Did The AI Bubble Just Burst? Technical Analysis Deep Dive With Gareth Soloway

Good afternoon everybody. Welcome to
Trading the Close. My name is Gareth
Soloway, Chief Market Strategist here at
verifiedinvesting.com.
Now, we had a huge sell-off on Wall
Street today, mainly driven by the AI
stocks. So, we saw Micron down 13% on
the day, SanDisk down over 10% as well.
And this is what happens when you get
these bubbles in the market, especially
in the AI sector, it makes it very
vulnerable to these huge drawdowns. we
know if the AI bubble has burst
officially? The answer is no. What we
need to do is we need to look for a
confirming down move in the semis. Now,
will this come tomorrow? Unlikely,
because we're going to be all waiting
for Micron earnings after the bell
tomorrow. That could be the trigger.
It's either going to give reinforcement
to the AI trade and boost everything
back up, or it continues the fall and we
actually get a major top. But, I will
say this, I talked about this in the
game plan today. We have a scenario
where there are cheaper models, AI
models coming out. And at some point
that ripples through the supply chain.
In other words, you have chips, you
don't need as many high-end chips to run
these things. You don't need as much
memory, again, to to do these same
things, you know, the same projects that
you're doing. You don't need the
hyperscalers to be investing $200
a year. In fact, they're not going to
make their money back based on these
type of investments.
we're still in the infancy of the AI
story. So, I don't think the AI story is
going anywhere. It's going to change all
of our lives. In many cases, it's
already changed our lives. But, have
these stocks gotten ahead of themselves?
Yes. Do we have a president who every
time the market drops comes out and
formulates something to push it back up?
Absolutely. Is that good? No, and I'll
tell you why. Because every time you
prop the market up on hot air, it means
there's more air for the markets to
crash down on. And again, that's
something we have to remember. Let's
take a look at the S&P here, folks, on
the charts. This is your intraday chart,
so every candle is 10 minutes. This is
where we opened today. We initially had
a buy the dip, then a sell-off. Another
attempt at a buy the dip, but a lower
high. High, lower high, right? And it
sold off again. And then towards the end
of the day, there was an attempt to get
another buy, and it just fizzled out.
And this was a very weak trading day
overall. And this again was led on the
back of the AI stocks selling off, which
started in Asia overnight last night. We
saw the KOSPI down 10%. They even had
the circuit breakers triggered over
there. Now, remember the KOSPI, the
South South Korean stock market, that is
made up of basically two stocks, right?
Two stocks over there account for over
50%
of that index. So, if we look at the
KOSPI, you can see right here. I mean,
look at this drop. We'll get rid of
that. Massive 10% decline on their stock
market, but in essence, it's really two
stocks, right? Two stocks drive that
market. Now, you can say, "Oh my
goodness, how can you have an index that
is two stocks that makes up over 50%?"
Well, ding ding ding ding ding, here in
the US, the Nasdaq 100,
50% of our index is basically 10 stocks.
It's not much better. It puts us at a
lot of risk for drawdowns. And the
Nasdaq, by the way, today was down over
3%, not 10%, but over 3% defensive names
like Conagra today as well as some
software plays like Microsoft money was
rotating into those. All right, so let's
go to the daily chart of the S&P. I'm
still monitoring to see do we get a a
lower high on this remember and again I
followed this day by day. We had a low
here from this Valley. That's a valley
right there. Then we had another Valley,
right? So that can confirms we have
lower lows. So that's not in question.
The question is is when we look at
peaks, do we have two peaks in the
market? Here was peak number one.
Is this peak number two yet? It's tough
to know. We don't know just yet. It's
looking more and more like it in which
case we now have high lower high in the
market, but I'm a little hesitant until
at least we get through Micron earnings
tomorrow after the close to make the
call that we now have lower highs in
addition to the lower lows. The lower
lows are in there. That's stage number
one.
Lower highs stage number two. That puts
in a market top. Okay, so again, we'll
keep an eye on this. Tomorrow things I'm
watching.
Tonight I'm watching the Kospi
how it trades, the Nikkei how it trades.
Nikkei was down about 5%. Do we see a
bounce in those companies the AI stocks
over there which should bounce the
Kospi? If we do, then you get a little
relief rally tomorrow into Micron
earnings or do we see a continuation of
the sell-off?
We're going to be watching, but that's
what I'm watching this evening.
Absolutely. Do I care about oil?
Frankly, no. Oil's a non-event. Markets
in all fairness,
they never really traded massively on
the back of oil and the conflict between
the US and Iran. It was used as an
always a deal always a deal to prop up
the markets, but really that was just
giving an excuse for the buyers to pile
even more into the AI stocks and
continue that narrative. And again, the
question is is that ending? We'll find
out. Nasdaq right here, folks. Big drop
today on the Nasdaq QQQ 100, down 3.3%.
Same thing. It's looking closer and
closer to a high and a lower high. I
want to see a little bit more of a dip
to really solidify that second lower
mountain peak. So, you have a peak here.
Now, we have this, right? Do we come
down like this? Then it's like, okay,
game on. We have that in play. So,
again, little things like that I am
going to continue to watch. Now, just
flipping back to the Kospi, this will
begin around 8:00 p.m. Eastern time here
to be trading. So, I'm going to be
watching that very closely. There is a
gap fill here at 77,666
7,766
that would be a area of support. That
would be down a little bit on the day.
Let me just do a quick a number here for
us. How much of a drop to get us to gap
fill? It would be about a 5% drop. So,
if it falls 5%, we would fill the gap,
then that would be a logical bounce
zone. We'd have to see if it ends up
getting a bounce there.
All right. So, we'll continue to watch.
We'll continue to monitor and see how
that plays out. Uh the dollar today, the
dollar just continues to soar. Now,
this is something I did a video on
earlier um in terms of currencies. And
this is a lot more interesting than most
people think. So, the dollar has all of
a sudden grown very, very strong because
of two factors. One is the unease about
risk assets. So, people are running to
the dollar for the safe havenness of it.
The other one is the Fed and Kevin Warsh
last week came out much more hawkish
than the markets had anticipated. When
you're more hawkish, when you have a
Federal Reserve that's more hawkish, it
tends to breed more confidence that the
Fed will do what it needs to do to keep
the financial stability of the United
States. Now, if you're like me, and I
know the president said, "Hey, I'm only
going to appoint someone who's going to
really cut rates." I have a hard time
having faith that that determination by
the market is the correct one. I want to
see more from the Fed that they actually
are going to do the right thing versus
the easy thing. If that's the case, then
the dollar can go higher, but I'm very
suspect about that. And so, the dollar
here, if we look at the chart, we are at
the high end of a resistance zone,
coming right up to this 101.50 to 101.60
level on the DXY. Now, this zone has
been an incredible zone, because if we
zoom out, it was massive support between
2023
and 2025 before it became resistance,
and we broke below it, and we've tried
to break back above it. If you go back
even further, it is major resistance
going back to 2015,
2016, '17, '18, all the way to 2020
before we broke out. So, you can see how
this pivot zone is just epically
important to the market. And so, we're
going to continue to follow this and see
where it goes. If the dollar is able to
break out here, that would be somewhat
surprising. Obviously, good if you're
someone in the US, you want a stronger
dollar. Um but in general, with the US
having as much debt as it has, it's hard
to believe that the US is looking to
strengthen the dollar versus devalue the
dollar. And I know a lot of we all of us
have talked about de-dollarization,
other countries moving away from the
dollar. And then also in the US, well,
how do you get rid of so much debt? You
have to print enough money to
essentially get out of it. Um these are
all different questions, but the dollar
right now is up into major resistance.
We'll follow it through and see where it
goes. All right. After hours today,
FedEx falling on earnings. So, again, we
don't have a lot of earnings, but we
have Micron tomorrow after the bell.
Today, we have FedEx. And FedEx today
falling in the after hours. If we go to
the chart, you can see right here. I'm
not sure where that trend line was from,
but there's this is very interesting on
FedEx. Look at this trend line.
So essentially, we have a major trend
line here, right? And if we look at this
and we put our line in. So if we pivot
low, pivot low, pivot low, pivot low, it
looks like we're going to gap below this
major trend line. That's not good for
FedEx. Okay, that would be a technical
breakdown. So again, FedEx has actually
been a very strong stock, but based on
where it's currently trading after
hours, and we want to see obviously
where it closes tomorrow, cuz you just
don't know. This is just after hours
action, but this could be a major
breakdown in the FedEx chart. So keep an
eye on this trend line. It's an
incredible trend line. Here's where
we're trading after hours, well below
that technical line. Now, in a little
bit of time at 7:00 p.m. tonight,
Cerebrus, which is one of the new IPO
semiconductor stocks and their
performance has been atrocious since it
became public, they will report earnings
at 7:00 p.m. tonight. Not sure why it's
at 7:00 p.m. Why are they What are they
trying to hide and slip in late in the
after hours? And I'm being a little, you
know, facetious on that, but the point
is it's very rare for a company of this
size to report that late at night. So it
does make me say, "Hmm, that's a little
strange." But let's see what it is.
Maybe it's good news.
Is it a big enough company to impact the
semiconductors?
Probably not to a major extent.
Obviously, if it's horrendous news, that
would be another negative that would
probably make people a little skittish
going into Micron, but keep an eye on
Cerebrus 7:00 p.m. tonight. They will
report earnings. The stock again IPO
opened for trading for the public at
3:50.
It's traded all the way down to two.
Basically, the recent low was $197.
I mean, gave basically anyone who bought
this stock in the first week or two the
first two weeks of trading is down on
this position. Now, insiders that got
shares early, they got it at a buck 85,
$185. They're still doing fine, but
again, not exactly the right price
action and I will just say this, even if
this bounces on earnings back up here,
you still have kind of what I would call
a bear flag formation on the charts,
right? If we look at this, look at that.
A down move inside bar. So, this even
leaves room for on earnings, even if it
traded back to like 270, it would still
be in this choppy inside bar action that
to me eventually signals trouble on the
stock. Now, where is money going?
So, it obviously was running from
semiconductors today, right? We saw
that. I mean, when you see Micron down
what it is, I mean, we flip over to
Micron here. I mean, Micron down 13% on
the day. That's a tremendous drop. It
is, by the way, it's bouncing $15 after
hours, but again, that's by the dippers,
short covering, all the nonsense. People
hoping for a bounce on the Cospi
tonight. They're gambling essentially,
so we don't really know.
But nonetheless, money rotating. In my
opinion, you're starting to see beaten
down names, high-quality Netflix,
Microsoft today. Look at Microsoft.
Microsoft was up today almost 2%. That's
where the money is rotating. Now,
listen, will it continue? Well, it's all
going to be up to the AI trade. If the
AI trade bounces back, well, then
obviously these stocks could resume
getting weak. But if we see a
continuation of selling in the AI names,
likely to see names like Microsoft head
back to about $400. Not that that's a
big move, by the by the way, that's 10%
or so, even a little less than 10%, but
that would be the normal that would be
an oversold bounce on Microsoft, but as
well as money rotation. All right, let's
get into commodities out there. Before
we do that, I just wanted to point out
Nvidia today, guys. Nvidia down 4%. And
this is again, you might say, "Well,
Nvidia is actually reasonably priced.
It's trading at a forward PE of 21.
That's not so bad." Correct. But,
if it's true, and it looks like it is,
that these new AI models are so
inexpensive,
then you know what? Like I said earlier
is, do you really need the most advanced
chips to run these AI models from the
Chinese players that are building them?
Are there other AI models that are going
to come out? Maybe you don't need these
70, $100,000 chips from Nvidia. Maybe.
In which case, that's really bad news.
It's going to basically margin
compression. And this is going to happen
with the memory plays as well, with
memory and storage and these these AI
chips. At some point, we don't know
when, but at some point the margins are
not going to be 60, 70% anymore. They're
going to drop precipitously. Could be 2
years from now. I don't know. Maybe
coexisting with the Great Depression
100-year cycle.
Something else that I talk about on
occasion, uh but don't talk about much.
All right, let's go into the commodities
here, guys. Um gold today falling to the
downside. Nice drop on gold. Again, you
guys know I've been bearish on this. I
still think it's headed down to this
level as your next support. This is
4,000 to 3,900. You have down sloping
trend line here and a flat pivot low
here. If it breaks this, it's going to
3,500. So, this is a major level for
bulls to hold and eventually break out
above this trend line. Silver even
worse. This is really bad on silver,
folks. A nasty daily candle breaking
below lowest close on silver since we
had the mega move up to $120 per ounce.
And I hate to say it, but if we confirm
this tomorrow, within days we could be
at $54 an ounce, which is what I've been
calling for as my first downside target
for the last month or so. It could
happen very, very quickly. Is it my
end-all-be-all? No, I still honestly
think it's going back to 50 bucks, but
54 is pretty darn close. We'll first
test that level of support. Oil today,
again, we used to talk about oil all the
time. Not a non-event today. It's
trading in this range and again, you
have support here and here. It's low end
of support. The markets again are
looking at AI. Everything is AI at this
point. It's The markets will go up on AI
or they'll crash on AI as we clearly
see. Um of course, there's opportunities
in between on stuff like Microsoft and
you know, I don't know if you guys saw
it, but like Conagra, Kraft Heinz. I
mean, those stocks had great days today.
Great days on those names because
they're defensive. People rotating money
into defensive names today. Will it
last? We'll find out. All right, and
then of course lastly guys, I'll quickly
touch on natural gas, but I I honestly
don't have much of an update here on
natural gas. Then we want to get into
Bitcoin real quick, but nat gas coming
in just a little bit. It's really been
stuck in a very very tight range. I
pointed this out this morning, but
again, you know, you have your potential
cup and handle pattern here. Maybe
bullish cup and handle patterns are
bullish. We'll keep an eye on that.
Lastly, Bitcoin again, if the stock
market and AI trade is coming down,
chances are Bitcoin's coming down. Can
it hold this double bottom? I hate to
say it, but listen, I wouldn't be
surprised if we still have another move
up, but down the line, I still think the
Nasdaq's got a lot of correcting to do,
a lot of AI flush out to do. And if
that's the case, Bitcoin's likely headed
to 50,000 or below. All right, guys.
Wow, what a day. Let's keep our eyes on
the prize here. Where is this market
going to be? Watch the Kospi tonight,
the Nikkei tonight. Keep an eye on the
S&P futures. We can see where it's
trading coming into tomorrow. I'll do
the game plan as always at 9:00 a.m.
Eastern time live with my latest levels,
latest trades, and latest charts.
Remember, here at Verified Investing,
it's all charts, no BS. If you want that
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right here, verifiedinvesting.com. Have
a great rest of your day, guys. I'll see
you soon. Take care.