Transcription
Hey folks, welcome to verified investing.com. My name is Gareth Solomay, chief market strategist here.
Now, in today's video, we need to deep dive into the S&P 500 and the NASDAQ. Are we close to the 20% draw down that I see in the charts? We're going to look at this. All right.
So, again, we're looking at potentially by the end of the first half of this year, 2026, the S&P is likely to have at least a 20% correction. Where it goes from there, we'll have to analyze. There's a lot of moving parts. We have the 100-year cycle coming up from the Great Depression, but that's not till 1929. Can the markets hang in there with minimal 20% type corrections and even push higher? Again, we'll have to watch and see.
But I'll tell you something, folks. The writing is on the wall. The dollar is getting close to a major breakdown. I did a video earlier today on how the dollar is looking like it's going to collapse, how the 10-year yield uh looks like it's going to start to spike up. Now, we need to dive into the S&P 500 and the NASDAQ to look for the key break point. So, let's do that right now.
We're going to start with the S&P on a daily chart basis. The reason why we're starting here is because it's one of the most fantastic charts out there. We have a crystal-clear COVID low. A line connects through the bare market lows of 2022 and 2023 and the liberation sell-off low in 2025. That trend line, you can see right here, folks, it's perfectly parallel. We bring it up to the bull market highs in 2021 and it gave us literally almost to the point on the S&P, the high here in 2020, late 2025.
Now, since then, we've done done a lot of chopping, but I'm going to show you a new trend line that is going to determine if we're going to get a bigger correction in the near term or is it going to be postponed to, let's say, late first quarter or early second quarter of 2026. And that trend line, my friends, I'm going to draw it in right now. You take your liberation sell-off low here from April, connect it through this lowest point, and drag it right out. And look at what we have on this chart.
Now, what's so remarkable about this is that essentially this is now creating a wedge pattern. The bigger parallel, right? This bigger parallel. So, this trend line in yellow is creating what we call a wedge pattern with this white trend line. Notice how again this caps the highs and maybe we go back up here to let's say 7,000 on the S&P. It's not that far away, about 140 points away. But ultimately, which way is going to break? Are we going to see price go up here and break out or are we going to see price chop around and break down?
If we get a breakdown, when we break this trend line right through here, that's where you get your bigger correction to begin. Essentially, what I'm saying to you guys is if we break this white trend line, that tells us the 20% draw down in the stock market is likely beginning. Okay? Uh if we don't, we could go up and test this 7,000 level on the S&P. At that point, we must monitor to see, can they push it above? Does it stall out? Does it continue to get squeezed in this uh wedge pattern?
And essentially what's interesting about this wedge pattern is if we bring this chart back, we can see that by a certain date the price will have to make a decision. In other words, right here is where these two lines meet in February. So what I'm saying to you guys is that we are going to know by February which direction price will go because it will be forced to break out or to break down by early February. In other words, in one month, we're going to know, folks.
It's either the correction is in play and we're in the free fall in the S&P. We see some bigger factors like the dollar begins to break that major support I covered in an earlier video today. Uh, and the yields are pushing up and that again creates fear. Black swan event. It's my worry for this year is that the loss in trust in the US financial system is going to accelerate with a new Fed chairman this year, which is going to be handpicked by Trump. and he said it's only going to go through if they promise to agree and do what he wants. Right? So that again degrades the US financial system trust and the Federal Reserve independence trust.
You also have other scenarios. Right? We obviously know that de-dollarization while it's a slow process will continue as countries do not want to be beholden to the US because they have so many dollars. It's the the major currency reserve and obviously the treasury market. And I talked about this earlier today in my last video as well, but 10 years ago, 40% of all US debt was bought by foreign countries. Japan, China, you name it. Uh, now only 15%. So foreign countries are buying less and less US debt. That again is a sign they are trying to diversify away from being beholden to US interests and pressure. Very important guys. This is a big trend change in the overall markets.
Now from technical analysis, we're going to follow this trend line. We tagged it here just on p this past Friday. We bounced up. We held this line. Will it break here in the coming week? We're going to watch and see or weeks and it'll give us an idea of when that bigger correction is underway.
Now, where will we go? So, if we see a break of the white trend line, your first target rate is going to be right here. Why? Because this is your major former high pivot, right? So, this was your all-time high in 2024 into 2025 before the liberation sell-off collapsed. Then you go back up and we made new all-time highs. Therefore, technical analysis dictates that former major highs. If we break this line, you look like this. You come back to correct into that level.
Now, this level would not be a 20% drop. In other words, to get that 20%, we would have to tag this lower level down here. But ultimately, again, first target, second target here, we would get a big bounce. Then after a big bounce, you'd likely see another move to the downside. All right, so that's your S&P. Watch this level on the S&P.
Now, let's go to the NASDAQ, right? So, I'm going to look at this chart here. The NASDAQ's very interesting, and I want to show you why. Essentially, we have this trend line here, which tells me that going back to 2023, we're on the weekly chart of the NASDAQ. We had a high pivot, high pivot, high pivot. Notice how each time we hit this, we had a draw down in the market. The idea here is we've hit it and now look at this pattern. To me, this looks a little bit like a bare flag. And ultimately, if we follow suit with all the other times we've hit this line, thought process is we should see a bigger draw down in price, right? And the idea here is first draw down would take us down to this level, which was our high from December of 2024 and January of 2025.
How do we know when that occurs? All right, so when does that start? Well, guess what? Just like we saw on the S&P 500, there's the same sort of trend line. Flipping back to the daily chart here. Take your low from April 2025. Connect it right through. There it is. Isn't it amazing how this is basically going to guide us to when to expect that bigger draw down in the market.
Now, we also, interestingly enough, have this trend line, right? So, you almost have this other wedge pattern forming that if we cannot break and we can break this, we actually could have some more upside in the market. So, the question is, well, which way is this going to go? Now, listen. And if we do break this, we probably only go back to double top all-time high here at around 24,000. But either way, in the short term, this will tell us we break above, let's say, 23,570, and you're looking at a move to about 24,000 before you hit resistance. You break this, sure, you'll have a stopping point here and here. But really, that would be your next big corrective move on this front.
Now, on the NASDAQ, I'm going to flip to the logarithmic chart. Looking at this, what do we have here? We definitely have some very interesting chart analysis to look at. Again, this is the NASDAQ. I'm going to go to the bigger time frame here. We're going to go all the way back to basically the beginning of the NASDAQ in 1973. We have our low pivots here. And just look at what's kind of going on here. I mean, this is interesting. If we look at some of these pivot points, we have a lot of trend lines that are really right in the current range here. All right. So, again, if we kind of look at this, and again, you can connect it through these highs. Pierces here and we're right up into that.
Now listen, we could still make a move up to 25,000 on the NASDAQ, but again, it's amazing how the logarithmic chart really does give us a little isolation on a potential move. Now, if we do go a little bit higher, this would be in the one possibility where we could go a little higher. Notice you take the low from the dot collapse logarithmically, you connected through this high here, and we get a move up to about 28, 29,000 on the logarithmic chart. But again, for me at this point, I'm more looking at the shorter term, right? I mean, projecting out, and I think it's important to understand that is projecting out literally, you know, years or 6 months or 12 months or that's harder to do. It's much easier to look at the shorter term because there's less issues that can occur, right? We don't have as many Fed rate cuts or Fed intervention or government printing of money, right? All of these different things can change the potential movement in the chart.
But ultimately for me right now, that wedge in the near term is either going to determine the beginning of a bigger correction or a move back to all-time highs depending on which one that breaks. Keep an eye on that, folks. Let's go back and just look at that one more time. So, if we look at this trend line, let's draw these in again on the NASDAQ. We're back to the linear chart here, the regular chart. And what we have here is watch this on the NASDAQ. Which way does it break? And like we showed on the S&P, probably has till February. This only has till about mid-January. So within two weeks we should know one way or the other which way this is breaking.
So big stuff coming guys. And by the way, what this tells us is that there is going to be big moves here in early 2026. Um, again, if it's the correction, fine, but we know these by by like NASDAQ by mid-January is going to either show us a m bigger breakdown or breakout and vice versa or or subsequently the S&P by by early February. So everything's coming to a head basically in two to four weeks. Which way is this market going to go? Either way, I think later this year by mid-year we have a 20% correction in the markets. But in the near term, do we break up? Do we break down? Let's follow it. I'll keep you guys posted as always. Thanks for tuning in. Thank you for checking out verifiedinvesting.com. I'll talk to you soon. Take care.