Meltdown Begins: Trader Called Pullback, Warns Another 50% Crash Next | Gareth Soloway

Key Concepts

• Technical Analysis: Use of chart patterns (double bottoms, bear flags, head and shoulders) to predict market movements.
• Market Correlation/Divergence: The historical relationship between Bitcoin and the NASDAQ/S&P 500 and why they have recently decoupled.
• IPO Dynamics: The risks associated with high-hype IPOs (e.g., SpaceX) and the concept of "exit liquidity."
• AI Capex Cycle: The impact of massive capital expenditure in AI on market valuations and the risks of "rational exuberance."
• Monetary Policy: The role of the 10-year Treasury yield and the Federal Reserve’s (FOMC) interest rate trajectory.

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1. Market Volatility and Asset Performance

Gareth Soloway notes that risk assets are experiencing significant volatility at the start of summer. The S&P 500 has declined approximately 3.5% since June, while Bitcoin has dropped 14%. Soloway attributes this to a rotation of capital: investors are pulling money out of "boring" crypto assets to chase the high-growth AI semiconductor trade. However, as AI stocks (like Micron) face corrective moves of 10–20%, the market is showing signs of a potential downtrend.

2. Bitcoin Technical Analysis

• Current Status: Bitcoin recently hit a "double bottom" (a technical support level based on February 7th lows).
• Key Levels: Soloway previously targeted $80k–$85k, which was achieved before the current pullback. If the current support at the double bottom fails, he identifies the next major structural support at $50k–$53k.
• Worst-Case Scenario: A "head and shoulders" pattern suggests a potential drop to $35,000 if the broader market (NASDAQ) experiences a 25% correction.
• Psychology of Support: Soloway explains that support levels are psychological; investors who missed previous rallies view these levels as "second chances" to deploy capital.

3. The SpaceX IPO

• Market Sentiment: The IPO is described as "the most hyped in recent history."
• Risks: Soloway warns that retail investors often act as "exit liquidity" for venture capitalists. He draws parallels to the Facebook IPO, where initial hype led to a long-term fade.
• Valuation Concerns: With the company trading at roughly 90x revenue, Soloway remains skeptical of buying on day one. He cites recent IPOs like Cerebrris (down 30% in three weeks) as cautionary tales.
• Strategy: He advises waiting for the "dust to settle" rather than participating in the initial retail frenzy.

4. AI Capex and Market Risks

Soloway argues that the market has priced in an unsustainable trajectory for AI capital expenditure (Capex).

• The "Broadcom Effect": He notes that even companies meeting earnings estimates are being punished if they fail to raise guidance.
• Systemic Risk: If major tech firms (Google, etc.) decide to plateau their spending rather than increase it, the "circular finance" driving the S&P 500 could collapse.

5. Precious Metals (Gold)

• Technical Outlook: Gold is currently in a downtrend characterized by lower highs and lower lows.
• Price Target: Soloway maintains a target of $3,500 by late 2026/early 2027.
• Fundamental Perspective: He views gold as a long-term insurance policy against debt and inflation, not a "get-rich-quick" asset. He believes the current weakness is a "flushing out" of speculators who entered the market for the wrong reasons.

6. Monetary Policy and the FOMC

• 10-Year Yield: The rise of the 10-year yield toward 4.5% is acting as a "de facto" rate hike, tightening financial conditions regardless of Fed action.
• Kevin Worsh/FOMC: Soloway expects Worsh to take a "measured" approach, walking a tightrope between hawkish Fed members and political pressure to lower rates.
• Rate Hike Probabilities: With the market pricing in a >60% chance of a rate hike by December, Soloway suggests that if the Fed remains measured, the market could actually rally on the relief that the situation isn't worse.

7. Synthesis and Conclusion

The overarching theme is a transition from "irrational exuberance" to a more cautious, data-driven environment. Soloway emphasizes that technical analysis is about probabilities, not certainties. His actionable advice is to avoid chasing high-hype assets (like the SpaceX IPO or overbought semiconductors) and instead look for value in beaten-down, high-dividend-paying stocks (e.g., Conagra) that are currently ignored by the broader market. He concludes that while the long-term trend for many assets remains positive, the short-term outlook requires defensive positioning and patience.

"I love stocks when everyone else hates them and vice versa... I don't like the semiconductors right now. I like dividend payers... those are the types I'm going for." — Gareth Soloway