Someone smarter than me please tell me this is capitulation / the bottom.
I will bite, though I do agree with
@StealthP3D that these bottoms are only knowable in hindsight.
With that said, here are a few points worth considering.
1. TSLA Vs SP500:
The day Tesla was added to S&P 500 in Dec 2020, we closed at 695, with the trading prices earlier in the day at around the levels today. For reference, SPX on that day traded around 3700. Relative to that level, SPX is up about 3% and Tesla is down ~6%.
A significant underperformance, especially considering a) a lot of non-index funds had to still add Tesla, and more importantly b) Tesla blew the cover off the ball in terms of execution. What did the average S&P company do for you in terms of execution relatively speaking? To be fair, there was a good amount of supply to offset the index demand from Elon, but that pales in comparison to what had to be net bought by a multitude of funds.
Macro:
Clearly Powell wants to be the second coming of Volcker, and to be fair he cannot be blamed for wanting to tame inflation. Long term thats important for the US economy, a stable dollar, and its role as the reserve currency.
The fly in the ointment is - if you're paying any attention to the inflation numbers and the methodology the Feds use to calculate it, you would very well know that housing cost increases from increasing home prices and rents are added to the CPI calculations on a lagged basis. I believe it takes 6-12 months for all the rent increases and price appreciation that happened thus far to be baked into the inflation numbers. And we have a lid on energy prices from the drop in China consumption. I am not in
@TheTalkingMule camp of oil is overpriced here. Russian oil being throttled by the west to the extent it has been, is a big deal.
So Fed has a lot of wood to chop, and there are 2 more rate increases coming with a good bit of quantitative tightening. On the earnings front, I believe SPX earnings estimates are yet to bake in impact from increasing factor costs that cannot be passed on to consumers. We just started to see this with WMT and TGT, and folks are speculating this will show up big time in AMZN numbers for 2Q, etc.
On top of this, equity risk premium is increasing. Which is to say, PEs are dropping, even after adjusting for the impact of higher interest rates. I do believe that we have seen the top for long term interest rates (3.2% on the 10 Yr), at least for the rest of the year.
Net net, SPX may have another 5+% or so to go, with a little more from may be a capitulation at the end. The big question is what does that mean for TSLA?
Options
Options, and flows from options have always been a huge driver for TSLA stock price, but now we are seeing that impact in reverse. As folks are aware I keep a tab on the number of Tesla shares indirectly owned via options
here. For the first time since I have started keeping this record, which spans a little over 2 years, the shares are showing a negative number (middle column in the second table for today)! That is the options position calculated from all the open interest is a net short! This is remarkable because a significant amount of TSLA is owned by proxy via leaps. The shorter term puts for their part have managed to overwhelm the Leaps exposure for the first time. And by a significant amount.
What we have on our hands is a put squeeze from short dated puts. These are either protective puts or speculative puts, and regardless these will be monetized. These have become valuable because we have dropped about 500 points in about 7 weeks (Believe it or not). This put squeeze is not sustainable though, and as Tesla continues to execute we should see this revert back. This will surely be a tailwind in the coming days.
TLDR:
The macro picture continues to be negative for the next 3+ months. Options players have piled on with puts for a steep drop in Tesla price. Some headwinds from Shanghai troubles. I suppose we disconnect from Macros soon as the options headwinds are not sustainable. or at least not move with a 8x multiplier on down days like today as I type this.
I have no opinion on levels, but 620 is ~half of all time high. That has to count for something if we get there. Anyways back to watching macros which is all that matters for now I think.
Edit: edited a bit for clarity
