A daily market update from Fundstrat — what you need to know ahead of opening bell

“The only way to discover the limits of the possible is to go beyond them into the impossible.” — Arthur C. Clarke

First news

• Iran keeps saying it doesn’t want a wider conflict; well, it might get it now.
• AI chat bots are finally breaking out of their English-only sandbox.
• Hewlett Packard gets hacked by the Russians, but not very well.
• The European Central Bank has reason to believe that social media activity can cause or amplify bank runs.

Overnight

• Tesla CEO Musk: Chinese EV firms will ‘demolish’ rivals without trade barriers. link
• Apple’s smartphone shipments in China shrank 2.1% in Q423 y-o-y, hurt by intensifying competition from local rivals led by Huawei. link
• Fed to allow emergency bank lending program to expire on March 11. link
• ASML shares close at record high after earnings beat expectations, orders pop. link
• IBM revenue rises 4% amid AI demand. link
• Argentinian unions stage a mass strike 45 days after presidential election, the earliest in any Argentine government’s term. link

MARKET LEVELS

MORNING INSIGHT

Good morning!

S&P US Flash PMIs move >50. (To be clear, this is not the ISM Manufacturing, which is out in early February.) 

The move supports a recovery thesis in capex = improving EPS growth in 2024.

Click HERE for more.

TECHNICAL

The TSLA cycle composite remains lower until late February.

Many investors might be questioning whether the recent consolidation in oversold territory might signal a buying opportunity for TSLA.

We analyzed this based on factors such as counter-trend exhaustion, along with cyclicality, to determine whether this could be ready to turn higher.

The technical conclusion on whether TSLA is bottoming is that it’s still early given a number of reasons.

^{Source:  Foundation for the Study of Cycles}

Click HERE for more.

CRYPTO

• Bitcoin’s recent drop below the $40k mark appears to have been sparked by news that Mt. Gox is confirming Bitcoin addresses for paying back its creditors, potentially releasing a significant 142-200k BTC into the market.
• Magic Eden, a major cross-chain NFT marketplace, is shifting towards an open-source model in partnership with the new Non-Fungible DAO, which will introduce an “NFT” token to reward users.
• UMA and Flashbots have partnered to release an innovative MEV-based product, Oval, a system designed to help DeFi protocols benefit from oracle updates.

FIRST NEWS

It Can Hide, but Can It Run? Iran is now a ‘legitimate target’ for Israeli missile strikes, says Nir Barkat, Israel’s minister of economy and industry, and a senior figure in the current Israeli administration. Barkat added that Israel can afford to keep fighting, and that, as “big as the crisis is, it is also a really big opportunity”. After suffering a horrific massacre of its citizens and the taking of hundreds of hostages by Hamas barbarians on Oct. 7 and subsequently enduring months of increasingly brazen and destructive rocket and missile strikes from Iran’s proxies – Hamas and Islamic Jihad in Gaza, Hezbollah in Lebanon and Syria, and the Houthis in Yemen – which have seen hundreds of thousands of her citizens displaced from vulnerable areas in the north and south, Israel may be ready to wallop the source of the chaos, raising the prospect of an all-out war with Tehran. The Telegraph

Locally Vietted AI. It was only a matter of time before AI chatbots would break out of the sandbox delineated by Anglophonia. Now, non-English-language chatbots are poised to mark the latest evolution in the race to develop advanced AI models. Asia is leading the charge, with companies in Vietnam, South Korea, and Japan working on AI models customized to speak in their countries’ languages. While automated translation services, including handy multilingual devices, have become highly advanced, AI systems, trained for the most part on English-language data, are less than knowledgeable about cultural nuances. ViGPT – a Vietnamese chatbot able to correct a user’s intonation (important for a highly tonal language) – to the rescue! Japanese officials, prone to stating truisms in Master-of-the-Obvious fashion, said a bot that understands local business practices as it crafts emails affords its users an advantage. Semafor

The Spy Who Underwhelmed Me. Hewlett Packard Enterprise Co. (HPE) says the same Russia-linked group suspected in a recent Microsoft hack is behind an instance of unauthorized access to HPE’s cloud-based email system. The entity is “believed to be the threat actor Midnight Blizzard, the state-sponsored actor also known as Cozy Bear,” HPE said in a regulatory filing on Wednesday. Both Microsoft and the U.S. Cybersecurity and Infrastructure Security Agency have linked Cozy Bear with Russia’s SVR, the foreign intelligence service tasked with espionage activities outside the Russian Federation. Given the massive acceleration of the already speedy IT brain drain from Russia following its invasion of Ukraine in February 2022, it’s surprising there’s any human intelligence (in the sense of brain power) left in the pariah state to carry out attacks that actually achieve anything. Not surprisingly, HPE said the hack “has not had a material impact” on its financial health or operations. Bloomberg

Is That Old Man Potter Trolling on Twitter?* The European Central Bank is asking some banks to closely monitor social media activity to detect higher negative sentiment, possibly leading to a deposit run. After bank runs in 2023 and the collapse of Silicon Valley Bank and Credit Suisse in March last year, regulators have sharpened scrutiny of banks’ liquidity, and the ECB has been keeping a close eye on liquidity. A major European lender will be signaling large volumes of negative posts to the bank’s treasury, which will analyze impacts on deposits. Social media has amplified shocks to liquidity before. In October 2022, a social media post by a journalist to the effect that a “major international investment bank is on the brink”, led to a run on Credit Suisse; by year-end, clients withdrew better (or, if you think about, worse) than 100 billion Swiss francs ($116 billion). There is debate whether assumptions used to calculate the liquidity coverage ratio (LCR), which looks at access to cash over a 30-day period and is a key liquidity risk indicator, should be revised – or even scrapped. Measures of how much liquidity a lender can free up in one day may be more effective than LCRs. Reuters

^{* It’s A Wonderful Life.}