Tech Turmoil and Rotation: DeepSeek’s Impact on AI Stocks and Market Resilience
AI, GPT, and LLM Drama in the Monday Market Update
The Markets
It’s been a dramatic day in the markets.
Deepseek, a newly released Chinese AI solution, has spooked the semiconductor sector and many other AI-related companies. There is much debate about whether the fears are well founded. However, many argue that this event should be a bullish factor for the AI trade.
Time will tell.
For now, the SOXX was down 7.84% on the day. NVDA was lower by nearly 17%. Many others were off by double digits: ARM, AVGO, MRVL, NBIS, NNE, ORCL, and more.
There was also some rotation, resulting in positive moves.
The Dow Jones Industrial Average was up on the day, and AAPL stock was higher by more than 3%. Healthcare, financials, and many industrial names also moved.
Here are the charts.
The Charts
SPY - Last Thursday, the SP 500 booked a new high after a quick and impressive bounce from the August anchored VWAP. The price action showed hints of extension from the moving averages, suggesting that a rest period may come.
This was the recap after those close on Friday.
Today, SPY gapped lower to open the day at the 21-day MA. That was fast.
The intraday action was choppy but higher, nearly bridging the gap between the 8 and 21-day MAs. Price is no longer extended, and now we can see if the (rather abrupt) pullback gathers steam and moves back to new highs or if the Deepseek shakeup will have more lasting implications.
QQQ was naturally dealt a harder hit, given the more tech-focused makeup. The gap-down open started near the 21-day MA and moved mostly lower for the day. We’ve seen it fail to make a new high when SPY did, fail to get back over the trendline when SPY did, and now it gapped down and moved lower while SPY gapped down and bounced.
Tech continues to lag.
IWM was stronger early in the day and tested its 50-day MA again before coming back down to close very near the open. There was not much change in the day or the overall chart situation. $230+ is still the key to more upside.
DIA was the undisputed leader as buying rotated to non-tech names.
TLT was up more than 1% for the day, and we now have the 8-day MA back above the 21-day MA. Progress continues for the bonds, lowering interest rate yields and helping stocks. The next areas of interest above are the $88.68 pivot and the 50-day MA near $89.50
DXY US Dollar futures stayed below the 50-day MA while testing the pivot area under $107. Momentum is pushing them lower now, and we’ll see if they can keep going to the $104-$105 area in time.
BTCUSD still won’t stay down, and prices are well off the lows, with heavy volume. This is after moving below: $100k, the 21-day MA, and the 50-day MA earlier in the day.
The Trade
Always be ready.
“Anything can happen.”
“You don’t need to know what is going to happen next in order to make money.”
Mark Douglas, author of Trading In The Zone
Market volatility is an inherent part of trading, but it's also where opportunity lives. As Mark Douglas wisely noted, we don't need to predict the future to be successful.
What matters is having a solid foundation:
proper position sizing
disciplined profit-taking
well-thought-out contingency plans
By staying prepared and maintaining these sound practices, we can confidently navigate whatever the market throws our way.
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The Disclosures
***This is NOT financial advice. This is NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.