Trading The Close Market Recap - 12/15/2025: Market Divergence — Tech Sell-Off, Rising Yields & Money Rotation

As the markets digest recent central bank actions, a clear divergence is emerging. While major indices remain near their highs, the underlying technicals are flashing warning signs, and a significant rotation is taking place beneath the surface. In today's Trading The Close, guest host Gareth Soloway, Chief Market Strategist at Verified Investing, dissected the unfavorable risk/reward profile facing investors, highlighted critical breakdowns in key technology stocks, and detailed the "money rotation" trade that is quietly gaining momentum.

An Unfavorable Proposition: The Market's Current Risk/Reward

From a purely mathematical standpoint, the current setup in the S&P 500 presents a challenging proposition for bullish investors. A detailed analysis of the charts reveals a potential upside of just 2.6% to reach the upper trend line of resistance. Conversely, the downside risk to the nearest major support level is a staggering 10.5%. This skewed risk/reward ratio is at the heart of a more cautious, probability-based approach to the market.

As Gareth explained, this doesn't mean the market is an automatic short, but it does argue against aggressive long positioning. “It doesn't make sense to be heavily long the markets here with such limited upside potential. Now, if we break that trend line, that's a different story. Then you open up a new door to significant upside, but we can't assume that.” This highlights a core tenet of professional trading: react to what the market is doing, not what you hope it will do. Respect the established levels of resistance until they are definitively broken.

The tech-heavy Nasdaq 100 (QQQ) provides an even clearer picture of this technical resistance. After breaking below a key support level, the index rallied back to test that same level from below—a classic technical pattern known as returning to the "scene of the crime." The subsequent rejection from this level was a textbook confirmation of resistance, validating the chart's warning signal even as narratives about AI exuberance continued to dominate headlines. This serves as a powerful reminder of one of Gareth’s most important lessons: “We don't tell the charts, the charts tell us. Remember that when we tell the charts, honestly, the charts usually make us look the fool and we take losses when the charts tell us we usually will win a high percentage of the time.”

The Looming Threat of Rising Yields

While stock charts tell one part of the story, the bond market is often where the next chapter is written. The 10-year Treasury yield is arguably one of the most important charts for investors to watch right now. Despite the Federal Reserve's recent rate cut and introduction of a quantitative easing program, yields have defiantly pushed right back up to a critical resistance level.

The line in the sand is 4.2%. A confirmed break above this level would signal that the bond market is not buying into the Fed's dovish stance, which could have severe repercussions for equities. A move above 4.2% would open the door to a target of 4.35%. While this may seem like a small move, its impact is magnified exponentially across the global financial system. As Gareth noted, “When you're dealing with trillions and trillions of debt and the… financing of that debt, the interest rate on that debt, that's big. And that will hurt the markets.”

Higher borrowing costs increase the expense of servicing corporate and government debt, squeeze profit margins, and make safer government bonds more attractive relative to riskier stocks. This dynamic is a powerful headwind for the market, and the 10-year yield’s behavior at this critical juncture could dictate market direction well into 2026.

The Tech Wreck: When Charts Give Advance Warning

The recent carnage in semiconductor stocks offers a masterclass in how technical analysis can provide warnings long before a fundamental narrative shifts. Broadcom (AVGO), a stock that was flying high just last week, has experienced a brutal reversal. After briefly touching a $2 trillion valuation in after-hours trading following its earnings report, the stock has collapsed, falling 18% from its all-time highs.

This wasn't a random event. The charts provided a clear signal. A simple trend line connecting the previous major high pivots was tagged perfectly as the stock went into its earnings report. The last time Broadcom hit this trend line, it resulted in a significant sell-off. Based on logic and probability, a similar outcome was the most likely scenario this time around. “What do you assume based on pure logic and probability? You're going to get a big sell off. And that is exactly what has happened. Amazing how simple the charts can be when we let them tell us what the likely outcome is.”

Other tech giants are showing similar signs of stress:

• NVIDIA: While it caught a small bid today, likely from traders rotating out of Broadcom, the chart is forming what appears to be a bear flag. This pattern suggests the stock is consolidating before its next move lower, with a potential target near its 2024 high of around $150 per share.
• Apple: A parallel channel, drawn from major pivot lows and extended to the highs, perfectly identified the $285 level as major resistance. The stock’s rejection from this level provided a high-probability short opportunity, which is now more than $10.00 USD in the money.
• Oracle: The stock continues to pull back, and a key level to watch is the gap fill at $177.00 USD. This could be a prime candidate for a "January effect" play, where stocks that have been sold off for year-end tax loss harvesting or window dressing experience a sharp rebound in the new year.

The Great Money Rotation

While high-flying tech names are getting hit, a quiet but powerful trend is emerging elsewhere: the money rotation trade. This is a classic market phenomenon where capital flows out of over-extended, popular sectors and into undervalued, "unsexy" areas of the market that have been ignored.

We are seeing this play out in real-time. Money is leaving names like Broadcom and finding a new home in beaten-down pharmaceutical and healthcare stocks. Look at the recent performance of companies that have been lagging for months or even years:

• Pfizer (PFE): The stock is showing signs of life and is setting up for a potential breakout above $27.50 USD.
• Bristol Myers (BMY): This stock has staged a remarkable recovery, rallying from $42.00 USD in late October to over $54.00 USD today.

This rotation is a sign of a maturing bull market or the early stages of a broader correction. Investors are becoming more defensive, seeking value over momentum. Recognizing this shift is crucial for portfolio positioning, as the stocks that led the market up are often not the ones that provide safety during a downturn.

Bitcoin and Gold: Critical Tests at Key Levels

The indecision in the broader market is mirrored in key alternative assets like Bitcoin and gold, both of which are at critical inflection points.

Bitcoin is currently trading around $86,000 after dipping as low as $85,000. It is precariously holding onto the lower trend line of a large parallel channel. The asset is literally "holding the line." A bounce from here could send it back toward the top of the channel. However, a break and close below this line would be a significant bearish development, opening the door to a target of $80,000. If that level fails, a much deeper correction toward the $69,000-$74,000 zone becomes likely.

Gold, meanwhile, is showing signs of fatigue. Despite multiple opportunities, it has failed to break out above its all-time high near the 4400 level. This failure is a potential red flag for bulls. In technical analysis, the inability to make a new high can often lead to the formation of a "lower high," which is the first step in a potential trend change. If gold cannot take out 4400 in the coming days, the recent sideways chop could be interpreted as bearish consolidation, setting up a move lower. Conversely, a decisive breakout would validate the uptrend and put a target of $5,000 in play for the first quarter of 2026.

Conclusion: Navigating a Market of Divergence

Today's market action was a story of divergence and rotation. The headline indices didn't experience a massive sell-off, but beneath the surface, the leaders of the bull run showed significant weakness while capital flowed into long-forgotten value names. The risk/reward profile for broad market longs is unfavorable, yields are threatening to break out, and key commodities and cryptocurrencies are testing make-or-break levels.

In this complex environment, a disciplined, chart-based approach is more important than ever. By letting the charts guide decisions, focusing on high-probability setups, and understanding the powerful undercurrent of money rotation, traders can better navigate the challenges and opportunities that lie ahead. The market is sending clear signals; the key is to listen to what it is saying, not what we want it to say.