Hi YXI friends,

(Please note that this article is written before the Nonfarm Payrolls (see my preview here).

We are barely into the third month of this year, but it must have felt like an entire year of trading done.

Yesterday we saw SPY and QQQ sell off 1.9% and 2.1% respectively. This was another 2-standard deviation drop for QQQ against the 1-year volatility.

Both SPY and QQQ’s rolling 1-month volatilities have shot up since February 20th. While they are not at the levels of the August 2024 Carry Trade Unwind, they have stayed more elevated than other periods in the past year.

The speed of the ascent is also alarming for both the December selloff and February selloff. It’s safe to say, this year won’t be an easy market for either bulls or bears - I’ve seen it being dubbed the “Kangaroo Market”, which is an excellent caption.

Kangaroos are fast, aggressive, and hoppy, until they get run over by a bus. We just don’t yet know what that bus might be - could it a bus full of new bearish tariffs? or bullish Fed cuts / end of QT?

Now onto the Magnificent 7s, which are suffering a terrible start to the year.

Meta is the only company with positive returns since the new year, up 7%. But even then it has already given up all of its gains since Inauguration, that was hard worked by 20 green candles in a row.

Let’s review them one by one.

Table of Contents

• 1. Tesla (TSLA)

• 2. Nvidia (NVDA)

• 3. Meta (META)

• 4. Alphabet (GOOGL)

• 5. Amazon (AMZN)

• 6. Apple (AAPL)

• 7. Microsoft (MSFT)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Tesla (TSLA)

To understand how Tesla really trades, we must acknowledge that while Tesla receives most of its revenue from car sales, it does not trade as a car company, whether investors like it or not.

It is an incredibly misunderstood point still, because I see people frequently cite the falling car sales or Elon’s politics being alienating to European buyers for the reasons of its drop. This fundamentally assumes that higher / lower car sales move the stock. They do not. They just serve the purpose of media attention and commentary.

Tesla’s price performance relies on two components:

1) its high sensitivity to global liquidity for risk assets and 2) investors’ sentiment towards Elon’s Robotaxi / Optimus vision.

G5 M2 Money Supply (USD) vs TSLA

Here is the G5 (US, China, EU, UK, Japan) M2 Money Supply (in USD) vs Tesla’s stock, with an 11 week lag. We see striking similarity between the directional moves of the money supply and TSLA, just like Bitcoin.

The sharp pullback we have seen TSLA experience follows the drop in G5 M2 Money Supply that started in September. We are still going through the negative impact from late December - early January trough due to the USD strength. This lagging impact can last into early April for TSLA.

However, we must note that the impact is more of a directional one - we can’t purely rely on the above chart for predicting the magnitude of TSLA’s price changes.

TSLA Daily (https://www.tradingview.com/x/DiqQ7FcS/)

Now onto the TSLA medium-term look back, TLSA is trading at the critical support band that used to be the resistance in 2023-2024. The band was tested 6 times before TSLA broke through in November.

TSLA Hourly (https://www.tradingview.com/x/EaRjsp8S/)

There are two changes here. First, the February decline was extended enough to rule out the prior A-B-C pattern. Instead, the chart looks better as a direct 5 waves down, implying a Zig-zag pattern.

This means the next bounce is very likely to be 3 waves up only, before we see one more low. I have mapped my current expectation for the rebound on the chart as (a)-(b)-(c).

Secondly, the height of this next bounce is highly uncertain. However, looking back the prior declines in each of 2021-2024 years, there is a good chance we get a 0.618 to 0.786 retrace of the initial pullback. This points to the $400 region.

Incidentally, there were large trading volumes between $395 and $420 from the dip buyers in January. This area could act as a source of significant supply as the currently trapped short-term buyers unload.

2. Nvidia (NVDA)

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