Weekend Wall Street #54 - Oil, Tesla, and Crypto (October 16th-20th)
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First - some changes are coming to the newsletter. I’ll be doing more deep dives on individual companies and second it’s free for everyone for the next month as I work on some other projects. Now, let’s get into it!
Happy Sunday everyone and welcome back to Weekend Wall Street. The S&P 500 closed +.5% with the Dow while tech stocks in the Nasdaq closed the week -1%. Both consumer and producer inflation were hot last week leading the market to believe the chances of another hike are higher than previously thought.
Let’s take a look at what this week has in store!
Even while the market fell last week, one sector stayed very strong and that was energy. The disruption to the oil market in the middle east is leaving investors to flock to oil now vs. later - this can be seen in the backwardation of oil futures prices. This means that having oil now is more valuable than the time value of getting it later.
The US increased sanctions on Russian oil as well further leading the market to believe that supply will tighten and driving up the current price. Reports state that if we find more conclusive evidence of Iran’s involvement in the Hamas events unfolding there, it could lead to further political tensions and drive up the price of energy even more.
In an interview with Seeking Alpha, venture capitalist Yanev Suissa states that the AI bubble will pop in the next year, but gives reason for another trade that can benefit off of AI. Goldman Sachs expects $200B in Gen AI investment by 2025, therefore Suissa believes security for these AI programs will be vital. His fund has invested in EVLV and S before they went public and he’s now investing in DataBricks. I think security based companies for AI may be the next evolution in how the market will focus on what these companies really need.
Pfizer shares continue to decline, even though they have one of the most successful COVID products. They have un unexpected $9B slash in sales to end the year forecasting down, also implementing restructuring plans for 2024 to save ~$3B as well. Sympathy trades like MRNA and NVAX are also on the verge of a massive breakdown.
The crypto world is also seeing some interesting developments. Ferarri is now accepting crypto as a payment and bellies it will expand to the younger generation and they will not add extra fees for these payments. Second, and probably bigger news, the SEC isn’t challenging their los against Grayscale which can lead to our first crypto ETF’s.
#1) Earnings week has finally heated up with the big eyes on Tesla and Netflix after the bell on Wednesday. Although there has been a massive writer strike, Netflix has excelled by pre-producing this content. Tesla continues its reign as the #1 EV car in the US, so we’ll have to see what guidance is with so many new companies trying to get their piece of the pie.
#2) On Tuesday, BIDU is hosting an event where some analysts are expecting updates on their AI chat bot. The retail sales report for September will also release at 8:30 AM EST.
#3) On Wednesday, the Fed will release their Beige Book report and Tesla is expected to move ~7% based on options pricing for earnings after the bell - any move bigger than that should have a ripple effect across some indexes
#4) On Thursday, Fed Chair Jerome Powell speaks at 12:00 PM EST.
The S&P 500 ($SPX index) continue to rally last week, but as predicted we hit the gap fill and then dumped pretty strongly. I still believe SPX will see 4180 before new highs, but at the end of the day price drives action and the key breaks below are the best way to trade.
My key breaks are $4345 for bulls and $4300 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla is in an a huge pennant here and is ready to break in any direction, but it’s not worth trading before earnings. Remember it’s not how the market believes they did last quarter (Wall Street is pretty good at predicting that) but how they’re going to indicate they will continue to do in the future that will drive where price is going to go. Whichever way this breaks I think that will be a massive trade to take.
Apple has always been a market leader and it looks like it wants to break out of this downtrend again. They just released some new products and revamped their executive board, so this one can get interesting if it wants to lead stocks to their next leg higher.
FSR can be a play on Tesla earnings as they’re also an EV stock but it’s notable that they also have high short interest which can make this pretty explosive if it wants to go.
VOXX and LXRX are new and interesting buys hitting the tape here. Great charts and bottoming with reasonably big buys.
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)
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