Market Top – China Pin for Bubble, Aztec – AZT, High grade Ag Hit
Bitcoin
Yesterday's market rout should come as no surprise for readers here. I have been warning of a bubble market top for months and just recently again, this past Friday under my topic 'Bubble Bubble ends in Trouble'. I commented the S&P 500 new high was not convincing and may be a double top and that now appears more the case.
I find bubble tops easy to see but sometimes difficult to predict the ultimate top or the pin that pricks the bubble. Nobody saw this one coming except the Chinese. My magnificent 7 short barometer signaled ahead of last years correction, but nothing this time. The decrease in shorts the first 2 weeks of January was mostly from Apple.
A new A.I. system from a Chinese AI startup company, DeepSeek, matches the abilities and out performs U.S. systems like ChatGPT but was fractions of the cost to build and uses way less energy.
Seeking Alpha reported in its Monday Wall Street Breakfast newsletter that DeepSeek's latest LLM - called R1 - has outperformed models from established rivals like Microsoft -backed OpenAI, Meta and Anthropic, which have spent billions of dollars. DeepSeek's first open-source LLM - DeepSeek V3, released last December - took less than $6M to build, using Nvidia's H800 chips for training. The R1, built off the V3, is developed to perform complex reasoning and rivals OpenAI's o1.
"The new model is cost-effective and runs on reduced-capability chips," Saxo analysts noted. "The development raises questions about the high valuations of leading AI companies like Nvidia and the investment case for the entire AI supply chain." Also, DeepSeek's LLMs have been developed despite U.S. export controls to limit China's access to the advanced chips needed for AI work.
"DeepSeek's recent progress shows that the perceived lead the U.S. once had has narrowed significantly," said Alvin Wang Graylin, a tech expert serving as global VP at Taiwanese firm HTC.
Before I get into more detail on what this huge news means for AI and the market, Aztec reported an awesome high grade silver intersect.
Aztec Minerals - - TSXV:AZT, OTCQB: AZZTF - - Recent Price - $0.22
Today Aztec announced the intersection of Bonanza-grade silver results from step out drilling in the Southern Extension target of their Tombstone Property. The total intersect was 106.4 metres of 147.9 gpt silver equivilant with the high grade portion at a whopping 7,269 gpt AgEq over 1.52 metres.
Important is this intersection is an expansion to the south and is situated nearly 450m south of AZT's previous highest grade silver drill intersection of TC23-01 which was 3,485 gpt Silver Equivalent over the same width.
Highlights:
Bonanza grade Silver Intersection of 7,269 gpt AgEq (233.7 opt AgEq – 3,669 gpt Ag, 44.7 gpt Au) over 1.52 m, within a zone of 569 gpt AgEq (18.3 opt AgEq – 290 gpt Ag, 3.48 gpt Au) over 25.8 m, is the highest silver grade encountered in drilling to-date by Aztec at the Tombstone Project;
The intercept was in TR24-16 in the South Extension of the Contention pit and intersected multiple zones of oxide Ag-Au mineralization including 106.4m of 147.9 gpt AgEq (1.85 gpt AuEq – 0.90 gpt Au and 76.2 gpt Ag);
The TR24-16 bonanza intercept is located along the general Contention Pit trend 439 m SSW from the prior bonanza intercept in TC23-01 (3,477 gpt silver and 0.12 gpt gold (3,485.1 gpt AgEq) over 1.52 m;
The deep oxidation, alteration and mineralization of TR24-16 supports the concept that the large AMT anomaly further down may be mineralized.
The 2024 RC drilling program has concluded, and the oxide Ag-Au mineralization remains open on all sides. I believe 2025 is going to be a good year for silver so it is just a matter of time when this stock wakes up and goes much higher. I included the map from the press release to give you a good perspective where the high grade hit was made and the CEO comments.
Aztec Minerals’ CEO Simon Dyakowski stated, “The bonanza grade silver intersection drilled in TR24-16 demonstrates the continued discovery of high-grade precious metal mineralization that the historic Tombstone Silver District is famous for. This spectacular intersection of 7,269 gpt Silver Equivalent over 1.5m is situated nearly 450m south of our previous highest grade silver drill intersection of TC23-01 which was 3,485 gpt Silver Equivalent over the same width. The impressive width of the intercepted strong mineralization zone south of the primary Contention zone, in combination with the depth of oxidation, as well as its situation above the deep CRD target identified by geophysics, add a significant and exciting new dynamic to the project’s overall potential.”
The stock seems to be sitting about midway between support and resistance.
So what does DeepSeek mean for the market?
I wonder why they went with 'Deep', it reminded me of IBM's Deep Blue back in 1997. In May of that year, it became the first computer system to defeat a reigning world chess champion in a match under standard tournament controls. Big Blue's victory in the six-game marathon against Garry Kasparov we could say was perhaps the beginning of AI. Today AI is common in computer games.
One word of caution is because DeepSeek is Chinese, we have to take a grain of salt with the numbers they publish, but more reliable data should come out over time.
As I have been harping about, the market has bubble type valuations driven primarily by tech stocks and more so all the hype and potential of AI. This new Chinese AI is strong indication that AI can be developed a lot cheaper causing significant competition that will bring down the very high revenues, profits and margins that the market has been projecting. Perhaps the real cost of AI was just revealed? It is like I commented many times, that AI has been around for decades it has just better and more accessible now and on that point what did ChatGDP AI tell me about DeepSeek AI?
“DeepSeek is revolutionizing the way we explore and analyze data. By harnessing the power of advanced AI and machine learning, this platform provides unparalleled insights that drive smarter decision-making. With its intuitive interface and robust capabilities, DeepSeek empowers businesses, researchers, and innovators to uncover hidden patterns, trends, and opportunities. Whether you’re navigating complex datasets or seeking precise predictions, DeepSeek transforms overwhelming information into actionable intelligence. Trusted by industry leaders and celebrated for its cutting-edge technology, DeepSeek is not just a tool—it’s a game-changer in data exploration and discovery.”
ChatGDP called it a game changer. NASDAQ has a more prominent double top than S&P 500.
Yesterday’s nearly 17% plunge sent NVIDIA sharply below its uptrend line, which had been intact since the beginning of 2024. The stock also closed below its critical $130 support area, that had held the stock up in recent months. This is a very bad chart for the bubble leader in the market, considerable technical damage has been inflicted on the chart. I expect it to fall further and a test of $90 would be something to watch for. A break below that means a lower low in the correction. Below $120 is official bear status and the stock briefly flirted with the bear for a couple days in the July correction. It recovered then, I don't think it will be so lucky this time.
Semiconductors Remain in a Bear Market.
Our pick in the sector, Intel is holding up well but semiconductors as measured by the SOX are in a bear market. The Philadelphia Semiconductor Index SOX, includes major players like NVIDIA that produce the semiconductor chips, has fallen below its uptrend line established in November 2023. So far support is holding at the 4,800 area. Official bear status on this index is about 4,720 and it went well below that last August so it's recent move up to 5,400 area is really a bear market rally.
It did recover about +23% from the August low, but that and the chart is not a convincing new bull market for me. This index is not a good sign for this bubble market.
Once again, Bitcoin proved it is really just a speculative investment as it plunged with stock market Monday, falling from around 105k to 98k but not enough to consider selling our short positions SBIT. Bitcoin surged following the election, but has since struggled to maintain momentum. Similar to the NASDAQ and S&P 500, Bitcoin may have formed a bearish double-top pattern over the past month.
And to end on a better note, gold often does well when stock markets weaken as it gains popularity as an alternative investment. I expect gold could test it's record high in the next week or so.
And to be clear AI will continue to grow strongly and prosper, it is just the stocks involved may see their valuation multiples contract. The data center power demand will continue to increase and that is another reason Trump is very focused on energy development in the U.S. Energy security for any government – especially one with a highly developed economy – is crucial for financial and long-term stability. A nice chart from Goldman Sachs. Note the USA is expected to be about half the world.
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