Transcription
Hey folks, welcome to verifiedinvesting.com. My name is Gareth Soloway, chief market strategist here.
Now in today's video, we need to look at the charts. Are we at the precipice of falling off a cliff or potentially the other side, which would be a break above key levels into uncharted territory and price discovery? We are at that crossroads and I'm going to explain why it's so majorly important.
Let's dive right into the S&P chart. So, number one, here's the S&P today, right? This is the last week. We've had a nice little rally back up. This was following the big drop that we saw just over a week ago on the back of threats to eight European countries over Greenland.
Now, if we zoom out on a bigger time frame, what we're seeing here is this channel, which I've talked to you guys many times about the lows of COVID in 2020 to the bare market lows here to the liberation sell-off lows. There's a perfect parallel right here. Look at this. This line, you drag it up to the highs from the bull market and what do we get? We get this high right over here and we have yet to retest that line. All right.
Now, that's number one. I'm going to flip from the weekly back to the daily chart. Okay.
Now, number two, take the low here from the liberation sell-off low on the daily chart and we drag a trend line up to this low and to the subsequent lows right there. Okay? Do you guys see what's forming right here? We have two major trend lines. One, the top that's literally dictated the highest the market could get this trend line going back five years. And this one going back to almost a year ago, the massive sell-off on the back of the liberation tear off uh announcements, right? And what we can see is price broke down below that level. Since then, it's retraced and it's coming right back into that level.
Now, this is essentially two massive walls that are converging right here. Basically 7,000 just above 7,000 to about 7,50 on the S&P 500. And basically what you're realizing here, what I'm conveying to you is that if price this week on the back of the Federal Reserve and these big cap earnings tomorrow after the bell, Microsoft, Meta, Tesla, Thursday, Apple, and all of these other tech plays in between then and into next week where we see Amazon and Google, Alphabet all reporting this market is either going to rip through this level and go into uncharted territory, price discovery, or the more likely scenario, which I'm going to explore, is a reversal off this level to the downside and the bigger technical correction gets underway.
If you think about it, what's keeping this market up? It's the hope of the AI trade. We're going to find out in the next couple weeks if that is intact. All right, so monitor anywhere between 7,000 and 7,50 on the S&P. If we can get above that, basically 7,50 into uncharted territory, that would be the bull case and the markets could continue to climb.
Now, what are some concerning factors here, folks? And there's a lot. Listen, there's been a lot of negatives. And you're right if you're thinking, "Wow, nothing can take down this market. This market's been everything been thrown at it, even including the kitchen sink. And still, the markets are near all-time highs." And you're valid. That's valid.
But what I'm seeing in the dollar chart is particularly unnerving. I guess we would use that term. Let's flip over to the dollar chart here. This is the drop in the US dollar. This is the biggest drop in years in such a short period of time in the US dollar. It is cratering.
Now, part of this has to do with intervention into the Japanese currency, the yen market, trying to stabilize the yen. But what I'm saying seeing here is that this is the start of something that's not going to be solved by a little intervention. This is going to be something that is going to kind of become a snowball down the mountain side. So, it starts out small with a little intervention, right? But it gets bigger and bigger and ultimately the US is is basically part of what's going on here is selling from global powers. They're dumping dollars. But then also the US is intervening, weakening the dollar against the yen. And those all work in the reverse in terms of the dollar getting weaker because the US imports a majority of its stuff. It means outside US imports become more expensive and that is inflation. So inflation is going to start to bubble up here. And if the numbers don't, then there's something that should be, you know, we should all question these numbers just a little bit if we don't see it. And I'll tell you why. Not only because of the dollar weakening, but also because copper all-time highs, silver all-time highs. I mean, all of these things, even live cattle, beef prices, all essentially at all-time highs. All of this is going on. You can't tell me inflation's not going to uptick, right? And we've already been suffering under this inflation nastiness for years.
All right, going back to the dollar. This is the problem here. If we look at the US dollar and we go to our weekly chart, we are on the precipice of a massive breakdown in the dollar, right? It's right in this range. So, yeah, granted, we're still holding that range. Maybe we'll bounce off like we did over here and then we here and then here and then here, right? All these levels here. It was again bouncing off and here we've tagged it. But the problem is this is that at some point you weaken this trend line by hitting it so many times. If we break below this, the dollar goes into a semifreefall.
So listen, how much intervention can we do in Japan? All right, maybe this time it works. Maybe the dollar bounces. But what if we have to intervene again, which is most likely going to happen? What happens when more countries start to ddollar the ddollarization process and we start they start to move away from the dollar and they're dumping dollars on the open market which by the way the tariffs and the threats of tariffs that's making other countries do that because when you have a country that has the reserve currency it gives that country power and these other countries don't want the US to have that much power where essentially they can impose these tariffs left and right and just do whatever they want and so it's the Dolorization. It's speeding up dolization here, which by the way, yes, it's long-term good for gold, probably long-term good for silver, even though those look like they're on the verge of some sort of pullback here. But ultimately, it doesn't matter. This factors in into something that's bigger here. And I do think that you're looking at a stock market that's at a pivotal junction here where it's either going to start to pay attention to what we've been talking about and absolutely collapse or we're going to go into the final blowoff top phase of the market which either way results in a big collapse. It's just a matter of does it occur here or do we have that final blowoff top candle up here like on silver for instance and then we have the bigger collapse back down. Either way, the market's endgame is going to be to the downside. Really, what we're watching is does it start in the near term here at this pivotal junction right here.
Now, other factors to watch as well is the US 10-year yield. The US 10-year yield broke out. Now, contrary to what everyone's hearing about, we're hearing, oh, well, new Fed chairman coming in, he's going to lower rates. Doesn't matter. the 10-year yield, unless the Fed starts intervening or the government intervenes in the actual long-end Treasury market, the long-end interest rate market, the Fed doesn't, it doesn't matter. The Fed doesn't have control of that. That's my point. And what we're seeing here is that the yields probably because other countries are starting to shy away from US debt. We broke out on the yield and now the likely scenario is a move up in this direction. And ultimately, if you're seeing a collapse in the dollar, by the way, usually what ends up happening is that in fear periods, the dollar strengthens and yields go down because the people jump into bonds for safety. We're not necessarily seeing that. And that's problematic as well. And so, imagine a scenario where the dollar starts collapsing, yields start ripping higher. That's your case for catastrophe in the markets.
Now, listen, you might say, "What does that have to do with the stock market?" It's all intertwined. It's all money. It's all money. It's all liquidity and when money gets scared from these other factors, it absolutely will reverberate through other areas. Keep an eye on this guys. This is major stuff that we are witnessing.
Normally, I wouldn't do a video just on the S&P, the dollar, and the 10-year, but we are at a pivotal level here that in the next week or two, we will know one way or the other. Is a collapse beginning or are we going to gap above and make that final god candle if you will, that massive move up, that final blowoff top in the markets? But we are here. Watch this happen here over the next week or two.
Have a great rest of your day, folks. Thanks for tuning in. Talk to you soon. Take care.