Mid-Day Public Commentary [10/11]: TSLA Pulls Back + Market Rally Broadening Continues
Good Afternoon -
Our last message to the public was that the best outcome for CPI Inflation was an in-line figure. Even a slightly than hotter than expected figure may be OK. What I did Not want to see was a cooler than expected figure.
The stock market prefers Inflation to Deflation. The bond market prefers Deflation to Inflation.
If we got a <2.3% reading, capital would flow towards TLT (Bond ETF) and away from stocks.
For most of us, that would not be a good thing.
There will be a time when TLT is appropriate. I’ll later identify when and where that will be.
Link to read our commentary from 10/8 ahead of CPI is here.
That’s pretty much we got, and as a result U.S. indices are tracking about a 1% weekly gain. This is particularly helpful for bulls because QQQ ETF 495/share (equivalent to 20500 NQ) is revisiting the Same Area where it failed to breakout in the first week of October.
Every test of resistance gives the market another chance to breakout again, with each attempt increasing its probability.
The market is now at the upper range its recent range heading into the 2nd Half of October, which has been historically been a bit more challenging during election years. Makes sense, given that the election is now only 3 weeks away.
The market has favored our strategy lately, but we’ll of course continue to be on guard. On the Semiconductor sector, we averaged up on NVDA at 115-118 after the October early selloff and now shares are +20 points in our favor since.
Members have been positioned for Higher across Semiconductors.
At some point, the rally will lose steam. We’ll be monitoring for this closely.
I do have 1 public idea for my general Community that I think may stack odds in your favor.
On Tesla (TSLA): The Robotaxi event has disturbed the recent rally. But I see no reason to get overly bearish on the company.
A position that I’m putting on is selling the January 2025 Expiry 160 and 170 Strike Puts on Tesla.
If the selloff continues in a massive way, I’ll get assigned with roughly a cost basis of 165. That region is my DCF Bear Case for TSLA. If assigned, I think the ROI will be…..very good.
Anyway, there is another press conference on China this Saturday that will give more updates on stimulus measures.
If the update is favorable…I expect BABA to revisit 115, PDD at 150, FUTU at 120, and EDU 80 next week.
If not, there will likely be a retracement first.
That is later bought back Up.
In my opinion, it doesn’t really matter what happens this Saturday.
Short-term anything can/will happen. Long-term China goes Higher. And if China goes Higher, so will the U.S and Europe.
Everyone benefits.
Policy Put has been “put” in place (no pun intended).
More nuanced commentary in Members notes.
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Disclaimer on H-Shares:
A note of caution for H-Shares (or China ADRs). They are extremely, extremely volatile during macro policy changes, and as a sector, exhibit the highest forms of volatility compared to other sectors I’ve studied. Holding H-Shares or China ADRs is only one notch below holding Crypto/AltCoins in terms of volatility. Only folks with the highest risk tolerance and highest ability to manage volatility should look at H-Shares. H-Shares can swing 20-30% in the span of days on the upside or downside. It can make Nasdaq-100 stocks (my core coverage) look slow.
As an example, Meituan which was a left for dead stock was trading at $60HKD just a few months ago. Shares have nearly tripled to around $180HKD, with the bulk of the advance coming from the past few weeks.
My DCF Model approach, which members know have powerful degree of forecasting power in my core coverage because of my familiarity with the companies, is NOT going to work as well on H-Shares. Any commentary that I give on H-Shares relies much more on macro observation and technical analysis, which may or may not be a full picture of a company’s fair value. For this reason, there is a speculative type of element when it comes to H-Shares. Investing in H-Shares is completely different from investing in U.S. stocks.