Tesla Market Cycle Analysis: A Textbook Bubble Study

[00:00:00]hey everyone and thanks for jumping back into the equity verse today we're going to talk about Tesla a textbook bubble if you guys like the content make sure you subscribe to the channel give the video a thumbs up and check out the holiday sale on into the cryptoverse premium at into the cryptiverse.com one of the most difficult parts of navigating Market Cycles can just simply be figuring out where within the cycle we likely are and if you can try to take a step back and look at it from an objective point of view if you could understand or better understand where we likely are within the market cycle it can hopefully help your strategy moving forward so I'm going to try to do my best to help elucidate where I think Tesla is within its Market cycle and of course you're up to your own accord to figure out how you want to use that information now if you have followed this channel throughout 2022 you know that my general thesis right for most of the year has just simply been risk assets are going to be very bearish okay and that risk assets like equities and cryptocurrencies are just simply in downtrends for the duration of this year and hence why I've said many times that cash is King if we break that statement down a little bit further and you wonder why cash is King it's not simply just because we can see that the asset prices are falling but there's this thing called the risk-free rate right and when treasury yields are going higher investors are less likely to put a lot of their money in Risk assets when they can put some of that money in say fixed income Investments and earn a relatively risk-free yield for instance if you were to go look at two-year treasuries you'll notice that they're at levels that they haven't been since 2000 2007 and if many of you have not been an investor since before 2007 though there's a good chance you just simply have not lived through an investment period where fixed income investing is this attractive getting four to five percent in a relatively risk-free way through things like certificates of deposit and whatnot are an attractive option for investors who are worried about the implications of a long lasting inflationary bear market we've talked about this on the S P 500 this year if we go take a look at that and let me just pull it up on the on the S P 500 one of the things we talked about is how we've just simply been putting in lower highs and lower lows and how every time we come up to this trend line it's easy for everyone to want to perform some type of mental gymnastics to talk about how this time it's going to break out and go to new all-time Highs but so far the status quo remains unchanged of course it eventually will break but it has not yet broken and so this inflationary bear Market continues risk assets continue to remain Under Pressure risk the risk-free rate is between you know like four to five percent or so and and of course it's going to make investing in Risk assets a little bit more difficult for more risk-averse investors so then where does Tesla fit into all of this okay this is the you know the question that we must answer now right now Tesla's at 123 dollars but today it's been it's been between 121 dollars to 128 so it's been within this you know fairly tight range today it is coming down quite quickly though and and so what I want to do is I want to talk about what is the best case scenario for a bottom in my opinion what is the worst case scenario and where's somewhere somewhat in between where we're I think more and more people will start to find some value okay now again I I will remind you the Tesla bulls will be the first to criticize any type of of analysis suggesting the price could go lower but they'll also be the first ones to tell you to buy the dip the next time it goes lower as well okay and they've been doing it all year so you have to remember it's easy for these people to say buy the dip when they're just speaking to you know to some audience on online but it's much harder to buy the up if you listen to this advice and you've been buying the dip all year if you've been buying the dip all year at 300 and then at 200 and then at you know at 150 Etc it doesn't really work out that well when they just simply keep saying buy the dip so what I want to do is I want to I want to show you and I'm sure many of you have seen this before and I'm not you know I'm certainly not under the impression that you know this is the first time you've seen this chart but this is the you know the psychology of a market cycle the Wall Street cheat sheet fairly you know fairly obvious chart we've been talking about these types of charts for a long time we've used these charts to under to better understand crypto as well but when you look at this chart what you'll see is sort of like an accumulation phase going into this hope and optimism belief thrill Euphoria followed by complacency you know the dead cat bounce for a couple bear Market rallies here and then anxiety and then in denial I think that Tesla is currently in the denial phase that's where I think Tesla currently is I do not think we have yet seen full panic and I don't yet think we have seen full capitulation either okay and the reason you know some of the things that you have to consider is is that these these changes in sentiment take years to really play out right so like if you think about this bull market really started in you know late 2019 and it didn't stop until the end of 2021 and so we've been in a bear market for about a year now but this could easily extend a few more months right no problem it could easily extend a few more months so what I want to mention first is that right now the valuation of Tesla is coming in at around 123 or so okay so we first must recognize that in a denial Panic anxiety phase there are bound to be bounces back up to the upside and every time a bounce happens the Bulls will say I told you so right and they will sort of point fingers at the Bears if you followed some of the some of the videos that I've done this year especially on some of the live shows where I've talked about Tesla I've been fairly adamant that this thing is going down right and I've been fairly fairly cautious about risk assets in general but when you're talking about the Federal Reserve really you know rolling off the balance sheet right reducing the money supply um raising interest rates to levels we haven't really seen in in 15 years you have to assume it's going to have an adverse effect on risk Assets in general but there's no such thing as as an asset going down or up monotonically right you will see bounces along the way if it's going down and you will see pullbacks along the way if it's going up this is only natural right I mean there are plenty of pullbacks by Tesla uh while it was going up so you would expect while it's going down there'll be plenty of bounces back up to the upside and again if you were to go look at at say the relative strength index you can see that we're at fairly oversold levels on the weekly time frame if you go to the Daily time frame I mean it's all the way down at like 19 or something so you know I'm not going to say that Tesla can't bounce in the short term there's a good chance that probably will bounce in in the coming weeks um to you know to some higher levels and and get the Bulls all excited again but what I think is worthwhile to consider is that just because you see a bounce does not mean the correction is over and I've said this time and time again you know we had a bounce back over here in June and where Tesla went back up to 300 and everyone was getting excited once again and I was like you know it's probably just gonna go put in a lower low same thing happened over here right it bounced at 200 back up to 240. people got excited again and so on and so forth right so the idea that bounces mean you're you know you're you're the coast is clear is just simply not true okay and it hasn't been true for a long time one of the things I think is worthwhile to consider is that the pullback on Tesla so far is about 70 pullback where does that stand in the context of Meta Meta pulled back 77 percent right 77 pullback Netflix pulled back about 77 too meta also from its low in March of 2020 only went up 179 180 percent or so Netflix from its March 2020 low so if we grab the the March 2020 so it's actually not even low on here it went up about 90 they still dropped about 77 percent Tesla from its March 2020 low went up 1548 percent now I know what you're probably thinking you're probably thinking well Tesla's not meta and Tesla's not Netflix and that's true and I would say that's a fair assessment however the valuation of Tesla exploded fifteen hundred percent since March of 2020 and since 2019 it went up about 3 500 percent or so now I know Tesla has come a long way in their production and and all these sorts of things and I'm not trying to discredit what Tesla has accomplished but markets are irrational and you know the same reasons that people were bullish over here they're going to be bullish every step of the way down as well and it's just simply because they are unable to go from thinking in a bull market term in bull market terms to thinking in Bear Market terms and it's hard to make that switch and for some people it takes a year for some people it takes a couple weeks a few months some people they still haven't made the switch and it probably will be until they make the switch that the bottom will not be in okay so sometimes you need that last Tesla bull to capitulate before the bottom is in now I do think Tesla has a bright future five years ten years from now I think it'll likely be trending back up at a bull market in the short term though we have to admit to ourselves that it could easily drop 77 which is what meta Netflix did and they didn't go up nearly as much as Tesla that would put it below a hundred dollars easily right below 100 easily so the best case scenario for a bottom for Tesla the best case scenario that I don't really think is that likely would be below a hundred dollar when I when I say I when I don't think it's not likely I mean there's a good chance it'll go lower but is below a hundred dollars all right could be after it might it might not be tomorrow right I mean it could come down and maybe it bounces back up for a little while then it comes back down later on right something like that could easily play out but you have to consider that this is a potential outcome right it's a potential outcome where Tesla could in fact see a similar type of capitulation like Netflix saw unlike medical right these are fairly standard things however the other way to look at this too is that meta has actually gone well below the March 2020 low Netflix has gone below where it was in March of 2020. for Tesla to go below where it was in March of 2020 it would actually have to go below 22 now personally I am not of the opinion that Tesla will go below 20 it could happen anything could happen I just wouldn't I wouldn't say prescription I wouldn't assign a fairly high probability to that outcome of it going below twenty dollars um but I think we'd have to admit that there is a certain possibility that it could in fact occur if you were to look at the pre-pandemic high it would put it right around sixty dollars a sixty dollar Tesla while it might seem absurd and like it can't happen is a distinct possibility over the coming months right so I think you have to consider that Tesla going down to the pre the pre-pandemic levels of around 60 is frankly a a good possibility we've talked about with the S P 500 that the S P 500 is at eventually likely going to make it to its pre-pandemic levels of 3 400 and this would constitute a soft Landing if it's able to hold the line there although there's a good chance it won't but if it were to hold the line at 3 400 I would say that's a soft Landing there's always a good chance we go below that though so if the S and P can go to its pre-pandemic levels if Netflix can if meta can if Bitcoin can and it's getting somewhat close I mean it's not there it's not there yet right I mean it's getting pretty close to its 2019 all-time high of 14k right but if if a lot of these and by the way if you look to see where Bitcoin is from from its pre-pre-pandemic levels it's about what 61 percent above it 61 above Tesla's pre-pandemic level would still put it down at a hundred dollars or so okay so you know you have to look at these charts and say you know what like even if you're bullish on the fundamentals of Tesla right it doesn't change the the psychology of a market cycle it doesn't always matter what the fundamentals are in the short term it doesn't always matter if production is growing right it just simply does not matter if you have the CEO selling billions of dollars worth of stock as late as like the last week or so it's going to instill negative emotions into investors that's just simply the way it works and one of the reasons is because you know insiders into a company tend to sell it usually if you look at history they tend to sell it when it's more overvalued than when it's undervalued if they truly think the company is undervalued they're likely not going to sell it right like if you were holding something and you really thought it was undervalued you probably aren't going to go sell that thing but if you're holding it and you think it's probably going to drop another 50 or something then you're probably going to be more likely to sell it so that you can either buy back more later or you can secure that funding for for a future investment or or to potentially buy it back in the future or maybe you're trying to fund another investment maybe whatever that is whatever it could be right there's a lot of different reasons why you could come up with to to sort of support that idea but I want to be clear about something you know I I've spoken about Tesla on this channel I think since like 2019 and if you go back and watch videos back then I was actually quite bullish on Tesla and I do think Tesla will do great things in the future I really do I think it will come back swinging when the bull market is back on and and I think we'll we'll look back at this phase and say all right good thing that phase is over let's just simply go back into slowly going up right it's much better for a lot of people than dealing with these you know crazy Mania bubble phases um but the truth is right the reality of the situation right now is that Tesla went up a lot in a really short period of time based probably a lot on the fact that the money supply went up very quickly in a very short period of time but now that's rolling over the fed's raising interest rates the s p is in a bear market and and you know risk Assets in general are are going down the risk-free rate for investing fixed income investing is more attractive and therefore Tesla has taken a huge hit so my guess is that Tesla's current stage right now is somewhere in the denial stage so I think it's somewhere in the denial stage I think you have the Bulls thinking like this can't be right like Tesla's so fundamentally better than this the Bears are wrong there's no way it's going to do this this is probably what they're thinking right and on the first sign of a bounce which you'll likely see at some point in the coming weeks at the first sign of a bounce what they're gonna do and look for this they're going to say ha I told you so right I told you so they'll say my investments are with great companies they'll come back right they'll come back but then after that bounces over whenever whenever and however High it goes and we then get into the panic and capitulation mode that's when you might finally see these these Bulls these permeables finally capitulate and once the final bull capitulates the new market cycle can begin and that's basically a textbook bubble so again we've been following risk assets all year I've been quite bearish on the S P 500 all year and I've been even more bearish on a lot of individual stocks because the idiosyncratic risk of an individual stock is quite High especially in the bear Market if you if you buy the whole Market you you know you mitigate or you alleviate that idiosyncratic risk and we just have the market risk so you're bound to get some companies that are like healthcare companies do much better in Bear markets than than other like tech stocks and whatnot so buying the s p as a whole is often better than buying like say like a tech stock in a recession um but even with that said like I've been fairly bearish on the S P 500 and you know if the s p is going to continue this move down to a new low um then it's hard you know it's hard to imagine that the Tesla won't eventually see further lows as well so hopefully this video is useful I I hope I was able to provide some insight into the current Tesla price action coming from someone who's not a permeable or a Perma bear if you want to call me a Perma bear go back and watch my videos from 2019 2020 on Tesla that was quite bullish I was open about my position on having a position now I mean for all of 2022 I've been very quite bearish about about risk Assets in general including Tesla but you know I think at some point in 2023 a lot of these risk assets are hopefully going to find some type of generational bottom at which point we can begin a fresh market cycle thank you guys for tuning in make sure you subscribe give the video a thumbs up and I'll see you guys next time bye