To The Moon

Public Holidays

There are no holidays in Singapore, Hong Kong, China and America for the coming week.

Economic Calendar (22 Apr 2024)

Notable Highlights

• New home sales will bring insight into the current status of US real estate.

• S&P global US manufacturing PMI will bring about an understanding of the manufacturing outlook for the US.

• S&P Global Services PMI will bring an understanding of services production for the US

• The most watched economic data in the coming week will be the PCE price index. This is the main index that the Federal Reserve used as a reference for inflation in America. Should this continue to trend upwards, it will be more difficult for the Federal Reserve to impose a fat pivot or a drop in interest rates.

• US GDP results will also be released in the coming week.

• Initial jobless claims will also be a key macro data that the Federal Reserve will look into as they ponder the next interest rate decision

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (22 Apr 2024)

There are a few earnings of interest in the coming week. Personally, SAP, UPS, Tesla, Meta, Chipotle, Microsoft, Alphabet, Intel, ExxonMobil and Chevron are earnings of interest.

Let us look at Tesla

Observations

• Tesla's revenue grew from $3.1 billion in 2014 to $96.7 billion in 2023.

• The gross profit grew from $0.8 billion in 2014 to $17.6 billion in 2023.

• Operating profit started with a loss of $0.18B in 2014 and in the 2023 year achieved an $8.8 billion operating profit

• Earnings per share (EPS) started at -$0.16 in 2014 and ended 2023 with $4.30.

• Over a 10-year CAGR, revenue has grown 47.3% and assets have grown 46%. Free cash flow over the same. Has grown 144.1%.

Personally, Tesla is a good company with strong fundamentals. There are also good developments in other products like FSD, Tesla robots, and Tesla energy.

The stock has fallen 10.92% from a year ago and is lingering along the 52-week lows. The P/E is 31.08. Investing has a “strong sell” rating for the stock.

For the coming earnings, the forecast of Tesla’s EPS and revenue are 0.4922 and $22.27B respectively. The general market sentiment towards Tesla seems to be bearish amongst the Magnificent 7.

From the initial sales figures released by Tesla, it is possible that the earnings would disappoint leading to a decline of its stock price. Get Tesla is more than just an automotive company.  Tesla should be seen as an AI and innovation company supporting sustainability using green technology and AI. Even though FSD remains a moving target, it is closer to completion. We have also seen healthy growth in its energy sector and await more news about robotics.

Will Tesla's stock dip after its latest earnings?

Market Outlook of S&P500 - 22Apr24

Technical observations of the S&P500 1D chart:

• The MACD indicator is on a downtrend from the past week and this should continue into the coming week.

• Chaikin Money Flow (CMF) has hit below the zero line. This can be seen as a bearish signal with more selling volume. Note that there may be a reversal in this coming up as the volume trend seems to be changing direction.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above the MA 200 line and below the MA 50 line. Thus, it could be read as bullish for the long term and bearish for the mid-term.

• Exponential Moving Averages (EMA). The 3 EMA lines have converged and started a downtrend.

• I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.

Introduction of a new indicator A/D Line

From MarketInOut’s website on 20 Apr 2024 (10.15am SGT):

The Advance/Decline Volume Line is a breadth indicator which is calculated by taking the difference between the volume of advancing and declining issues and adding the result to the previous value. It rises when advancing volume exceeds declining volume and falls when declining volume exceeds advancing volume. It's important to compare Advance/Decline Volume Line plotted for the index with the performance of the actual index. The AD Volume Line should confirm an advance or a decline with similar movements.

Note that the A/D volume line is starting to turn upwards, thus, the bulls could be back if this momentum continues.

Based on daily intervals, investing recommends a “strong sell” rating. There are 4 “Buy” ratings and 17 “Sell” ratings from Investing.

After reviewing the various technical data above, the S&P 500 should continue to decline in the coming days.

News and my thoughts from the last week (22 Apr 2024)

• Charlie Munger Gave His Family Fortune To The 'Chinese Warren Buffett' Li Lu Who Turned It Into Over $400 Million Dollars — 'Unholy Good Returns'

• China unloads more US Treasury bills as odds of Fed rate cuts grow slim. With the Federal Reserve suggesting interest rate cuts are unlikely in the immediate future, China has unloaded more of its US Treasury holdings - SCMP

• Epson closure of Tuas plant in Singapore - CNA

• IMF Steps Up Its Warning to US Over Spending and Ballooning Debt. Annual report credits unsustainable spending for US growth. US fiscal stance risks global financial instability, IMF says. - Bloomberg

• JUST IN: Ft. Worth Texas' tallest building is facing foreclosure just 3 years after the buyer acquired the building

  The 40-story, 1M SF office building will be sold at a foreclosure auction scheduled for May 7. The seller acquired the building (801 Cherry St) in 2021 for $137M.

• 'No need for cell towers': China has revolutionised smartphone communications. Has China found its own "Starlink"? Times of India

• These in-house AI chips that Google and Meta just announced pose one of the first real challenges to Nvidia’s dominant position. Nvidia controls more than 90% of the AI chips market with increasing demand. - Yahoo Finance

My Investing Muse (22Apr24)

Layoffs & Closure news

• Walgreens Boots Alliance is laying off another round of workers, marking the fourth time the struggling retailer has had to do corporate personnel cuts within a year. - Supermarket News

• Tesla is planning to lay off 300 temporary workers at its German plant near Berlin as part of plans to cut global staff, Business Insider reported on Wednesday, citing people familiar with the matter. - Reuters

• Citibank laid off 2,000 employees after a reorganization. Headcount at Bank of America, Wells Fargo, and PNC Financial, declined by about 2,000 jobs combined in the three months ended March 31. - Reuters

• Morgan Stanley Is Planning Biggest China Job Cuts in Years. About 50 investment bankers in APAC ex-Japan may lose jobs. China, HK bankers account for at least 80% of latest job cuts - Bloomberg

• Toshiba to cut 5,000 jobs in Japan, 10% of the workforce, to focus on core businesses. Facing financial difficulties, the company sold its memory chip unit. Job cuts are rare due to strong worker protection laws. - Times of India

• UBS Group AG is planning another round of job cuts as the firm continues to trim headcount following its rescue of Credit Suisse, according to people with knowledge of the matter. - Bloomberg

• Alphabet-owned Google is laying off an unspecified number of employees, a company spokesperson said on April 17, marking the latest cuts at the technology giant as it cracks down on costs. - Straits Times

• Rivian cuts roughly 1% of its workforce, following reduced demand for the company’s vehicles (and electronic vehicles in general) and a lower-than-expected production forecast for 2024. - Fast Company

• Tesla lays off ‘more than 10%’ of its global workforce - Electrek

Image

• A high-profile aerospace and defence contractor and a semiconductor company are among the latest tech firms to chop jobs in the Bay Area, cutbacks that will erase more than 200 positions.

Layoff news continued to hog the headlines in the past week. There seems to be more in the pipeline. All this will form an important reference for the Federal Reserve as it decides on the coming interest rate adjustments.

PCE

The PCE is the preferred data reference used by the Federal Reserve regarding inflation. Should the PCE data trend upwards, it would be more difficult for the Federal Reserve to implement interest rate cuts sooner. This should be bearish news for the market which has been anticipating multiple rate cuts since the beginning of 2024.

SPR

There were also concerns raised about the low level of SPR strategic petroleum reserves. Some reports have suggested that there are about 17 days of reserve left. The government has been releasing this stock to the market to lower gasoline prices. The current Persian Gulf tension could add to the energy crisis. Should there be any disruptions of oil supply, the US would only have stopped sufficient for 17 days based on SPR.

Earnings of Magnificent 7

The Magnificent 7 will release its earnings results in the coming days. With a heavy weightage in the NASDAQ and S&P 500, its earnings will definitely bring about volatility in the market indices. The last week was a bloodbath for the big tech. Companies with great growth are companies that are also capable of great declines. Such magnitudes do not work in a single direction but rather both when the market turns otherwise.

Personally, Microsoft and NVIDIA should continue to perform strongly. There are other players in the AI chips sector that include some of the magnificent 7. Though they are competition, it may take years before the rest can catch up with NVIDIA. We will know soon from the earnings and the outlook forecast provided. NVIDIA has reached bear territory having fallen more than 20% since its recent all-time high. Without strong competition in the near-term horizon, NVIDIA should have a comfortable lead. Its competition could also come from other non-public-listed players like Huawei.

Middle East tension

Iran seems to have officially downplayed the retaliation from Israel. This helps to bring down the tension that is in the Middle East. With Iran threatening to arrest vessels that use the Persian Gulf to service the state of Israel, we are expecting shipping companies to reroute some of the vessels and this would lead to an increase in supply chain lead time and logistic costs. Players have already complained about the disruption in the Persian Gulf. This implies that the price of crude oil could rise when things continue to heat up in the region.

My final thoughts

From the news and outlook, the market should prepare for volatility in the coming days. With the halving of Bitcoin completed, would it follow the previous history that saw a surge in Bitcoin prices? I recommend caution and hedging as they are set up for various Black Swan events in the coming days.

@TigerStars

$Tesla Motors(TSLA)$

$S&P 500(.SPX)$

$SPDR S&P 500 ETF Trust(SPY)$