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Random Thoughts: Has Tesla Entered Bubble Territory?


Stock market observations into the weekend.

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Following a string of losses in the stock market-begrudging losses, but losses nonetheless-the tape grinded higher yesterday to finish in the green, holding the 38.2% Fibonacci retracement in the S&P (INDEXSP:.INX) on the close. That was a victory for the bulls, but one that was short-lived, as evidenced by the price action this morning.

The looming concerns continue to emanate from Washington, DC, as the political infighting persists. Conventional wisdom dictates that calmer heads will prevail-and they most likely will, at some point. The caveat is a market that is priced pretty close to perfection near all-time highs, and economists predict a US government shutdown could shave fourth-quarter economic growth by 1.4%, depending on its length.

Last Friday, into the teeth of the "no-taper euphoria," we cautioned investors that the two previous "breakouts" to all-time highs were met with immediate selling, resulting in declines of 8% and 5%, respectively. That seemed like a throwaway thought at the time given the Circle Smirk at the Federal Reserve but it's worth a mention as we meander 2.5% lower week over week.

Alas, it's Friday and you know what that means: We're a few precious hours from our requisite respite and pigskin galore. As such, I humbly offer the follow Random Thoughts as we edge toward the weekend, in no particular order:
  • It's a market of stocks, not a stock market, and there has been plenty of movement under the hood. BlackBerry (NASDAQ:BBRY) and JC Penney (NYSE:JCP) stand out on the downside, while Facebook (NASDAQ:FB) and LinkedIn (NYSE:LNKD) have partied like its 1999.
  • I remember the persistent push higher into Y2K when I thought, "This isn't going to end well." Tech stocks lifted more than I would have thought but sure enough, they spilled with equal abandon.
  • I then thought about the historic "buying stampede" we chronicled throughout 2013 and wondered if the "other side" of that trade is in the wings. Few foresee it, which in a way increases the likelihood that it could happen.
  • The banks have been the quiet storm of late, underperforming the broader tape. As go the piggies, so goes the poke, per the chart below of the S&P vs. BKX (INDEXDJX:.BKX). For the latter matter, BKX 62 is the August low and should be monitored.
  • As long as we're talking correlation, I'll add the S&P vs. gold, charted from the beginning of 2009 when the rising tide of liquidity lifted all boats.
  • Uno mas, por favor: a bubble comparison chart with the NDX (INDEXNASDAQ:NDX) (circa Y2K), crude, China, Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA). t's not "scientific," but it does speak to the emotion and psychology in play.
  • S&P 1680 is the 50-day moving average support; S&P 1590 is the 200-day support, if and when.
  • While the tape has climbed a wall of worry for some time, it remains to be seen if it can lift into the weekend with a government shutdown looming. The bulls will argue it's a matter of time before we see a "Syria-type" ramp up on resolution but the timing of said resolution is unknown.
  • What we know is that performance anxiety is particularly ripe; the lesser-known story is that the recent rise in the discount rate has lowered pension fund liabilities, bringing them closer to being funded (reducing equity risk appetites on the aggregate). Maybe that matters, maybe it doesn't-greed and fear are the drivers-but we strive to see all sides, and now we do.
  • Good luck, and enjoy the weekend-you've earned it!

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

Twitter: @todd_harrison

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