A lot happened last week with Tesla and Meta earnings reports.  Elon Musk promised the cheap car model to be released in 2025 while continues to work on Robotaxi.  Investors bought the promise and the shares traded 16% higher immediately.  It’s not difficult for Tesla shares to rise because it has been sold severely before the earnings report.  Anything perceived good would give a relief rally.  At this point, Tesla is a story stock, meanings there is no earnings to back up the stock price.  Tesla share price is determined by how investors value its future with the cheap car model and Robotaxi.  Both things don’t have immediate earnings.  Meta beat Q1 top and bottom line, but gave poor guidance and large spending on metaverse.  Meta stock was sold off 16%.  This is the opposite reaction to Tesla stock.  Meta has been the shining star since 2023 because of cost cutting measures and AI initiatives.  Meta stock was priced to perfection.  A slight disappointment can upset the fragile high stock price.

If we have to choose one, we would buy Meta stock on the dip.  Meta has a more durable and asset light business than Tesla.

We also had a much lower than expected GDP and much higher than expected PCE data.  Both data point to a slower economy with sticky inflation, but consumer spending is still strong.  The stock market shook off the macro data and paid attention to Microsoft and Google earnings.  Microsoft and Google both beat and their AI stories are alive and well.  The stock market rallied last week to declare the April 19 low as the correction low.  That is about 5% correction.

This coming week we will have the Fed meeting on Wednesday and Amazon and Apple are due to report earnings too.  The Fed probably will emphasize keeping rates at where they are and cuts may or may not come in 2024.  If the Fed mentions a rate hike, that would shock the market.  As long as there is no rate hike, all will be well with the stock market.   Amazon probably will beat and Apple will be lackluster as Apple is behind its AI initiative in addition to the slowdown in China.

Technically, the S&P 500 is 5 days into the new daily cycle.  The 50-day moving average at 5124 could be a resistance for the daily cycle high.  By the May 7 target low date, it would be 12 days into the daily cycle.

May 7 is the Russian presidential inauguration day.  Putin will be swearing in as the President of Russia on May 7.  This event will prompt geopolitical tension and perhaps there will be more war fearing news.  Again, if there is a war coming, the initial reaction in the stock market would be a selloff.  But the dip will be bought up quickly as the U.S. stock market is a safe haven relative to the other markets.  It is a second term election year.  All forces are in place to work on the re-election.

Our large holding Matterport (ticker MTTR) announced that it will be bought out by CoStar Group at $5.50 per share.  Costar will pay Matterport share holders $2.75 cash per share and the other $2.75 will be converted to CoStar shares.  Matterport is a great AI software company, but it was sold down mercilessly by the shorts.  In our opinion, the buyout price is too low considering the AI potential. Matterport would have been a successful AI company given time to grow independently.  Matterport will grow faster under CoStar umbrella business wise.  But the Matterport stock holders lost the opportunity to have a bigger payday.  We made money with Matterport, but the payday was not big enough for the risk we have taken.

Matterport stock is a typical example of the limitations of technical analysis in the stock market.  The Matterport stock charts were total mess prior to the buyout announcement.  There were no patterns to analyze.  But clearly it had value to CoStar.  Matterport stock closed at $1.74 on Friday, April 19.  The buyout announcement came next Monday April 22 at $5.50.  CoStar is in a very strong financial condition and there should be barriers for the buyout to consummate.

Palantir (ticker PLTR) will report earnings on May 6 after market close.  PLTR is in a bottom forming stage right now.  It is very likely PLTR will take off again after Q1 earnings report.  The Palantir CEO is very good at talking to the retail investors about the AI excitements.  Coincidentally, the general market is expected to bottom around May 7.  When the individual stock bottoms together with a general market bottom, it is a more durable than otherwise.

Below is the S&P 500 daily chart.  Watch out how the market behaves around May 7.