The Rhyme of History

- The past is the prolgue

- William Shakespeare

In Shakespeare's play, The Tempest, he is saying that all past acts form a catalyst for what comes next. Human emotions do not change. This is why we can see individuals as well as national entities, repeating acts in many similar situations. This can also be seen in stock market charts. Despite all the regulations of pubically revealing stock trades by large traders, institutions and hedge funds, these people seek to confuse the market observations with hedges, distribution and other forms to hide their intentions. Of course, an afternoon refreshment at a watering hole, a phone call or other communication within the club of big money can clarify the intent position. 

We, at Evolution have stated in the past that we see "cannibalization" in the market due to the very rules that is suppose to protect trading. When a deep pocket observes market price action in a certain stock trades, that person can get a lot of information. If trades are in large blocks, this is a strong hand. If it is many small trades, the deep pocket can go against the retail trader. This action can scare the small retail trader out of the trade, even if the trade is the correct call. There are other dangers that seem to occur repeatedly in the market.

Meme Stocks

The list is as long as the market has been in existence. Recent action in Game Stop and AMC are perfect examples. However, there are also big names and companies that this phenomenon appears. Today, Sebastian sees this price action of cannibalization and meme in the price action of Tesla. Last month, Musk took a pay package of 10% of Tesla's market evaluation. One would think that the price would fall to a new market perception? It did. It went from the last high at $200 down to $170. Then, it rallied a hundred pointsto $270. You may ask why? We believe deep pockets purchased shares. Even when the price action indicated a retest of the last low, buying returned. The stock closed last Friday at $248 on strong volume of 816 million shares. Sebastian did notice the strength was to the downside.This battle is far from over. Keep the following in mind if you are thinking about entering the fray.

Tesla stock was $420 in November 2021. Competition in the EV field had the stock fall to $300 last July. There were also fear of a Chinese backlash due to tariffs and the end of EV tax credits. The ETF vehicle by Direction gave Tesla its own trading symbol, TSLL=bull and TSLS=bear. Then, one has to take into account the trend in the market. It is up, but it is also being led by only a few big caps. Speaking of caps, Tesla is valued at 16x Ford. It has a possible big winner with its semi. The truck has better excelleration and handling. The problem is twofold. A lack of charging stations and an excess supply of diesel engines at a much lower price. The rally in the price has been helped by the rise in the Dow, S&P 500 and NASDAQ. 

If you look at the market evaluations, they are in dangerous territory. The Schiller CAPE is up over 18.5% yoy. It sits at 35.49. The long-term average is 16.8. NASDAQ has climbed 10,000 points. The $COMPQ has climbed 6,000 points since November. Has any of the firms developed a new revelutionary product? The AI meme is only a projection. The answer is no. The index is following the same pattern as the market in the year 2000. You know what happened then. CISCO has never reached the high it did at that time. Buying at highs can lead to ruin. Be careful. Peace..