Make or break time for US equity market bears and Tesla to boot.
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Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only.

Hi everyone, it's John Hardy here, generally the host of the Saxo Market Call Now again, and I just wanted to do a quick question. I heard a couple of people mention this in their feedback on the podcast, and I forgot to mention this when I was recording the episode you're about to hear, but there's mention of whether we should put the Saxo Market Call on YouTube. It's something I'm strongly considering. It would require a bit more overhead in terms of setting up a video that's somewhat more compelling than just looking at my sometimes maybe a bit groggy face in the mornings.

and perhaps weaving in some visuals without becoming too heavy. But just curious, a show of hands, or if anybody cares to reach out to us, marketcallatsaxobank.com. And if you don't really have any strong opinion or if you're negative on the idea,

Why would you be negative on the deal? You wouldn't use it. You would just listen to the regular podcast. It wouldn't really change how this podcast works. It would just be that those that would prefer a YouTube style with some sort of visuals would be happy to set that up if there's a strong groundswell. And it's something I'm probably going to do anyway. But just would love some color from some of you. A couple have mentioned it, but if others would care to chime in. Really appreciate it. And now to the podcast. All right. It is Tuesday, 20th of May, 2025.

Top of the pod here. Thanks once again from so many of you who have reached out to provide your feedback on both how we do the podcast here and your preference for these quicker daily updates versus the longer form updates with Slide Deck. I think the general consensus remains that it is preferred to have a mix of both. A couple of you expressing concerns.

interested in mostly appreciating the longer ones, but I think we'll stick with this format. And maybe I'll flag quickly on the podcast description whether it's sort of the quick check-in versus the longer form ones. But hopefully once a week at minimum, we'll have the longer form ones with things like the calendar update, the longer reads, et cetera.

So you can look forward to that. At least I hope you can look forward to it. We'll do our best. All right, let's get into today. So yesterday, just wrapping briefly what happened. Of course, Mark is in a very defensive posture when I came in here to record yesterday's pod.

Getting a little bit in the histrionics side of things on my part with where the U.S. Treasury yields were. That 10-year was pressuring above 4.5%. The 30-year above 5%. Talking about it really gets existential very quickly if these long U.S. yields were to continue to rise. Alas.

Risk appetite came back in both in the Treasury market and in the U.S. equity market, and we saw U.S. equities closing more or less, I believe, in positive, at least certainly erasing the vast majority of the declines yesterday. And likewise, Treasury is finding support and dipping back into the ranges. So

The analysis stands that those long U.S. yields are existential and one should keep an eye on them where they are because of everything I outlined yesterday. Have a listen to yesterday's podcast on that front.

The Trump so-called big, beautiful bill did make further progress at the weekend. There's some political noise that is being held up, but it's being held up by issues like let's see how much of the spending we can cut for the very poorest Americans rather than anything sort of serious or structural and some arguments over tax cuts for Americans.

state and local taxes. That was one of the more brutal parts of the original Trump Tax Cuts and Jobs Act because it actually, for very, very classically democratic strongholds, California and New York, for example, which have very high state taxes, they eliminated the deductions for state and local taxes, meaning that actually, ironically, your tax bill went up very sharply in those states. So

There will be some kind of salt reduction, but this is just wrangling over which deck chairs need to be rearranged in what direction. As the U.S. fiscal picture continues, the U.S. Titanic – I'm messing up the metaphor, as you can hear. Rearranging deck chairs on the Titanic is the metaphor, if you didn't catch that. So I think it's still out there what all this means.

And where is the market? It's very difficult to say on a technical basis because we are very overbought if you just look at the recent rally. But we have also erased sort of the bearish case by slipping back above key resistance both in the S&P and the NASDAQ 100. There were a couple of you asking for – to maintain the technical updates.

I am a bit loose with some of the technicals. I'm not super rigorous, but I do very much pay attention to technicals. There's a really good outline of the technicals, by the way. He doesn't need any help because he has plenty of followers out there. But if you want a deep dive on a lot of technical matters, tune into the money matters with Sven Henrik. His ex-handle is at Northman Trader. He does a pretty thorough run through there. And I really agree with his general comment that, look,

You know, we've had this big, this snap turnaround here. And locally, the bearish case has been destroyed, but not 100% destroyed. And there's still a window here where the bears could yet prove themselves. And he offers some ideas of where that proof could come in.

I think he used the 20-day weekly moving average. I would argue that the pivot zone for the S&P 500, you could take the 200-day moving average, but I would outline a bigger pivot zone, the 57.87 high at one point further back and the 55.87 low. There's a gap in there as well and sandwiched in the middle of that pivot zone.

really key levels for the status of this market certainly Jamie Dimon chiming in with his view on things and I guess it's some kind of investor day with JP Morgan yesterday saying there could be a collapse in earnings this year and he thinks that everyone is too complacent on the risks to earnings from from everything from tariffs and and just the deficit as well so uh

into the economy via the deficit. So this is an interesting signal from someone with a slight stature. If we look at our Bitcoin indicator, Bitcoin being what is the crypto space doing, it's been bullying up to local new highs here. So it doesn't look like there's anything to fret from that front, but it's just one of the indicators for perhaps where liquidity is right now. It's certainly not flashing red, maybe even flashing green at the margin.

In terms of dates, looking forward, I think the most interesting date for the equity markets is May 28th, that NVIDIA earnings report. Got a couple of earnings coming up today that are quite interesting. Home Depot, massive, massive retailer, appreciated by 25 times in the 2009 lows to the 2021 highs. Just one of those interesting retail outfits on any signaling from impacts and forecasts today.

on the impact of tariffs. So this is a company with, we talk about a lot of products and its SKUs and its warehouses and its stores.

a lot of which I'm sure are China-based. What is the message from Home Depot? They report today, as does Panalto Networks. There's a bit of an AI angle here. It's a cybersecurity company. They're competing with the likes of Zscaler and CrowdStrike, apparently. And I'm wondering, you know, how often do you change your cybersecurity provider? It's not just something you jump around with lightly. So maybe a maturing market. Of course, it's been a spectacular performer.

since its IPO up 30-something times from the lows of 2013. But we're declining to something like a 15% year-on-year growth rate for a company like that. But of course, very interesting to see what they're saying on the AI front and for the company in general. And then noticing the comeback in a company like Tesla up over 50%, I believe it is, from the recent lows. Just shaking my head at this stock. And I think Tesla and Palantir are worth looking at for how

things are faring in the bubble sphere. I firmly believe, and I think others believe as well, this Cybertruck is one of the all-time product fails in the history of cars, really.

RoboTaxi is supposedly coming in a few weeks. We're getting really to crunch time on the case for this company because if it's not a car company, then it's supposedly a RoboTaxi, an AI company, and the rubber is hitting the road, ha-ha, in a few weeks on that front. And it feels like we're entering a make-or-break window for this stock, certainly relative to where it is priced. So I'll cast a dark shadow on where the Tesla shares are trading right now relative to where I think they should be trading. But, you know, let's see.

I actually need to rewind a little bit because while we did crush back a little bit lower on the U.S. Treasury front, it's nothing decisive yet. We're still only 10 basis points from levels that are starting to be a concern looking at the 10 and 30-year. JGBs overnight, so Japanese government bonds, certainly generating some headlines. And we're seeing a Japanese yen that is jumping as well.

There was a 20-year auction that saw the weakest demand metrics since 2012. And that 20-year yield going above 2.5% and closing, or I'm not sure if it closed yet, but it was at 2.53% just before I came in here. That is the highest level since the year 2000. There were multiple times back, somewhere back there, if I recall, 2000 and 2000.

Seven-ish, I can't remember, where it was testing the 2.5% level and did not break. 30 years, likewise, hitting a new high since 1999, whereas the 10 years, they hit their high recently and have not quite clawed back to that level, 1.52%. But just note what's going on in the Japanese government bond market as an indication of the pressure on global yields. It's quite something when Japanese investors are losing their appetite for bonds.

for bonds, which have been a mainstay of investment strategies for many Japanese for decades now. And then on the economic front, we're not getting any great and interesting economic news, but there was a great chart from Mike Green, so at ProfPlum on X.com,

with a chart of coincident versus leading indicators. I'll put this one up, I think, again, once we have some visual support to show this, just showing the incredible degree to which the soft data and the leading data is declining relative to the coincident data, which is still looking just fine. And these big divergences, these big yawning divergences, have classically been set-ups

ahead of recessions. And when they start slamming shut, in other words, when the coincidence starts to catch up with the leading indicators, that's when you're classically going into bear markets and into recessions. So it's like this big pause question. And is this time different? Is the soft data, is the leading data so bad just because of the concerns and sentiment that

and fear rather than actual need for that fear because of the nature of the Trump administration, some political angles on the sentiment surveys, et cetera. It really is, I think, one of the questions that's screaming right now. It is one of the most remarkable yawning gaps between these two indicator sets in the history of all of the data gathering, really. So this is something that's, you know,

sets up extreme uncertainty and extreme anticipation of incoming data over the next at least one to two months, if not three to six months, or all of the above, really.

Okay, a little bit more on the current events that have happened since yesterday. The RBA up overnight, and they did cut that rate 25 basis points as expected, and it kind of established now, if you want to call it a pattern, they cut, then they skipped a meeting, and they cut again, and the anticipation was maybe this was the pattern they would establish. But surprising on the dovish side in the guidance with a pretty slight, I would say, cut to the

inflation and economic outlook expressing a lot of uncertainty due to trade policy. But Michelle Bullock also indicating that they considered a 50 basis point cut at this meeting. That was a surprise. You've seen Australian rates knock down quite a bit overnight, but not providing that much drama into the Aussie in the crosses. So Aussie Kiwi down below 108.50 for the first time in about a week or so.

And Aussie dollar knocked back towards the 64, the figure level. Yesterday, the dollar sell-off tried to achieve that 112.66 break in euro-dollar terms, a really key level I've pointed out. Did break above that level and has dipped back below, so we're keeping the uncertainty here. We need to close above 113 to start getting more constructive on euro-dollar having found a bottom. We are getting some support for dollar skepticism and dollar bearishness in dollar-yen.

With a further move lower, it's really starting to break back down, I think, on the dollar-yen chart. Also, obviously, U.S. Treasury yields, having been disciplined a bit, is supporting that particular move. And then I think the geopolitical situation is worth a brief mention as well. So we have this UK-EU deal that Starmer is trying to highlight as a

as something great and a sign of his wonderful leadership. It looks like it could be an own goal, however, on the domestic political impression of what has been agreed to, that the UK is just kowtowing to the European agenda, etc. Don't have a lot of specifics for you. I'll cover this in more in-depth somewhere else. Hasn't been a huge catalyst in the markets for sure. I think more interesting as a catalyst is whether

there are any implications for the U.S.-U.K. trade deal on the U.K.'s import of Chinese EVs. If that is the case, it sets up an interesting, of course, showdown between, well, U.S. and China in general, but also China versus the U.K. If the U.K. is deciding to align with U.S. on an issue like this, this, again, aligning on where – getting other countries to align on the U.S. policies vis-a-vis China.

And China also making noise that it is really not happy with the Huawei chip ban is not in the spirit of what was agreed in Geneva by the two sides. So there's still plenty of ongoing tensions there between U.S. and China that have not yet been resolved.

All right, I think that was a fairly thorough brain dump for what is going on here. I think I'm a bit cautious in the very near term, very uncertain on whether we are in the pivot zone or whether we seriously challenge that pivot zone and slip back into a bear market in the more medium to longer term. But yeah, let's see where things stand, and we'll be back tomorrow with the next Saxo Market Call.