AI Trade Collapse, KOSPI Drops 10%, Crowded Bubble Trade Begins Unwind

My name is Gareth Soloway [music] and I
was a losing trader until I mastered
technical analysis. Logic and [music]
charts beat hype and narratives every
time. Now I teach investors the same
techniques [music] that made me a
multi-millionaire. This is my trading
game plan.
Good morning everybody. My name is
Gareth Soloway, chief market strategist
here at verifiedinvesting.com.
AI stocks are in free fall. The KOSPI,
the South Korean stock market, dumped
10% last night as two main stocks that
are AI chip makers, they collapsed over
12 and 1/2% They make up basically more
than 50%
of the KOSPI index. The Nikkei down over
5% this morning. The NASDAQ is down as
much as 3%. So we knew that a bubble was
brewing. The big question is, is this
the beginning of the end? There are
signs and I've been alerting you to you,
you know, multiple times that there are
issues with in the underside of this
market. And again, I'm going to go over
them, but I want to get to the charts
first and foremost. Let's take a look.
The S&P futures are trading just off the
lows of the session here, down
significantly. Flipping to the daily
chart, S&P is down 1.5%
pre-market. Markets open in less than 30
minutes, so it's going to be a nasty
start to the day. The NASDAQ, take a
look. This is the NASDAQ 100 futures.
Lows of the day right now. Look at this
drop in the overnight, non-stop as we're
seeing stocks like Micron and Sandisk
dropping as much as 10% in the
pre-market. Intel down significantly as
well. If we flip to the daily chart,
look at the size of that candle right
now, down over 3%
on the NASDAQ 100 slated for the opening
bell. Now, let's talk some realities
here. When you have the president
continually every time he sees a down
day coming out and trying to release
good news on Intel or another factor
like, "Oh, we have good negotiations or
a deal or a deal or another deal with
Iran to prop up the markets and keep the
drive going." That is going to create a
bubble. It creates an air pocket
underneath the market. We've seen this
consistently in the narratives of AI
like unlimited demand, yet the
underbelly and I've alerted this just in
the last three to five days, I've
started to talk about these AI models
out of China that are so much cheaper to
run that many companies, not just in the
US, but more so globally are going away
from ChatGPT, Claude, and Gemini because
it's so much cheaper. And when you start
to bring in this idea that prices are
going to go down, this is where you
start to say, "Wow, AI could be
commoditized later on." Meaning very
little margin on it. That's horrible for
the hyperscalers because their margins
after putting 200, 300 billion dollars
into these data centers, if you
commoditize this stuff, they are going
to have epic downside. I mean, literally
we're looking at something that could
create a crash in the tech sector over
the next three to six months. So again,
folks, be careful here. This is
dangerous territory. Again, I've heard
so many narratives and comments from
people saying, "Oh, but Trump will
always keep the markets up." I traded
through the financial crisis. President
Bush came out and tried to reassure the
markets multiple times, they went lower
when he talked. It was almost a running
joke during that collapse is that, "Oh
gosh, here comes President President
Bush, sell the market cuz it's going to
dump when he starts to talk." In
addition, the Fed even started TARP.
They started to do things like they they
banned short selling on banks. You know
what happened? Banks dropped even more.
So, my point is is don't think the
markets are invincible. If you think
they are, you will get hurt in the
overall debacle that is eventually going
to come. Now, we still don't know. We're
watching the charts, but if we flip over
to the S&P 500 here, we can see again,
we're going to be opening down sharply
here on the S&P. What I'm watching is do
we finally get that lower high in the
charts, right? So, if we look at this,
we already know and I've gone over this
in the last couple days, we have our
lower low, very defined, right? When you
get a V valley, that's a defined low
pivot, right? Down, up, very, very
crystal clear there. Now, the question
is will we get our We got our up in the
Nasdaq and put in a or in the S&P and
put in a lower high, we now need to see
our mountain peak coming down here to
solidify lower highs and lower lows, all
right? That's the last bastion of
factoring in this market. Now, take a
look at the Kospi. Actually, we'll start
with the Nikkei. Look at the Nikkei in
the overnight here, guys, dropping 5%
plus today. That is a bloodbath on the
Nikkei. So, Nikkei down sharply and in
all fairness, look at the Nikkei. Look
at how ridiculous this is, guys. The
Nikkei from the 2025 lows. You want to
see this? This is the actual index, the
Nikkei here 225. It was up 140%
in just over a year. This again is
extremely makes it extremely vulnerable
for a bigger dump out. Now, look at the
Kospi. The Kospi dropping at 9.99%
circuit breakers were triggered. All
right? Circuit breakers were triggered
in the overnight. They halted trading.
It got that bad and it still ended down
10% on the day, but look at this chart.
This is where I love the technicals.
Were there warning signs? High,
pullback, higher high, pullback, higher
high, pullback. So, all of this is an
uptrend, but look at what the RSI was
doing. High, lower high, lower high.
This is a massive negative divergence.
This is when you get the three So, I
always say three peaks to a valley. In
technical analysis, three peaks to a
valley, three valleys to a peak, meaning
that usually when you're looking at
markets, and this even goes into Elliott
Wave type stuff, you get these three big
moves up before you get a major
corrective move. And that also enables
the RSI to give you a three lower peaks,
potentially telling you there's the
negative divergence. Essentially, bread
crumbs telling you something is going to
come. And what do we have? Again, lower
highs. Look at that beautiful negative
divergence on the RSI on the KOSPI here.
So, sure enough, down 10% in the
overnight. Now, the question is, will we
see further downside? Listen, after 10%
downside, we could always see a buy the
dip. But again, I would dare say the
technical damage done by a 10% drop in
the KOSPI, that's going to be hard to
overcome. And literally, folks, when I'm
talking about these other platforms,
these other AI models, this is an
earthquake. This is the big one. This is
the Deep Seek of early 2025 where we saw
30-40% drawdowns in chip stocks because
Deep Seek was going to revolutionize.
Well, it's taken some time, but now you
have all of these models, all right? You
have Qwen, you have Deep Seek, you have
Kimmy, all out of China that are so much
cheaper to utilize than anything in the
US, and this is going to create a
problem. And again, the main problem is,
even if you say, "Oh, well, US companies
may not want to use AI from China." I
get that. But what about the rest of the
world? Do you think the rest of the
world's going to care? No, they don't
care. In fact, they probably favor China
models more due to how the US is
geopolitically right now. So again,
watch for this. We've already seen the
key signals in things like Nvidia. If we
bring up Nvidia, look at this, guys.
High, lower high, lower high, low, lower
low. So right here, we had a crystal
clear signal. High, lower high, and then
low, lower low. All right, now what are
you forming? You're forming a bear flag.
Watch for the breakdown on Nvidia on the
charts. You also have this trend line.
And by the way, do you guys see what
else is on this chart? Let me get rid of
these other lines. Heck, we don't even
need the RSI at this point. But what is
forming on this chart, folks? To me,
this looks very similar to a double top
head and shoulders pattern. Again,
neckline right through here. Watch to
see if that breaks. Now, what's going to
be interesting is Micron earnings,
right? We have Micron earnings tomorrow
after the bell. Micron is getting
slammed. Yesterday closing at an
all-time high of 1211,
is down literally 150 points about right
now. I mean, this is a massive drop to
1084. Granted, in the scheme of things,
it's still up sizeably. But the question
is, where does this go? And really, to
be honest, on a technical basis, you
might see an intraday bounce today. This
would be a gap fill at 1042. So there
could be a day trade there. But really,
in the essence of this,
the earnings are going to determine
this. Now, I want to be crystal clear on
the earnings.
The earnings are going to be amazing.
They're going to be amazing. They're
going to be beating revenue, beating
earnings, rating raising guidance. But
when you have a stock that's up 400% in
basically months,
they dang better do all of those things.
Not only that, but they're going to have
to cure cancer. And I'm saying that a
little facetiously. Like obviously,
Micron's not going to do that. But the
idea is expectations are so high that if
they don't come out and blow the cover
off the ball, you're going to see
massive downside and a continuation in
the AI sell-off here. I mean, that's how
much upside you have seen in Micron.
This has been in one of the stocks that
has befuddled me because of the upside,
up 287%
just since March 31st, just a few months
ago, but now correcting sizably on the
day. Now, listen, there's other names,
right? We talked about Intel. I mean,
look at Intel. Yesterday traded as high
as 141, it's back to 129. So, we're
talking about basically a 10% drop in
Intel as well. The idea here, folks, is
we saw Trump releasing news. And by the
way, go back in history. When you have
two companies doing a deal between like
Apple and Intel, um
when was the last time a president broke
that news? And he did so the night after
the Fed tanked the market. I pointed
this out before. That is classic
manipulation to keep the markets
rallying, but it also creates an air
pocket, right? And that's what you're
seeing here. These big drops are air
pockets. And again, right now buyers
will buy the dip. That's what the
institutions want you to do. They see
this. Do you you think they don't know
about this? The institutions are trying
to hide the fact that these cheaper
models are coming out because the
institutions are the ones bringing
public Anthropic and OpenAI. They don't
want you to get scared about buying
these things when they're coming public.
They want to keep that news under wraps
so that they can get these things
public. Think about it. Makes perfect
sense. They make a lot of money by doing
this. And look at SpaceX. Has SpaceX
performed well? I don't think so. Look
at SpaceX today, guys. It is down again.
And listen, if it literally it's at 150,
that's where it opened to the public.
That means every single person that
bought this when it came to the open
market, the open market meaning the
average investor could buy, every person
that bought is now down
on SpaceX.
I warned it. Listen, you had the
momentum. The momentum, the retail
buyers, and I said this. I said,
"Listen, retail, this is the most
exciting IPO to retail since Facebook
back in 2012." I don't know, early you
know, way long ago.
And what did Facebook do? It literally
was down a year later 35% from its IPO.
Now, I don't know if that's going to
happen with SpaceX, but the point is is
that when retail is FOMOing in,
who do you think selling to them? Do you
think Do you think the biggest
billionaire is like, "Oh, yeah, you
know, SpaceX going to go up to $500 a
share, but let me sell my shares to
retail because I want to give them a
chance to make some money."
Like, come on. Logic. That's what we do
here. Charts are logic. It's why I say,
"No BS, just charts." Because we focus
on what the data is saying and reality,
not emotion of greed and fear. All
right, let's get back to that. In fact,
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right, let's get back to the charts and
see where we are here. Um, all right, so
we're going to get into gold and silver
and Bitcoin in just a minute as well as
oil, but before we do that, you guys
know there's always a place to buy.
And if AI stocks are dumping and the
concentration has been that crazy, then
where do we go? Well, I've been alerting
you the last few days. I like Microsoft.
Microsoft's gone lower than I thought it
would, but it's bouncing today. So, even
with the Nasdaq down 3%, Microsoft
bouncing. Why? Rotation of capital. And
also, it's just beaten down. It's
actually a good probably old school
value play now at this point. So, if we
bring up the chart on Microsoft here,
take a look, guys. Microsoft rallying up
this morning even with the Nasdaq down.
This has a chance to bounce
significantly. Look at this drop on
Microsoft. I still think Microsoft goes
back to 400, which actually gives us
about 10% upside potential on this trade
on Microsoft. Netflix, Netflix is
starting to perk up. This is Look at
this, guys. You want to see an awesome
trend line?
Take a look at this. Connect these lows
and look at what we hit yesterday. So,
before your major move up, then your
first pullback, then major move up right
there. That's your bounce level and it
is starting today. I think I think
Netflix, listen, I I'm not going to
pretend to know where Netflix is in 6
months or a year from now, but I could
see this thing bouncing easily back 10,
15% up off of these levels, which for me
as a swing trade is right in my
wheelhouse. All right, it's awesome
stuff. Awesome stuff. All right, where
else? Well, you know, listen, I'm
certainly not going to go towards
Sandisk unless it corrects a lot more.
Look at Sandisk down here collapsing,
trading again down, getting close to
2,000 after closing yesterday. Where did
it close yesterday? Around 2273. So,
you're you could be down This could be
down 300 points today very, very easily.
We talked about SpaceX not going near
that as well until a $135.
That's where insiders bought it. The
institutions will try to support price
at 135 as long as they can. So,
therefore, it generates the likelihood
of a bounce there. So, I like that as
well. Um and then on the short side,
this chart. Now, listen, it's a bank
stock. These have been strong, but look
at this trend line. Beautiful trend line
on Citigroup right up here. I like this
here. Maybe it gets to 150, a little bit
higher, but in this upper range, I like
this for a pullback on Citigroup. All
right, gold. Gold continuing to dump.
You guys know, in the near term, I've
been a big bear on gold and silver. That
has been the right call, no doubt about
it. I'm looking at first support between
4,000 and 3,900. Pivot low here. We
could hit that within days. I do think
there might be an opportunity for me to
use my Rumble wallet there to swing
trade gold on the long side at that
point. And then obviously, if it breaks
here, this is your breakout. Okay, so
simple, right? So, I remain
bearish downtrend. We have a downtrend,
but if it breaks here, okay, well, then
we either go bullish or at least
neutral, but this is again short-term
downside. Do I think it's going to go
lower than this? I do think there's a
good chance that it will. And silver,
speaking of which, I told you about this
right here. Look at that technical
support, but look, it keeps trying to
break. The more it hits, the weaker this
line comes in. 56 is likely going to be
achieved within the next few weeks. 54,
excuse me, on silver. Bitcoin, guys,
actually, let's look at oil real quick.
We'll finish out with the commodities.
Oil is down slightly on the day.
Yesterday again, we had the gap up
initially, and then the fade as again,
supposedly, negotiations were going
great.
We'll see. We always hear, it's always
great. It's always the best. It's always
the greatest, right? Um
And you can fool the market so for so
long. And listen, I'm not saying there's
not going to be a deal reached with
Iran. I'm just saying in general, when
everything is great and deep down, we
know as citizens that inflation is up,
that things are harder out there, but
we're told the economy is the greatest
ever.
I have an issue with that. Just don't
don't sugarcoat it, right? I try not to
sugarcoat things in here. I tell you
what it is. Listen, I sometimes have
longs, they go against me. It is what it
is. I sometimes have shorts, they go
against me. It is what it is.
Sugarcoating does no one any good. Tell
me it straight and I have more respect,
100% all the time, as I'm sure you guys
do as well. All right, let's go into a
couple other things here. Natural gas,
let's look at nat gas real quick here.
Nat gas continues to kind of struggle
right in this range. I still think there
could be a cup and handle. I have not
rebought this though, but I am watching
it very closely to keep my eyes on it.
And Bitcoin, again, risk assets, tech is
selling, Bitcoin coming down. If Bitcoin
breaks 59999
or so, 60,000, and confirms, it opens a
trapdoor all the way down to about
50,000
on Bitcoin. Crazy stuff, guys. Listen,
today is going to be fascinating. So,
number one, the markets are down. Do we
see buyers step in and push the markets
back up? Do we end only down 1% on the
Nasdaq, flat, maybe green, or do we end
near the lows, which could denote more
selling in tech? The one thing I will
just leave you with is the AI trade is
as concentrated, actually more
concentrated than the dot com was. There
has to be an unwind. Doesn't mean the
trade's over, doesn't mean the
technology is not incredible, but at
some point it unwinds. When you have
hedge funds all in, at some point
they're going to they're going to pull
the rip cord. Retail usually gets stuck.
Be careful, guys. All right, on that
note, I got to get going. Thank you so
much for tuning in. I'll talk to you
soon. Take care.