economic weakness and anticipating more rate cuts from the Federal Reserve. If this breakdown is confirmed in the coming week, Gareth's technical target for the 10-year yield is approximately 3.6%. This trend is a major headwind for the economy and adds another layer of concern to the equity market's already precarious technical position.

The focus now shifts to the unofficial start of earnings season tomorrow morning, with major banks like JP Morgan set to report. This will be the market's first real look under the hood of the U.S. economy.

"That's going to act like our economic news for the day, meaning that we're going to look to see how is the consumer, how much money, what are the loan defaults… this will act as a good barometer for what the economy is doing."

With data showing credit card defaults already at levels not seen since the 2008-2009 financial crisis, the banks' reports on loan loss provisions and consumer health will be scrutinized. A weak report could be the catalyst that confirms the technical breakdowns in the S&P 500 and Nasdaq.

Key Levels in Commodities and Crypto

Gold & Silver: Precious metals continued their powerful ascent. Gold closed above a key parallel trendline, and now awaits confirmation tomorrow. Silver also pushed above a resistance line. Gareth noted that while he took a profitable short trade on silver recently, a confirmed breakout could send the metal rocketing towards a target of $60 to $62 USD. The rally is being fueled in part by reports of stablecoin issuers buying physical gold, raising interesting questions about their faith in the U.S. dollar they are supposedly pegged to.

Bitcoin: The king of crypto is holding a critical pivot point. The line in the sand for bulls is $110,000 USD on a daily closing basis. As long as Bitcoin holds this level, a move back to the $126,000 USD level is possible. However, a confirmed break and close below $110,000 USD would open the door to a much deeper correction, with the next major support target around $92,000 USD.

Solana: Altcoins also participated in the risk-on rally. Solana had a strong move to $207 USD. Gareth mentioned that he and his members at Smart Money Crypto bought the dip on Friday at $182 USD and are now sitting on a handsome unrealized gain, contemplating when to take profits.

Conclusion: A Pivotal Day Ahead

Today's market action was a classic relief rally born from the de-escalation of geopolitical tensions. However, it was a rally on low conviction, marked by the absence of the bond market and characterized by speculative retail fervor. Crucially, it failed to repair the technical damage inflicted on Friday, leaving the major indices below their broken trendlines in a "yellow flag" warning zone.

The market is now at a critical inflection point. Tomorrow will bring the return of institutional players and the first major earnings reports from the banking sector. Will the "smart money" confirm today's bounce and push the indices back above their key trendlines, re-establishing the bullish trend? Or will the banks' reports reveal underlying economic weakness, confirming the technical breakdowns and ushering in the next leg down? The charts have given us the levels to watch; now, traders must wait for the market to reveal its hand.