Tuesday, September 3, 2013

Are TSLA and TNX Ready to Dive?

You never know what you may find on comparison charts these days. This weird correlation just came up on my radar. TSLA and TNX are the least expected trading vehicles to be plotted on the same chart (at least by this blogger).

I think that high-fliers along with US 10-Yr Treasury Yield are going to take a dive soon. What will trigger the plunge? Here are my reasons:
  • Lack of meaningful taper at the September FOMC meeting. I expect a small symbolic gesture from Fed (on the scale of $10B monthly bond-buying reduction) totally spooking and confusing stock market bulls.
  • Syrian crisis. A quick military campaign is a dream, imho.
  • Weak seasonal pattern. Middle of Sep to beginning of Oct is almost always a stock market turbulence trigger. 
  • And some corporate earnings disappointments in a form of pre-announcements from discretionary sector, as consumers' exuberance is taken back by rising gas prices (as a result of the Middle-Eastern conflict), and by the lack of sustained recovery in the job market.

So why am I mentioning TSLA? For me, TSLA symbolizes a stock market pipe dream under current unlimited liquidity conditions. Good news gets better, shorts get killed, and nobody cares where the valuation is any more. It reminds me of AAPL at $700, when everything was priced in the stock. I see TSLA down at $130 before the end of the year. Yep, a bear market recharge (pun totally intended).

And in the case of TNX, it is up against a tough 3% barrier, which even if breached for a day or two, may end up being the high for 2013. I see it coming down to 2.5% and consolidating there before the next leg up starts.

click on chart to enlarge

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