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Deep Seek & Tariffs!
Last Monday, the NASDAQ 100 (NAZ) and S&P 500 (SPX) indexes dropped below their 50-day moving averages on above-average volume following the Deep Seek news. Deep Seek, a Chinese startup, introduced a new AI model that uses cheaper chips and less data, resulting in lower heat production and increased efficiency compared to current models. If their claims hold up, it could disrupt many AI companies. Despite the sharp drop, many of the stocks that were hit hardest on Monday have since rebounded, which is encouraging. Some of my sell-stops were triggered, so I repositioned into medical and software stocks, breaking out of solid bases. There are still a lot of stocks under institutional accumulation, which leads me to believe the bull market may not be over just yet. However, I’m cautious due to about seven distribution days (a 1% decline on above-average volume), which is a concern.
On Friday afternoon, Trump announced tariffs on Canada, Mexico, and China, causing the market to reverse course and close lower on significant volume. As I write this on Sunday night, futures indicate a rough opening on Monday.
The Fed hinted that it was nearing the end of its rate-cutting cycle on December 18. The indexes slipped below their 50-day moving averages shortly after, marking the first of seven distribution days. Since then, the NAZ has struggled but found support at its July 11 peak. I expect the NAZ to hold above its 50-day moving average, but further correction could be in the cards if it fails. The market seemed stable after the Fed held rates steady on Wednesday, but the Trump tariff news shifted the momentum.
I believe Trump is an effective negotiator working in America’s best interest, and ultimately, his policies will benefit the country. I don’t argue with the market—the price is always right. My health and peace of mind are far more important than any stock. If a stock doesn’t perform as expected, I’ll stick to my loss-cutting rules and live to trade another day. In the long run, we win!
Bottom Line: The bulls are still in control, but that could change. I’ll continue following the trends created by big money while sticking to my rules to ensure I can keep investing. Risk management and position sizing are key to long-term success. Grace & Peace!
May the God of hope fill you with all joy and peace in believing, so that by the power of the Holy Spirit you may abound in hope. Romans 15:13
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Dexter Lyons, Portfolio Manager
337-983-0676 Dexter@ChristianMoneyBlog.net
Active Risk Management, CANSLIM Investing
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