Trading The Close Market Recap - 10/20/2025: S&P Near Major Resistance After 6-Day Rally — Quantum Stocks & Transport Divergence

The market kicked off the week with a strong showing, continuing its rapid recovery from the dramatic sell-off on October 10th. With major earnings from Netflix and Tesla on deck and an FOMC rate decision looming next week, investors are buying the dip with conviction. In this afternoon's Trading The Close show, Pro Trader Drew Dosek of Verified Investing broke down the critical resistance levels the S&P 500 is now facing, highlighted key divergences between leading indicators, and identified strategic entry points in the hard-hit quantum computing sector.

The Six-Day Recovery and a Wall of Resistance

It took only six trading days for the S&P 500 to almost completely erase the steep losses from the October 10th sell-off. This rapid, V-shaped recovery is a powerful statement from the market, demonstrating that a significant pool of capital was waiting on the sidelines, eager to deploy on any sign of weakness. As Drew noted, this price action is "telling me a lot of investors are still eager to buy that dip."

However, the easy part of the bounce may be over. The S&P 500 closed Monday just shy of a major technical hurdle: the high of that October 10th candle at 6,739.5. After reaching a high of 6,722.1 today, the index is now staring at what Drew described as "double doses of resistance." The first layer is the 6,739.5 candle high, and the second is an inclining trendline that converges in the same area. Successfully clearing this zone would be a significant bullish confirmation, effectively negating the entire bearish event. Should the market push through, the next major resistance level sits at 6,775.

The Nasdaq 100 (QQQ) is in a similar position, having come even closer to its own candle high of 613.18. The price action at these levels tomorrow will be critical, providing insight into whether this rally has the strength to break out or if it will be rejected at this formidable supply zone.

Leading Indicators and Diverging Signals

To gain a clearer picture of the market's underlying health, it's essential to look beyond the major indices and analyze key leading indicators. Interestingly, some of these indicators are telling a different story, creating a complex and divergent market narrative.

On the one hand, the Semiconductor ETF (SMH) and the Russell 2000 (IWM) have already pushed above their respective October 10th highs. Historically, the semiconductor sector often leads the broader market, so the SMH's strength could be a bullish omen for the S&P 500 and Nasdaq. Similarly, the IWM's outperformance suggests that capital is flowing back into small-cap stocks, a sign of broadening market participation and risk appetite.

On the other hand, the Dow Jones Transportation Average (DJT) is flashing a warning sign. As Drew explained, the transports are a crucial economic bellwether. "The transports, if they're doing well, the markets are likely going to follow suit too." Currently, the DJT is lagging significantly. While the S&P 500 is flirting with all-time highs, the DJT is well off its highs from November 2024. This divergence suggests that the physical economy—the shipping and logistics that underpin commerce—may not be as robust as the headline index performance implies.

Technically, the DJT chart shows an asymmetrical inverse head and shoulders pattern, with a critical declining neckline around 16,218. A break above this level could signal a catch-up rally for the transports and add fuel to the broader market. However, until that happens, this divergence remains a point of concern for market bulls.

A Hunter's Mentality: Navigating High-Flyers

One of the most valuable lessons from today's session was a masterclass in trading psychology, using the recent action in high-flying tech stocks as a case study. Stocks like AppLovin (APP) experienced meteoric rises, more than doubling in a matter of weeks, only to give back a substantial portion of those gains just as quickly. This price action creates intense FOMO (Fear Of Missing Out), tempting traders to chase momentum at the worst possible time.

Drew offered a powerful alternative mindset: the patient hunter.

"Don't chase. Don't chase these high flyers. I know it may feel like you're missing out, but just don't chase… You're hiding out, waiting for that one shot… You're strategizing and getting into plays with thought and intention… It helps guide the way, folks, so use this to your advantage."

This approach transforms trading from a reactive, emotional activity into a proactive, strategic one. Instead of chasing a stock that has already run, a disciplined trader identifies key support levels where a pullback is likely to find buyers. For APP, after its fall from grace, those levels are now emerging at a previous pivot high of $525.15 and a parallel channel support just under $500 at $489.42.

A similar setup is unfolding in Seagate Technology (STX). After a massive run-up, the stock is pulling back hard. Drew identified a powerful confluence of support—an "X marks the spot" area—where two long-term trendlines intersect just under $200. A pullback to this level would represent a 24-25% correction, offering a much more favorable risk/reward entry for a patient trader than buying at the top.

Decoding the Quantum Sell-Off: An Opportunity in Disguise?

The story of the day was the sharp, sector-wide sell-off in quantum computing stocks. While the exact catalyst was unclear, the price action created a potential opportunity for investors who may have missed the initial wave. Drew provided fascinating context on the industry, explaining that a major hurdle to mass adoption is the need for extreme cold—near absolute zero—for the computers to operate. However, new developments using crystals and even organic compounds could solve this problem, dramatically lowering operating costs and unlocking the technology's potential.

This fundamental backdrop makes the current technical pullback particularly interesting. Drew highlighted his two favorite plays in the space, IonQ (IONQ) and D-Wave Quantum (QBTS), and laid out a clear strategy for potential entries.

IonQ (IONQ): This stock pierced a long-term inclining trendline today, offering an aggressive entry point around the $59 level. Given the stock's high volatility, Drew stressed the importance of starting with a light position and planning to add at subsequent support zones. He identified a tiered support structure at $53.96, $50.20, and $47.33, allowing investors to build a position methodically rather than going all-in at once.

QBTS: This stock has seen a beautiful four-day decline, bringing it closer to a key technical zone. The next major support is a well-defined inclining trendline that marks a full retrace of its previous breakout. This level comes in just under $30. An entry near this area, especially if price moves into it quickly, could offer a high-probability bounce setup.

Commodities Check: Gold, Oil, and Natural Gas

The commodity markets are also presenting compelling, and at times conflicting, technical pictures.

Gold: Despite a scary red candle on Friday, gold bugs piled back in today, pushing the metal to a new all-time closing high. However, Drew remains cautious. Citing his analysis comparing the current chart to the 1970s gold bull market, he noted that the "time count is telling me time is up on gold, at least in the near term." The first major support level to watch on a pullback is $4,034.64.

Silver: In contrast to gold's strength, silver printed a "nasty reversal candle" on Friday and showed relative weakness today. This divergence suggests that bearish consolidation could be forming, with potential downside targets at $49.83 and $46.79.

U.S. Oil: Oil is showing signs of life. After a steep decline, the last two trading days have produced long lower wicks, indicating that buyers are stepping in to defend the sub-$60 per barrel level. If this support holds, a bounce back to the declining trendline resistance at $61.43 is a likely target.

Natural Gas: The Natural Gas trade played out perfectly. After patiently tagging a "double layer of support" for six straight days, the price rocketed higher, blowing past the $3.83 target to close at $3.95. This is a textbook example of how waiting for price to come to a well-defined support zone can lead to explosive results. The next resistance target is now $4.08.

Conclusion: Navigating an Inflection Point

The market stands at a critical juncture. A powerful, dip-driven rally has brought the major indices right back to a wall of resistance. While leading indicators like the SMH provide a bullish tailwind, divergences from the transportation sector suggest underlying caution is warranted. Upcoming earnings from tech bellwethers and a looming Fed decision are sure to inject further volatility.

In this environment, discipline is paramount. The lessons from today's analysis are clear: avoid chasing parabolic moves, adopt the patient mindset of a hunter, and use technical analysis to identify high-probability entry zones where risk is defined and reward is favorable. Whether it's the hard-hit quantum sector or a high-flyer coming back to earth, the best opportunities often arise from the dislocations that scare emotional traders away. By staying strategic and letting the setups come to you, you can position yourself to capitalize on the market's next move, whichever way it breaks.