Profit-taking on equities as sentiment wanes and Tesla weighs

  • Tesla results weigh on US equities: Tesla shares fell almost -10% on results.
  • Recession fears gather pace: Weekly jobless claims continue to rise.
  • USD and JPY are positive: The safe haven currencies are performing well on major forex.
  • Profit-taking is threatening on equities: The rally on European indices has stalled, US futures are marginally lower after yesterday’s decline.
  • Metals and oil fall: In commodities, there is a risk-negative bias.

Tesla hits market sentiment 

The shares of Tesla fell sharply yesterday after Q1 results disappointed investors.

Here are a few highlights:

  • Revenue of $23.33bn ($0.85 per share), very slightly missed estimates of $23.34bn ($0.86 per share).
  • However gross margins fell from 29.1% to 19.3% year on year.

This considerable decline in gross margins is showing the strategy of slashing prices to sell cars. It is negatively impacting the profitability of the company.

Investors took the news badly, with the shares closing at $162. This was down almost -10% on the previous close of $180.40.

The shares are now at their lowest since late January.

Tesla hits market sentiment

The problem is that Tesla is a large company on the NASDAQ.

Having a weighting of over 3% of the NASDAQ 100, this was a significant drag on the performance of US equity market indices yesterday.

Recession fears add to the waning sentiment

After such a strong run higher in the past four weeks, there are signs of waning sentiment now on US equity markets.

Wall Street fell back yesterday as concerns over the mounting prospect of recession in the US.

Weekly jobless claims remain around a 12-month high (245,000 in the past week).

Furthermore, the continuing claims of job seekers continue to rise.

Weekly jobless claims remain around a 12-month high (245,000 in the past week).

The US labour market is increasingly showing the signs of strain that come with such an aggressive interest rate hiking policy of the Federal Reserve.

A negative bias across markets

These fears are starting to weigh on sentiment.

  • Treasury yields fell back decisively yesterday, as investors piled into the safety of US Government debt. 
  • This has helped to support the Japanese yen, but also the USD is finding support too. This is a classic risk-negative reaction on forex.
  • Elsewhere, we are seeing this negative sentiment impacting other asset classes.
  • Commodities are falling, with metals and oil dropping back. Equity markets look to be at risk of profit-taking.

Technicals show US equities are beginning to sag

S&P 500 futures (SP500ft)

The run higher over the past six weeks has been impressive, but as the rally has faltered under the 4208 January high, this move is beginning to wane.

A six-week uptrend has been broken.

  • The daily candles have been struggling for traction over the past week, with yesterday’s decisive negative candle suggesting the sellers are gaining momentum.
  • For now, the daily RSI is holding up OK, but a move below 50 would be a corrective signal.

We are watching the support at 4096/4110 for a key signal that a decisive correction could be forming.

The resistance at 4198/4208 has been strengthened by the recent price action.

NASDAQ 100 futures (NAS100ft)

The NASDAQ futures also look to be at risk of rolling over.

A failure to breakout above the April high of 13347 is weighing on the market.

The NASDAQ futures also look to be at risk of rolling over.

  • The daily candles have had a series of small real bodies, denoting uncertainty and caution recently. 
  • Yesterday’s move lower seems to be starting to gather downside momentum, with the RSI beginning to edge lower.

The important near-term support is at 12925 which has been a floor throughout April. If this is breached then it would signal a more decisive correction forming.

The resistance is strengthening now between 13300/13350. 

Support and resistance levels for Forex, Commodities, and Futures/Indices 

EUR/USD R2 1.0989
R1 1.0972
S1 1.0933
S2 1.0917


R2 1.2476
R1 1.2445
S1 1.2344
S2 1.2275
USD/JPY R2 134.82
R1 134.35
S1 133.70
S2 133.40


R2 2008
R1 1998
S1 1969
S2 1950


R2 25.49
R1 25.19
S1 24.64
S2 24.55
Brent Crude Oil
R2 82.15
R1 81.70
S1 80.25
S2 78.15


S&P 500 futures
R2 4173
R1 4158
S1 4136
S2 4124
DAX Index 
R2 15,958
R1 15,860
S1 15,702
S2 15,687
FTSE 100 Index
R2 7960
R1 7915
S1 7868
S2 7843

Data: MT5/IXOne

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