S&P 500: The Failed Breakout That Could Crash the Market 15-20%

[00:00:00] Speaker 1: Hey folks, welcome to verifiedinvesting.com. My name is Gareth Soloway, Chief Market Strategist here. Now in today's video, we're going to deep dive into the S&P 500, looking for clues in the charts to where the next big move is coming. We're going to start with a near-term view and then expand out exponentially to look at the bigger timeframes, which give us more insight into why things are happening and what is likely going to happen. As always, all charts and no BS. Let's get right into it here, folks. So here's the chart of the S&P 500. And you guys know that we had been watching and we're zoomed in on the daily chart here, right? So this was the trend line that I'd been watching with you all. We were talking about how you just were kind of bouncing along this trend line and that once you broke, we would see a bigger drawdown. And sure enough, we did, but then we got to bounce late in the week. And you could arguably say that was due to a potential deal with Iran, although we've heard that a million times over, but it looks like oil is down now in the mid 80s. So it's really come down significantly. And then also the SpaceX IPO, if you know anything about the institutional money, they need an up market. You don't really sell or bring an IPO to public when the markets are collapsing. And so you have to really force the markets to get a rally, whether you do upgrades or whatever you have to do, you trigger that buy side mentality amongst retail to absorb all the shares that are coming public and make sure it's a great debut. And SpaceX was a great debut. There's no doubt about it. But the bottom line is we bounced. Why did we bounce right here? Remember that parallel that I had shown you guys that we broke out of to the upside? It was a parallel that I thought might not break, but it ultimately did. Let's draw that in right now, because this is just incredible. And again, this is the stuff that gets me to look at charts consistently and always. So here we put this trend line right here and notice how, again, it's going right through pivot low. And then you can see you, you open below it here. And I don't know if you can see that, but then we close back above, then we touch it here. Then we closed briefly below it here, but we never got a confirming candle. And then we tailed a tail flush through and it closed above. So that's how I would draw this trend line. Notice again, this is, and this is part, you know, technique, science, and part art, but notice how I'm having it touch each of the points. One, two, three, four after the initial one. So this is actually five hits of this trend line. But again, you know, you could draw it down here, but then look, it misses here and it doesn't quite hit here. So it makes more sense to have it touch all the times because number one, you never closed below it here and you only open below and they recaptured it. It tells you it's significant. And also there's a secondary little touch right there. Here's a touch here. It closed below, but never confirmed the breakdown. And here it just wicked below essentially. Now, what I want us to do is take that parallel and extend it up. So number one, look at how cool this is. All right. This is the stuff again. That just is amazing. Look at how it goes right to this top, right to this low, right to that low. All right. I mean, again, it's, it just basically gives us another pivot point or trend line to look at, but that's not the one we're looking at here. Extend it up, up, up, up, up. Now look at this here. We have another point where right here you hit and then right over here you hit as well. And even right in there you hit as well, but that's not again, what I'm wanting to show you. We bring it up even more. And listen, I could go through this constantly, right? With all of these points, but the one that I'm drawing your attention to is right up in this range, right? It's right here, but we see it touch right over here. It goes there and then look at, as we came down right into that level right there, it kind of kisses here, touches right there. And then we kissed it right there. And that's where we got the bounce. So essentially we have our parallel here, which was broken above. And what do we know about technical analysis guys? All right. So this is again, the educational stuff that I try to bring to you guys is so, so important. So when we have a parallel channel, okay, and we kind of are trading in that parallel, right? From the upper to the lower bands like this, and we break out, there's a tendency for us to come back to that level and then get a bounce. It's called a retrace to the scene of the crime. Now, the key is this, is that when you get that, and that's exactly what's happened here, right? We, we can see we hit up here, here and all the lows right through, we broke out, we've retraced and we're getting a bounce. Now what I'm watching for, there's a couple things that give me insights. So number one, as I told you guys last week, we had a low and we have a lower low. So that's not great in terms of the bullishness scenario, but what we don't have yet is a confirmed lower high. And that's really the break points. You can have lower lows and then you can actually have, still have higher highs. It's called more of like a megaphone pattern for those of you that know the technical jargon. So again, essentially a megaphone pattern would be something like this, right? Where you have two trend lines that are going like this and you have this, you have lower low, but also a higher high, lower low, higher high, lower low, right? And that's actually okay. I mean, it shows more volatility, right? That it's getting wider and wider, the bigger, the moves, but what we want to watch for here is as this bounce ensues, do we take out this high right here and make a higher high? Okay. Well then it's still a bullish market or do we go up and we stall out just shy? And do we come back in and make a lower low? And then the bigger point to bring to your attention is if we ever break and confirm back below this parallel, there's a lot of room to drop. And that would be what we would call a failed breakout. Now in technical analysis, failed breakouts are epic. And the reason they are is because the biggest moves come from failed moves. So if we get a lower high and then the parallel, we see price break with it back within that parallel, you likely are going to see 15, 20% downside in the market. All right. So not only do we have the lower, low and lower high, but now you failed the breakout. And again, just to show you what I'm talking about here is if we have a trend line, right? Let's say we have a trend line here, right? And we have, we're hitting on it. We're hitting on it. We're hitting on it. We break out and then you come back in and you get a bounce and then it fails. So this should have been a breakout in here, right? Really when instead of failing, this should go even higher. That's what should happen here. We should go even higher on the S and P, but if it doesn't, and it breaks back below, you usually get a much bigger draw down in the charts. In other words, it's a failed move. And the biggest moves come from failed moves. All right. So that's what I'm looking at in the short term. I'm really just watching and I'm trying to give you guys exactly from 27 plus years of trading experience of studying charts, relentlessly studying them literally overnight and just watching, learning every little thing. This is again, the information I want to bring to you guys, because number one, you're, you're spending your heart, you know, your valuable time watching this video. So it's the least I can do, frankly. And number two, I just love it. I love, I'm so excited about this to share it with other people. It's like something amazing is happening. You just got to tell the world, right? And that's what I want to show you guys. And listen, some of you guys won't buy it, you know, like believe in this stuff. That's okay. That's totally okay. Um, everyone gets to make their own decisions in life. It's one of the greatest things about being human is we get to make our own decisions and our own path. All right. So before we can continue guys, cause I got some big stuff to show, just a reminder that this video is sponsored by the rumble wallet, the rumble wallet. It's where I buy and sell my crypto, a buy and sell my gold on a swing trade basis. I got the app right here on my phone. It's fantastic. And it's just easy to use. And not only that, but they're offering you a free $10. So again, you can scan the QR code, but basically one of the beautiful things about this guys is for verified investing. If you just download the app, all right, and you use code verified 10, you get a free $10 deposited in. I mean, for probably about 30 seconds of work or whatever, you know, like, like to me, it's like, okay, well, if I had to spend an hour doing it, it's like no brainer, but for, for 30 seconds or a minute, 10 bucks done, you know, think about that hourly rate, pretty darn good. All right. The only other thing I want to just mention about this is it's the rumble wallet is just awesome because again, it's just quick. I love being able to grab my phone and be like, Oh, Bitcoin's at a great level by or short this or buy some gold here. We just hit, we just pierced 4,100 quickly buy some gold. Right? So that was the technical levels if you've been following me, but in any case, it's great to use rumble. I thank them from the bottom of my heart for supporting me and supporting this channel and helping me do the best that I can be. All right. Now back to the charts we go. Um, so number one here, now we're going to go to a bigger timeframe, right? What we're going to do is we're going to zoom out. And when we zoom out, we see this chart. Now this chart, this goes back to the bull market of the.com bubble, the collapse, the bull market for real estate, the financial collapse. And then look at this. So number one, that's ridiculous. Like how do you even chart that? It's basically virtually impossible, but what we can do is we can switch to logarithmic. Now, this is where things get very, very interesting. Right? So if we take a parallel and we connect the low, so this is the financial crisis low, and I've switched it to logarithmic. Now the key with logarithmic, instead of dollar values on the S and P or point values, it starts switching it to be more percentages. So it gives us a better view of the longterm. And I do, I don't use, when I'm looking at a chart over the course of a year or two years or three years, I'm generally, unless it's like a crypto micro cap, which I don't even trade those, those crap coins, but that's when you got it. Basically, if something's gone up exponentially, you've got to flip it to logarithmic. If it's linear, you want to stick on linear. If it's more of a normal chart that goes up a reasonable amount, not thousands of percentage points. Okay. So put a trend line here at the low of February 09 and connect it through right here. Okay. Bring this up. And this is what I wanted to show you. So on the logarithmic, a lot of people wondering why we stalled out where we did on the S and P. All right. What was one of the factors here that stalled us out? And the answer is this parallel, literally a trend line on the logarithmic chart on the S and P from the 2009 low to the 2020 low. Think about that. The two most major collapses and scary points in the history of the S and P over the last 20 years or so. So 2009 was the financial crisis. That was nuts. Then the COVID collapse was nuts too. So you're connecting those. And when you do that and you draw that trend line up to the high of the bull market of 2021, which was the last peak euphoria before what we're currently in, to the current peak euphoria that we're currently in, look at what you get right there. High pivot and high pivot. So that to me is very insightful because it does tell me that there is a chance for a bigger breakdown in the market. Because really what we saw is the last time we hit this trend line, right, was in 2021 and we had the bear market of 2022. Okay. So that was one of the things here that I want to really focus on. I don't want to spend too much more time taking your time up. But again, guys, just a reminder, I'm dropping a members only video for YouTubers here. Anyone who is a Gareth's top squad member later today, probably this evening, East coast time, you will get that top squad video. And so again, if you do want that, it's usually comes with more of about my exact entries and what I'm really liking, like specific trades and so forth. Feel free to join my channel. It's so cheap. It's a way to support us. I have 15 plus employees. As I say, it supports me. It supports the channel. It shows you guys are into it. And I love that. And I just thank you again, guys. As always, you'll see that member video if you're a member a little later today. Have a great rest of your day, guys. Take care.