Hello Traders and Investors and thank you for joining me for another edition of the Magnelibra Markets Podcast, I’m your host Mike Agne and today’s episode #24 is entitled “Tesla Tanks Kicking it Out of the MEGA8s”
But first a quick regulatory disclaimer:
DISCLAIMER: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.
Well as we noted in yesterday’s subscriber only newsletter post which is now free to view, the upside in Tesla was most likely limited due to the over 100k open interest in the calls for Friday’s expiration. We noted the Puts would then be in focus and a break of $208 would most likely lead to an assault on $200 and $195. Well here is the current chart of Tesla which is trading $186 -$26 or 12.4%:
As far as the earnings yesterday, they posted a 71c EPS vs the 74c expected. Revenue was less than expected coming in at $25.17B vs $25.6B. Operating margin dropped from 16% in Q4 2022 to 8.2%, tightening things up there. Net Income was $7.9B more than double Quarter over Quarter but mainly due to the $5.9B one time non cash tax benefit. (CNBC)
CNBC also posted this Tesla Revenues Chart which shows quite a flat path over the last 5 quarters:
Today’s move has kicked Tesla out of the top 8 in regards to market cap as it is currently down a whopping $70Bn at $588Bn. Magnelibra has decided to replace Tesla with Broadcom (AVGO). We talked about Broadcom last year as it was making some big jumps off the AI mania in May of last year. For those not familiar with Broadcom, please click the link and read about their history, it is really a great story of innovation, acquisition, private equity etc. Who is Broadcom?
Broadcom Inc. is a global infrastructure technology leader built on more than 60 years of innovation, collaboration and engineering excellence. With roots based in the rich technical heritage of AT&T/Bell Labs, Lucent and Hewlett-Packard/Agilent, Broadcom focuses on technologies that connect our world. Through the combination of industry leaders Broadcom, LSI, Broadcom Corporation, Brocade, CA Technologies, Symantec's enterprise security business and VMware, the company has the size, scope and engineering talent to lead the industry into the future. (Excerpt and link found here, Broadcom History )
Broadcom is up nearly 9.2x since the covid 2020 lows, currently trading $1260 +143.75:
We suspect with Tesla moving out of the Top 9 that systematic algos are going to continue to plow money here and most likely has been the beneficiary already as big funds have been obvious sellers of Tesla and moving capital to other names, like Broadcom.
Let’s not forget about IBM which we saw earnings yesterday as well, as CEO Arvind Krishna reiterated that,
"In the fourth quarter, we grew revenue in all of our segments, driven by continued adoption of our hybrid cloud and AI offerings. Client demand for AI is accelerating and our book of business for WatsonX and generative AI roughly doubled from the third to the fourth quarter," -IBM Newsroom
We share in his sentiment and it everyone is on board the AI boom and we too believe it will transform not only business, but the way we interact and live each and every day.
Some of IBMs highlights, Revenue was +4% to $17.4B higher than expected, EPS of $3.87 beating exp. $3.80 and posting $12B in free cash flow +7% YoY. As far as the stock, its trading $196.27 +$22.34, +12.8%. For those that want to see what a textbook base pattern break out looks like take a look at the chart, it shows the breach above the baseline top in July 23 with a retrace back test in Nov 23 and now the rocket higher:
All in all we will update our Magnelibra MEGA8s data to now track Broadcom and remove Tesla, our subscribers will get that data later today.
In other news we had Q4GDP data coming in at 3.3% higher than the 2% median forecast which saw the bond market initially dip but prices quickly recovered. This is leading to a more softer landing approach and it will be interesting to see how the FOMC swallows this data.
We also had the ECB out keeping interest rates unchanged and Lagarde continued with the usually central bank jargon of data dependency, robust wages combat weaker Q4 growth but forward indicators show a pick up in activity later this year. As we noted the central banks work in coordinated fashion and we suspect we will see the BOJ maybe raise rates into an FOMC that is cutting rates and an ECB that is waiting in the wings some 6 months post to begin their own cutting regime. This is how these things go…so we will be on watch as these things develop.
Ok we did hear whispers of the terrible 5Y auction yesterday came with a 2bp tail indicating weak demand and despite the 5Y yields being 25bp higher than last month, that still wasn’t enough to increase demand as the bid to cover was 2.31 vs 2.50 last month. We know the US Treasury will have to continue to increase the auction sizes and this is saturating an already oversaturated marketplace.
As far as today, technically we want to point out that the Nasdaq futures continue to be bulled up and now 17600 is key support and would suspect any trade there initially will see support, a daily close below could lead to more selling, but for now Nasdaq is well bid +125.5 points so far:
Ok we will have more later for now let’s look at yesterday’s settlement page where we note the weakness in the bond market, the Nasdaq and SP500 were higher with the other indices lower, FX, Energy and Metals all higher across the board except gold, which was down $10 and the Canadian Dollar lower the only exceptions:
The Magnelibra Futures Model Tracker saw no changes, but is gaining traction and recovering some of the January losses thus far:
When we look at the MEGA8s which will change today as we noted we can see the market cap continues to make new highs, which continues to be led by Nvidia +2.49%:
Our Market Cap comparison chart shows the absolute dominance of Nvidia followed by Microsoft. Nvidia is +$802Bn in market cap since May 10th:
As far as the group they continue to push near $13.5T in total market cap:
Alright that does it for today. Be on the lookout for PayPal later today, let’s see what great innovation they have in store, could be a flop or could be something to propel this stock, so keep an eye out.
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