Musk Lifts Sentiment In Entire Stock Market By Saying A Regular Car Is Like "Riding A Horse"

To gain an edge, this is what you need to know today.

Musk Lifts Stock Market Sentiment

Please click here for an enlarged chart of Tesla Inc TSLA.

Note the following:

• This article is about the big picture, not an individual stock. The chart of TSLA stock is being used to illustrate the point.
• The chart shows that TSLA stock fell to the upper band of the support zone prior to earnings.
• The chart shows a big move up after TSLA earnings.
• RSI on the chart shows that prior to earnings, TSLA stock was very oversold, and thus it was easy for it to bounce.
• TSLA reported earnings significantly worse than both the consensus and whisper numbers. Here are the details:
  • Q1 earnings of $0.45 vs. $0.51 consensus
  • Q1 revenue of $21.3B vs. $22.15B consensus
  • GAAP gross margin of 17.4%, down 199 bps year-over-year
  • Operating expenses up 37% year-over-year
  • Deliveries declined 8.5% year-over-year.
  • Guided 2024 vehicle volume “notably lower” than 2023
• Despite the numbers from TSLA earnings, Elon Musk has lifted sentiment in the entire stock market by saying that buying a regular car is like “riding a horse and using a flip phone.”
• Here are the other key points from Musk that are lifting the sentiment in the entire stock market:
  • Tesla is accelerating development of several low priced cars.
  • Tesla plans to own and deploy a fleet of 1M robotaxis.
  • Tesla has increased its AI training capacity from 15,000 Nvidia H100 GPU equivalents at the beginning of the year to 40,000 now. Musk is projecting a computing capacity of 85,000 H100 equivalents by the end of the year.
  • Musk made the most convincing case yet that Tesla is not a car company but an AI company.
  • Musk’s statement is especially boosting AI stocks such as NVIDIA Corp NVDA, Advanced Micro Devices, Inc. AMD, Super Micro Computer Inc SMCI, Taiwan Semiconductor Mfg. Co. Ltd. TSM, Applied Materials, Inc. (NASDAQ:  AMAT), and Arm Holdings PLC - ADR ARM.
• There are two earnings of note this morning.
  • Boeing Co BA earnings are being well received by the stock market. BA stock is up.
  • Vertiv Holdings Co VRT, a maker of cooling equipment for AI servers, is rocketing after better than expected earnings.
• The new data on durable orders is strong.  Here are the details:
  • Durable orders came at 2.6% vs. 1.8% consensus.
  • Durable goods ex-transport came at 0.2% vs. 0.3% consensus.
• The U.S. Treasury will conduct a record auction of $70B of five year Treasuries. We will be carefully watching the results and will let you know if a canary in the coal mine develops.    
  • It is important for investors to carefully watch longer duration Treasury auctions due to the second blunder that the Fed has committed. The second blunder is Powell’s press conference in December 2023.  
  • Of note is that yesterday, the Treasury conducted a record auction of $69B of two year Treasuries. The auction was excellent with yield coming at 4.898%, lower than expected. The reason is that investors are shifting money from money market funds to two year Treasuries.  

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. AMZN, Microsoft Corp MSFT, Meta Platforms Inc META, NVDA, and TSLA.

In the early trade, money flows are neutral in Apple Inc AAPL.

In the early trade, money flows are negative in Alphabet Inc Class C GOOG.

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

API crude inventories came at a draw of 3.23M barrels vs. a consensus of a build of 1.8M barrels.

The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.