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The T3 Daily Recap: Market Shrugs Off QE Worries, Short Squeeze Theme Continues


Elon Musk's Tesla was in the news today after a favorable review of its Model S.

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When the Wall Street Journal released an article Friday mapping out the Fed's potential exit plan from QE, many traders speculated that we could be headed for a tumultuous week in the market. However, the volatility and panic that was supposed to ensue never materialized as major indices finished near the flat line. While the article by the Wall Street Journal's Fed expert Jon Hilsenrath discussed scenarios for unwinding the unprecedented asset buying program, there was no concrete timetable for such action. Perhaps the market believes the Fed was simply trying to temper future QE expectations.

Anyway, prudent technical traders don't trade based on headlines; we trade on price action and the reaction to headlines. Futures were down only slightly last night and even pared losses into the open after better-than-forecast retail sales data at 8:30 a.m. ET. At no point during the session was any of the anticipated anxiety apparent, but that doesn't mean you fall asleep at the wheel.

Right now, it does feel like broad indices need rest, but there continues to be very tradable action in individual stocks. The short squeeze theme continues to dominate the tape, with many high-short-interest stocks continuing to go for the throats of naysayers.

Tesla (NASDAQ:TSLA) continues to steamroll shorts and looks like it could be set for triple digits in the not-too-distant-future. The electric car maker, which gained more than 35% last week and is up 130% in the last month-and-a-half, tacked on additional gains of 14.38% today as the chart goes parabolic. Highly regarded CEO Elon Musk, who also serves as CEO of Solar City (NASDAQ:SCTY) and private space exploration company SpaceX, has become the talk of Wall Street after turning around his once struggling enterprises. (T3Live Editor in Chief John Darsie has been pointing out his bullish view on the stock since early April.)

When Tesla looked set to potentially go belly-up during the financial crisis, Musk sank the last of his personal fortune, which he accumulated as a founder of PayPal (NASDAQ:EBAY), into the company, believing that its brilliant products would one day lead the company to the brink of innovation. That day appears to have finally have arrived, with the latest earnings reports showing the company is for the first time profitable. Throw in a 99 out of 100 score for the Tesla Model S from Consumer Reports, which called it the best car it had ever tested, and things are looking up for Musk and Tesla. Fundamentals may now be out of whack for the stock after the recent run, but the remaining heavy short interest could continue to provide the fuel (err, electricity) to power TSLA toward the triple digits.

Speaking of Musk, his aforementioned solar company Solar City also enjoyed a healthy gain today ahead of earnings. Most solar companies require upfront investment in panels for anyone who wants to use them, but Solar City's business model involved the leasing of panels, which is seen as much more viable at this stage of the solar energy's evolution. Some of the company's technology is also used in Tesla cars, making it a derivative play on the high-flying automaker. SCTY closed well off its highs of the day, but still finished up 24.24% on the day. Options were pricing more volatility on earnings after the close, but so far the stock is down only about 4% following the announcement.

Another one of last week's short-squeezes, Green Mountain Coffee Roasters (NASDAQ:GMCR), wasn't as explosive today but still held near its highs with a marginal 0.21% gain today. The longer it digests these recent gains, the more likely it could squeeze higher in the coming days and weeks.

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Scott Redler is long ZNGA, AAPL, GS, JPM, V, BAC, CLF, MGM. Short SPY.
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