Morning Comment: Very important week for Bitcoin...and for Tesla.

Do you ever wonder what Elon Musk says to his friends in the evening? This is what he might have said late last week. “I’m bored. Since I’m not in the lime-light to the huge degree I was last weekend when I was doing SNL…I have to do SOMETHING to get the focus right back on myself once again. I know, I’ll saying something negative about Bitcoin…then I’ll double-down on the comment…AND THEN I’ll take some of it back. Won’t it be funny to watch the price of Bitcoin dance around on my every word????”

Well, the price of Bitcoin got hit hard on the statement that Tesla would not accept Bitcoin any more for payment for their vehicles…and got hit harder when he insinuated that the company has sold a some (or even all) of its position in the cryptocurrency. However, although the asset is clawing back some of its losses this morning after Mr. Musk said that Tesla has not sold any of its Bitcoin, but the net effect of this whole thing has been decidedly negative for Bitcoin. In other words, Musk’s negative comments have had a much bigger impact than his retraction…at least so far.

Looking at the charts, this could/should be an important week for both Bitcoin AND Tesla. For instance, Bitcoin is becoming oversold on a short-term basis…with its RSI chart showing the same kind of reading it saw in late April…just before it bounced 25%. (It’s also slightly more oversold than it was back in September of last year…just before it exploded to the upside from the $10,000 level.) Therefore, if it can continue its bounce this morning…and move higher as we go through the rest of the week, it should give the cryptocurrency the kind of momentum that will take back towards the $60,000 level…….However, if it rolls back over and takes-out its overnight lows…it’s going to give us its first “lower-high/lower-low” sequence it has seen in almost 15 months. That would not be good at all. Therefore, how Bitcoin acts over the next 48-72 hours should be very important.

The same can be said about TSLA. The RSI chart on TSLA has also reached the same level it did in March…just before it started a one-month bounce of over 35%. (It’s not quite as oversold as it was in March of 2020, but that was a complete washout move for the entire month. Besides, it’s still pretty close to that 2020 extreme.)…..We’d also note that TSLA is testing its 200 DMA…which provided EXCELLENT support for the stock at those 2020 lows. Therefore, it looks like it’s getting ripe for another multi-week bounce. HOWEVER, if it breaks below its lows from March of this year (of $563), it’s going to give it its first “lower-high/lower-low” sequence in over a year (much like it would for Bitcoin). THAT would be very bearish for the stock…as it would also take it below the lower line of a “descending triangle” pattern (which is not drawn on the chart below).

So as you can see, there are two assets that are closely tied to Elon Musk that are sitting at very important technical junctures. Of course, one of them (Tesla) is tied much more closely than the other (Bitcoin), but how they act this week should be VERY important as to how they move through the rest of the second quarter…and beyond.

As for the broad stock market, this could be an important week as well. The further bounce in the market on Friday came on very poor volume, BUT the breadth was quite good. It was 6 to 1 positive on the S&P 500 and 5.5 to 1 positive on the Nasdaq Composite…and 30 to 0 for the SOX semiconductor Index!

The futures are trading lower this morning, so we’ll see if the market can see any upside follow through from late last week before too long…….As we’ve been saying for quite some time now, the action in the Nasdaq and the chip stocks should be the key indicators for us (along with the Treasury market). They looked good late last week, so is positive. However, if they take-out their mid-week lows, things could get a bit ugly for before Memorial Day (which comes two weeks from today)……Therefore, this could be a very important week in several different ways.


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Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

TheMaleyReport.com

275 Grove St. Suite 2-400

Newton, MA 02466

617-663-5381

mmaley@millertabak.com


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on May 17, 2021 — 9:05 AM

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