Published January 12th 2023

Daily Brief - ☀️ The cult of Elon cracks

TLDR: The cult of Musk is creaking and that might put the brakes on Tech’s ability to rally. Also, we snatched 2nd place in FT Alphaville’s Meme of the Year contest!

elons cult

The Cult of Musk is creaking, and that’s bad for Tech

TLDR: retail investors are withdrawing from the market and institutional investors would rather buy bonds and utilities. Who’s left to buy Tech?

On Monday Alphaville wrote about the souring mood amongst some of Musk’s long-time supporters.

This is an interesting piece per se, in particular when it comes to the responsibility of the current Board of Directors - how the heck did they allow Elon to scamper away and leave TSLA unattended.

But TSLA’s 70% fall from peak reaches much further than its understandably sour shareholders. You might not remember but at one point in 2021 TSLA’s options accounted for 50% of the option market in the US by volume - including SPX!

The persistent bear market in TSLA has far reaching implications for the withdrawal of retail traders from the market - which in turn underpinned the rally in tech stocks up to 2021.

It is fair to ask if the time has come for Tech stocks to shine again, especially as we look ahead to a) the end of the Fed hiking cycle and b) narrowly avoiding a recession.

But the retail traders who might be there to believe and buy the stocks are kind-of exhausted and out of money or willingness to trade.

And don’t look at institutionals: with 2-year US Treasuries offering a risk-free 4.2% yield, institutions will be much less inclined to buy into growth stories this year.

us option market

The Peak & Valley Indicators

The Valley Indicator flashed green a few days back. Keep an eye on the Peak indicator for a possible peak.

New: the P&V Indicators are soon coming to TOGGLE, along with RangeFinder. Stay tuned.

peak index

valley index

Idea Spotlight: Amazon

According to the Goldman chart above, Amazon had the 3rd highest average daily option volume in the lead up to Nov 15 - almost $150b worth.

TOGGLE observed that equity yield indicators for Etsy rose and historically, this led to a median increase in Amazon's stock price.

amzn price history 011123

Daily Brief - ☀️ The cult of Elon cracks

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