Trading The Close Market Recap - 10/14/2025: S&P Cracks as AI/NVIDIA Fade; Semiconductor Sell-Off and Tariff-Fueled Speculation

In this afternoon's Trading The Close show, Pro Trader Drew Dosek at Verified Investing broke down a market grappling with conflicting signals. On one hand, Fed Chair Jerome Powell’s comments suggested a firm grip on inflation, momentarily soothing investors. On the other hand, the technical charts are beginning to show significant "cracks in the ice," while a speculative frenzy, fueled by tariff threats, has erupted in specific sectors. Today’s article will expand on these critical themes, providing deeper context on the technical warnings, the fundamental questions now surrounding the AI rally, and the discipline required to navigate a market of stark contradictions.

Cracks in the Ice: The S&P 500's Technical Warning

The market has been in a relentless uptrend for months, shrugging off minor dips and consistently finding support. However, as Drew Dosek highlighted, a subtle but critical shift has occurred that seasoned traders are watching closely. Following Friday’s significant sell-off, the S&P 500 has now closed below its 20-day moving average for three consecutive days.

"If you look from the April low, this is the first time that's occurred… Does this mean it's the end of the road? No, not necessarily. But we're starting to see cracks in the ice."

This is not just a minor technical event; it represents a change in character. Throughout the rally that began in April, the S&P 500 has only briefly dipped below this key moving average for a single day before buyers stepped in aggressively. A sequence of three closes below it suggests that selling pressure is persisting and short-term momentum has shifted. The large red candle from Friday’s session now looms over the market, acting as a formidable resistance level. Until price can decisively reclaim the top of that candle, the probabilities favor sellers. This technical weakness provides a crucial backdrop for the fundamental questions that are now beginning to surface.

The Questions Haunting the AI Rally

The market’s incredible run has been powered by an explosive narrative around Artificial Intelligence and the massive build-out of data centers. Companies like NVIDIA have reached astronomical valuations based on the seemingly insatiable demand for their chips. However, as Drew pointed out, sophisticated investors are starting to look past the initial hype and ask some difficult long-term questions.

"We're building out these massive data centers, but the more and more you think about it, how much money and revenue are they going to have to generate to maintain these levels? They're going to have to be replacing these ships every three to five years, and plus the sheer size of these data centers is going to soak up cities (plural) worth of power."

This line of questioning cuts to the core of the AI investment thesis. The sustainability of this boom depends on several factors that the market may be overlooking:

1. Profitability and Margins: As Oracle’s recent earnings revealed, the margins on renting out AI chips may be far lower than anticipated. If companies can't generate massive profits from their AI infrastructure, how can they justify continually buying the next generation of expensive chips?
2. Energy Consumption: The power requirements for these data centers are staggering. Who will pay for the necessary upgrades to the power grid, and how will rising energy costs impact the profitability of AI services?
3. Technological Miniaturization: Historically, electronics have become smaller, more powerful, and more efficient over time. The current trend of building city-sized data centers feels like a step backward, reminiscent of the room-sized supercomputers of the 1950s. Are we setting up for a future where today’s massive infrastructure is made obsolete by smaller, more efficient technology?

These concerns are no longer just theoretical. They are contributing to what Drew described as "extreme profit-taking" in the sector. The market is beginning to demand proof that the AI revolution will translate into sustainable, long-term profits, not just a short-term hardware boom.

The Semiconductor Canary in the Coal Mine

To understand where the broader market may be headed, Drew advises traders to focus on one key sector.

"Now really, if you want insights as to where the market's going to go, look no further than the SMH. This has been a tech-led rally. This has been a semiconductor-led rally. Everything right here on this chart will give you insight as to where the rest of the markets are going to go."

The VanEck Semiconductor ETF (SMH) is showing more pronounced weakness than the S&P 500. After putting in a topping tail at $348.53, the SMH has been unable to reclaim that high and is now breaking down. The next major technical support level lies on an inclining trendline near $320.75, implying a further drop of nearly 4%.

This weakness is epitomized by the sector's behemoth, NVIDIA. The $4.37 trillion company is now trading clearly below Friday's low, a sign of accelerating selling pressure. Technically, NVIDIA is starting to break down from a "fan" of inclining support trendlines that have guided its ascent since April. This suggests a normalization of its parabolic move, which could unlock a wave of further profit-taking. Given NVIDIA's immense weighting in the S&P 500, its direction has the power to pull the entire market with it.

A Market of Speculative Frenzy and Defensive Rotation

While the tech giants are showing signs of fatigue, a different story is unfolding in other corners of the market. The Russell 2000 (IWM), which tracks smaller-cap stocks, saw a surge today, driven by a speculative frenzy in mineral and energy plays. This mania was ignited by talk of potential 100% tariffs on Chinese goods, particularly rare earth minerals essential for semiconductors.

This has led to astronomical, multi-hundred-percent gains in just days for companies like US Rare Earth (USAR) and an Australian mineral company, NVA, which rallied an incredible 217% in just three days. Drew’s advice on these moves was unequivocal:

"Guys, don't chase this. Just wait. Let it go. Let it come back… I'm hanging by watching this, grabbing some popcorn and waiting for a pullback."

This is a classic "fear of missing out" (FOMO) rally in stocks that are often unprofitable and highly speculative. As seen with USAR, which fell nearly 20% intraday from its high, these parabolic moves can reverse just as quickly. A normalization of trade relations with China could cause these stocks to make a "complete round trip" back to where they started. In contrast, the Dow Jones Industrial Average, a collection of more defensive, blue-chip companies, is showing relative strength. While it is also contained within its Friday sell-off candle, the candle itself is much smaller, suggesting less panic selling. The key resistance for the Dow is 46,641; a break above that level while semiconductors continue to fall would signal a major divergence and rotation in the market.

Bitcoin's Bear Flag and Commodity Crosscurrents

The risk-off sentiment seen on Friday also slammed the crypto markets. Bitcoin, after failing to reclaim the upper half of its long-term parallel channel, has been consolidating sideways. This price action—a sharp move down followed by a period of consolidation—is forming a classic bear flag pattern. If this pattern plays out, Bitcoin could test the bottom of its channel at $105,896, with a measured move targeting the $97,000 area. For long-term investors, however, this presents an opportunity.

"On sale prices is what I like to buy at. So I'm almost rooting for more downside in Bitcoin. That way we can scoop some more up for longer term holds."

In the commodities space, gold continues its powerful ascent, closing around $4,100 as central banks accumulate the precious metal—a potentially ominous sign for the broader economy. Silver, being more of an industrial metal, is showing indecision at its highs. Oil has broken its uptrend, and a continued decline could signal weakening economic demand. Natural Gas is in a healthy retracement, with the onset of winter likely to provide support around the $3.31 level.

Conclusion: Navigating a Market of Contradictions

The current market is defined by contradictions. The major tech-led indices are showing their most significant technical weakness in months, while a speculative mania rages in a small pocket of the market. The AI narrative that has provided so much fuel for the rally is now facing its first serious fundamental reality check.

Navigating this environment requires discipline, patience, and a deep respect for risk management. The lessons from today’s analysis are clear: avoid chasing parabolic moves, pay attention to technical warning signs in market leaders, and understand the fundamental questions that could shift the dominant narrative. The large red candles from Friday now control the market's destiny. Until the bulls can prove they can overcome that overhead supply, the probabilities suggest that the cracks in the ice could widen.