DeepSeek & Stock Market Sentiment

Episode 53 - DeepSeek & Stock Market Sentiment

This is episode 53 of The LongVol Report Podcast – welcome back and for the new listeners, welcome. Make sure to subscribe to the Spotify/YouTube – we put this out each Thursday with the Pod/video out on Fridays, you can ask questions each week here and I’ll do my best to answer.

This week all we heard was AI and DeepSeek and to be honest I didn’t even know DeepSeek (nor did anyone else) until this week but given the amount of emails and headlines on it I think we all do now. It’s silly at beast that this has an affect on the broad market like this but this is what you get when you have everyone, everywhere trading the same thing: crowded trades.

I talked about this EXACT thing in my letter to my investors this month – Mag 7 Crowding and it’s a positive as I see it for one reason: The volatility.

That vol you see in these names has EXPONENTIALLY increased since 2011-2017 era and that vol allows for short-term trading to happen.

In fact, this has really taken over society. When people ask what I do they automatically assume I trade this stuff because everyone else does. I do trade them but it’s small size and tactical, however, it seems like everyone today has that idea as well given the amount of crowding into the options and Mag 7 names.

The Nvidia volume this week was insane and it works but there are just other ideas happening right now that most could care less to dig into for one reason: they don’t move fast enough and they’re not shiny enough. For the premiums sellers, however, this was probably a big P&L week to clean up on that!

Sometimes, boring stocks like VF Corp which is not that sexy work and work well just not in 1 or 2 days which is good because I am happy to wait on 1-2 baggers when we can find them but at the same time trade the shiny stuff as needed.

We introduced it into The LongVol Report August 2024 and it’s up over +140% since!!!

This week we’ll talk about:

Broad Market Update
Housing Notes
AG Stocks Inflecting?
SP500/Nasdaq/Broad Market Charts
VF Corp Update
Boeing Update
The AI Grift: Trade it Don’t Date It

Now on Spotify

The Broad Market: Stock Market Sentiment

We’re going to keep this part of the show short this week because there are some names to review here on earnings that are some positions we own and or have talked about in The LongVol Report.

To start, the sell off this week was extended and this is still bullish on my models technically. I have comments later on DeepSeek and AI at larger and will tie those into the shiny object stocks, Alibaba included who just did the “me too” thing with AI.

Existing home sales dropped 4.06 million in 2024 the lowest number since 1995. Annual sales declined for the 3rd consecutive year matching streaks from 2006 and prior decades.
Something will need to give here eventually – what that is? Who knows.

As expected the Fed did not cut this week and likely is still on par for only two rate cuts this year despite some comments this week from The President.

We added in some notes in this weeks report for Agriculture names. Not sexy and not fast movers but this could be the inflection.

DBA (ETF) potential to break multi-year downtrend
Many Potash names hurt last few quarters from weaker sales
Potential that Trump hits Canada with tariffs

Charts of The Week:

SPX/QQQ/NVDA/DBA/GLD

VF Corp Earnings: This was a great position for listeners of this show and for those that subscribe to the Swing Portfolio Alerts – we close a nice trade this week.

I also closed out the positions we owned in portfolios for clients and not for any fundamental reason but purely around technicals.

I put out a note to subscribers here on the event.

We’ve traded in and out of this name since last fall in the AST Swing Alerts Portfolio and added another alert a few weeks ago.

Boeing Earnings: This is a name discussed in the report for the last 4-5 months as well and while I sold out of our position last month this is back on the radar to find a new swing long. The original thesis still applies plus some new updates given the earnings report this week.

Revenue: $15.24B v. $16.17B
EPS: -$5.90 v. -$2.44
Will have negative cash flow for the majority of 2025 with that expected to change come 2026
Backlog continues to grow

This is a core, long-term hold – not a 2 month tech stock squeeze like $OKLO (for those that know).

The AI Grift: Trade it Don't Date It

I want to keep this part of the article short and sweet this week. The title is what I feel: most of this in this space is a grift. Not to say that AI is not changing real-world application, it is – but like many things it can get used to drive narratives and unwarranted sentiment across the markets.

From FactSet: More than 40% of S&P 500 companies cited AI on earnings calls for Q2.

The news over the weekend is interesting and what the repercussions are for other tech and AI related names I still believe are uncertain. I read a few notes passed along to me this week from a Jefferies sales call and they were interesting to say the least.

I also spent about an hour laughing at memes and then realized this entire topic is a waste of time, for me at least. One, because I don’t care about most of these hyped names trading at insane multiples other than to just TRADE THEM, NOT DATE THEM.

I think if you’re a larger PM running tens of millions or a larger institution digging into it all matters but for the average investor I feel as if it’s a waste of research time.

I take this stance one because I am not an institution and two because I’ve been around so many cycles where narrative drives prices and at the end of it I find myself going back two two primary things:

1. The financials – sometimes they are terrible and you can just trade them and I am okay with that.

2. The price chart – It’s not a secret, I believe in order-flow and price levels and a common-sense approach to looking at a price chart to tell me where to be an interested buyer or seller.

As for number 2 – it’s not my job to convince anyone to believe in it but it’s always been the purest source of decision making when it comes down to it. In fact, ask any real futures trader and most will tell you it’s the chart and/or order-flow.

Further, I look at things like Open Ai as an example and this recent Tweet today.

$340 billion – it’s asinine and it’s not the first time Wall Street has tried this and it won’t be the last. So, what’s the point of spending time on it other than just TRADING it is my question to readers this week.

And for the record, that’s open ended – I do what works for me and you can do what works for you but ignoring stuff that generates no P&L and distracts from the task (research/trading) is what too many investors tend to fall into.

One of those tradable themes is and has been Oslo.

I own some LEAPs in this because it’s too hard NOT too – because when sentiment and euphoria takes hold, especially in this era of markets, it’s too hard to not put a trade on to capture it. And you just keep trading it until it’s done never losing site of what it is you’re actually buying and in this case I am buying the hype (at least to me) – nothing more, nothing less.

It’s not a VF Corp, it’s not a Boeing and it’s not a Schwab. It’s a hype with potential potential and right now that seems to be good enough in markets.

I wrote this piece on the blog in 2022: Speculation Stocks – a quick guideline for the beginner – maybe worth a read.

Final Word.

Issue 5 of The Report is out Monday – get a copy.
I will be in Dubai for meetings and a few conferences next month if you are around and want to meet up ping me – will also be in Zurich later in the month
Reminder: Swing Trading Webinar Saturday 11am EST here.

This is opinion, not advice. Please read the terms and disclosures. I own a position in $OKLO via LEAPs.