Note: Meisler's next column will be Tuesday, Jan. 3.
Everyone seems obsessed with the move in Tesla (TSLA) . I can see why. It is like watching a slow motion car wreck on the highway, you simply cannot look away. But does this one stock matter that much for the market as a whole? I mean, why isn't anyone fussing over what matters much more to stocks?
That's bonds.
Where is the focus on the move in bonds? It may not be as eye catching as Tesla's collapse, but the yield on the Ten Year bounced right off that blue line (as it should have) and crept higher for most of December. There is no hysteria yet, but if rates get to 4% (they ought to make their way there) I can see some hysteria. Although maybe not until after the calendar turns to 2023.
Perhaps everyone is too busy watching Telsa's meltdown this week to fuss over bonds but the Daily Sentiment Indicator (DSI) for bonds is now at 21, so a little back off here (in rates) and another push upward toward that 4% area in the next week or so could/should bring that DSI low enough again (it was single digits in October) for bonds to rally one more time.
For me, interest rates are more important for the overall market than one stock, namely Tesla.
What about Nasdaq? I have noted this 10200-10300 area a few times now, but take a look at this now third trip down here in as many months.
Now let's pull it back and you can see on a longer-term basis, this area is quite important.
So, sure, breaking this level would be a negative (something I have said for months now) on an intermediate term to longer term basis. In the near term, however, the DSI for Nasdaq has fallen to 16, so any break from here would take the DSI toward, or into, single digits and then ought to produce a rally. The only issue would be the resistance left overhead.
My own short-term Oscillator is moderately oversold and I think that means we ought to rally once more into year end.
My big issue is that the intermediate-term indicators are not yet oversold. They are heading that way, but like fine wine one cannot make them get there any faster.
This leaves the indicators in the same place they have been since late last week. That's short-term moderately oversold and the intermediate-term indicators inching toward an oversold condition, but not there yet. The only change has been the move in the bonds.
Wishing everyone a very happy new year!
