The charts that matter: Tesla and Turkey

First things first – if you’re in Edinburgh this month, make sure you get to see MoneyWeek editor-in-chief, Merryn Somerset Webb.

Merryn will be at Panmure House – Adam Smith’s only surviving residence – debating everything from populism to economics to Brexit to Trump to Tesla to Turkey, with a range of comedians, authors, politicians and investment analysts.

Book now – the show runs from 16 to 25 August, but it looks like the 16th has already sold out, so do get in now to avoid disappointment.

If you missed any of this week’s Money Mornings, here are the links you need.

MondayWhat Dr Copper is telling us about China’s tough balancing act

TuesdayI have a big problem with this idea that investing can ever be “passive”

WednesdayGold has been so bad that it’s now starting to look good

ThursdayIf Elon Musk takes Tesla private, that’ll mark the top of the market

FridayThings are getting ugly in Turkey – what does that mean for global markets?

And don’t miss this week’s issue of MoneyWeek magazine! If you’re not already a subscriber, sign up here now. (And podcasts will return soon).

And now over to this week’s charts.

Gold (measured in dollar terms) remains under pressure from the US dollar strength, but my colleague Dominic reckons – for the traders among you – that we may be at or near a buying opportunity.

Gold price chart

(Gold: three months)

The US dollar index – a measure of the strength of the dollar against a basket of the currencies of its major trading partners – had another good week. The latest inflation data – with core consumer price index inflation hitting its highest since September 2008 – helped buoy the US currency.

US dollar price chart

(DXY: three months)

The Japanese government bond (JGB) yield remains close to the 0.1% level after the Bank of Japan’s recent decision to let it move around a little more.

Japanese government bonds price chart

(Ten-year Japanese government bond yield: three months)

The yield on the ten-year US Treasury bond eased back below 3% this week.

US Treasuries price chart

(Ten-year US Treasury yield: three months)

Meanwhile, the yield on the ten-year German bund (the borrowing cost of Germany’s government, which is Europe’s “risk-free” rate) fell a lot harder than its US counterpart, partly as fears over contagion from Turkey’s woes ripple through eurozone markets.

German bunds price chart

(Ten-year bund yield: three months)

Copper appears to have found a bottom for the time being. The future movements in the price depend to a great extent on what happens next to the Chinese economy.

Copper price chart

(Copper: three months)

It’s been another tough week for cryptocurrency bitcoin. It saw a big slide earlier this week as the SEC once again delayed a decision on a proposed cryptocurrency exchange-traded fund (ETF). An ETF would of course make it easier for retail investors to get exposure to bitcoin, and thus – the market clearly thinks – drive the price higher by increasing demand.

(Bitcoin: three months)

On US employment, the four-week moving average of weekly US jobless claims fell to 214,250 this week – very close to a new low for this cycle – while weekly claims fell to 213,000.

David Rosenberg of Gluskin Sheff has noted in the past, that when US jobless claims hit a “cyclical trough” (as measured by the four-week moving average), then a stockmarket peak is not far behind (on average 14 weeks), and a recession follows about a year later.

We hit a new trough – of 213,500 – just over two months ago, so if there’s anything to Rosenberg’s observations (drawn though they are from a limited pool of past cycles), then we should see the stockmarket hit new highs before this cycle is out.

More to the point, though, we could easily set a new trough soon.

(US jobless claims, four-week moving average: since January 2016)

The oil price (as measured by Brent crude, the international/European benchmark) has continued to rattle around the low $70 a barrel level this week. One issue is the trade war between China and the US. China hasn’t yet placed sanctions on US-produced oil, but it looks as though it will (and who’s going to buy it anyway?)

As a result, more US oil will end up elsewhere in the world, putting pressure on Brent as well as West Texas Intermediate (the US benchmark).

Meanwhile, US oil supplies fell by less than expected last week while stockpiles of petrol rose to their highest levels since January.

Oil price chart

(Brent crude oil: three months)

Internet giant Amazon this week yet another all-time high this week, rising to more than $1,900 a share. The current ‘hot’ rationale for buying the retailer is that many big brands are throwing in the towel and partnering up to use Amazon as a distribution platform in a “if you can’t beat ‘em, join ‘em” move.

Amazon share price chart

(Amazon: three months)

It was real fun and games for electric car group Tesla this week. Founder and CEO Elon Musk (who owns 20% of the company) issued what may prove to be the Tweet that finally gets him into a real spot of bother.

Musk is fed up with running Tesla as a public company. A part of me actually sympathises. There’s a lot of attention on Tesla – it’s producing an exciting product. And having to keep a group of external shareholders happy is very distracting when the things they want to focus on may not be the things you want to focus on. Curse those pesky fellow owners of your company!

But on the other hand, revolutionising the car business is not easy and it takes a lot of money – which is why he went public in the first place. So my sympathy is limited.

Anyway, so this week, Musk tweeted that he had the funding in place to take Tesla private at $420 a share. People treated it with a pinch of salt (as you can imagine) but the share price still moved on the news. It fell back later in the week as the story started to look even more threadbare. But In essence, if the tweet isn’t true, then there’s a good case that this is market manipulation – and that’s pretty serious.

The SEC – the US securities regulator – is looking into it even as I type.

Of course, if it is true, then it’s a huge story. And also the top of the market, I reckon. But it has to happen first, as I explained in Money Morning earlier this week.

Tesla share price chart

(Tesla: three months)

Have a great weekend.

Until next time,

John