A Mag 7 Black Swan or Another Buy-the-Dip Opportunity?

Good Monday Morning, MPTraders! January 27, 2025-- Pre-Market Update: There are five trading days remaining in January... Many consequential Earnings Reports this week (See Calendar below) and an FOMC Meeting and Policy Decision on Wednesday... 

Okay then!  What do we have here? A Mag 7 Black Swan or another Buy-the-Dip Opportunity? DeepSeek and its initial ramifications hit the airwaves over the weekend,  triggering a panic sell-off in overnight trading: 

About DeepSeek From Ed Yardeni: 

A pasted image

One thing is for sure: At the moment, this DeepSeek product is a major disruptor. Welcome back to the world of rapidly progressing and transforming computer technology! Hasn't it always been this way? This brings to mind the expression, "adapt or die!

With the foregoing in mind, competitive American companies will adapt, and as such, my sense this AM is that CEOs, investors, and the financial markets just received a very valuable wake-up call-- not a death sentence-- that will represent a buy-the-dip opportunity  (not necessarily today, I might add) within a still-dominant longer-term bull trend... 

Technically and "objectively," today I will be focused on the up-spike in the VIX (see my attached 2-Hour Chart), which all too often represents a "mini-panic" sell-off in the SPX ahead of a resumption of the underlying SPX uptrend. The window of risk spans from today through Fed and Powel Time on Wednesday afternoon because once the dust settles a bit from this DeepSeek shock, Fed policy will be back on the front burner. If the Fed refrains from upsetting the applecart and investors have calmed themselves in the aftermath of DeepSeek event, then investors will be back to assessing the impact of EARNINGS... 

As for the market setup this AM, my attached ES Big Picture shows that the price structure sliced beneath the 20 DMA (5998) earlier in the pre-market session to an overnight panic low at 5948, but already has recovered ABOVE the 20 DMA. A close above or below the 20 DMA TODAY will provide us with clues about the potential extent of the "DeepSeek Attack," or not... 

Finally, a look at NVDA, perhaps the poster-child for the implications of this DeepSeek situation. Let's notice on my attached 4-Hour Chart that NVDA plunged beneath its cluster of corrective December lows in and around 126-127 to a new post-January spike low at 122.75, BUT HAS NOT FOLLOWED THROUGH TO THE DOWNSIDE so far. In fact, the NVDA spike low came within 1% of a full-fledged test of NVDA's up-sloping 200 DMA, now at 121.60, representing a significant support level. 

In the upcoming hours, as long as NVDA remains ABOVE its 200 DMA on a CLOSING basis , my pattern work off of the ATH at 153.86 (1/07/25) argues in favor of a corrective bottom in formation between 121.60 and 126.70 during the upcoming sessions, well ahead of NVDA's 2/26/25 Earnings Report... Last is 126.13...




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Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

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