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One thing we love to do around here is identify where everybody’s wrong.
When the humans believe one thing but the market is doing another, that’s when the biggest opportunities are born.
Something that continues to stand out is the extreme level of short interest in the ARK Innovation ETF (ARKK), the flagship fund managed by Cathie Wood.
Nearly a third of all ARKK shares are currently being shorted – the count is more than 31 million.
Remember, if you own a stock, you’re just promising to be a seller one day. But, if you’re short a stock, you’re a guaranteed future buyer.
The more short-sellers, the more natural buyers you have in the equation.
The Bellwether of ARK
When you dive into what’s inside the ARK Innovation ETF, you’ll notice that Tesla (TSLA) is by far the fund’s largest holding.
Tesla’s double-digit weighting in ARK’s flagship fund is nearly twice the size of its next-largest holdings.
And look at this base in TSLA as it breaks out this week to its highest levels since January:
Tesla is the largest holding of a fund that has its highest short interest ever. More people are betting against this basket of stocks than ever before.
What do you think will happen if its largest holding breaks out of this multi-year base and begins to rip to new all-time highs?
The short-sellers are going to get smoked.
The Catalyst
Elon Musk – the founder and CEO of Tesla – just announced he bought about $1 billion worth of TSLA stock.
On the surface, that might seem like a bullish indication.
Do you think Elon is spending a billion dollars on the stock because he thinks it goes down in price?
Probably not.
But when you consider his total net worth — he’s one of the richest people on Earth — and how many shares he already owns, is another billion really that much?
It’s actually not.
I’m more interested in the sentiment out there surrounding Elon and the stock.
The short interest in ARK definitely has me intrigued.
But the trolling by former vice presidential candidate Tim Walz has to be the most bullish indication out there.
Earlier this spring, Tim Walz was laughing on stage about how happy it makes him to see TSLA stock falling in price.
This is a guy who is constantly telling people how broke he is and how he doesn’t own any stocks.
Yet, despite that, he has the time to watch Tesla’s stock price?
Since that now-infamous moment, TSLA is up more than 70%.
That’s about a $600 billion increase in shareholder value:
But wait, there’s more!
This putz Tim Walz is at it again. He was caught trolling Elon Musk once again last week, this time about no longer being the world’s richest man, with Oracle (ORCL) founder Larry Ellison sneaking past him this month.
TSLA is already up 20% in less than a week since the latest Tim Walz trolling job.
Again, this is a guy who brags about having no money, owning no real estate, and having no portfolio of stocks.
Yet, the governor of Minnesota has the time to troll the founder and CEO of a company that his own state is a major investor in — Minnesota owns more than 1.8 million shares of TSLA.
If this guy wasn’t making us all so much money by being such a great contrarian indicator, I’d probably tell you what a terrible person he is.
But I’m actually incredibly grateful.
And, to be clear, this isn’t a political thing. I honestly couldn’t care less about what the guy thinks about politics, or even what Elon believes for that matter.
I’m mostly just interested in a political figure taking time out of his “busy” day to troll CEOs of companies his state invests in.
This kind of psychotic behavior is something you tend to see near turning points.
This time is no different.
Now that he’s doubling down on his trolling, we’re doubling down on TSLA.
I think this one goes much higher and will continue to rip in his face.
Thanks, Timmy!
Stay sharp,
JC Parets, CMT
Founder, TrendLabs