US equities rise, yet the basis for a bullish outlook still not present

Since yesterday US stockmarkets  have been on the rise as the market sentiment improved. On a fundamental level, we note the U-Turn of US President Trump and the Fed’s role, while we intend to have also a deeper look at Tesla’s fundamentals. For a rounder view we are to provide a technical analysis of S&P 500’s daily chart.

Trump’s U-turn pivots the markets

Yesterday US President Trump, practically backed off from prior threats made on Fed Chairman Powell. Trump’s request for Powell’s termination and naming J. Powell a “looser” intensified market worries for the Fed’s independence in the past few days. US President Trump yesterday stated “I have no intention of firing him,” also stating that “I would like to see him be a little more active in terms of his idea to lower interest rates“, easing market worries. The news allowed for the greenback to gain and despite some wobbling it seems to stabilise. The market sentiment was also improved by US Treasury Secretary Bessent’s comments that an easing of trade tensions with China is possible, also adding that should there be a trade deal with China, tariffs would be substantially reduced, something verified by Trump as well. The US Treasury Secretary also stated that the current situation is not sustainable which is obvious on both sides of the front, which could be highlighting the willingness of the US to strike a deal with China. At the same time White House officials stated that 18 countries have offered proposals up to this point and the US negotiating team is to start discussions this week. Overall, the comments of US President Trump and the US administration in total seems to constitute a U-turn as the US side tends to point that there is light at the end of the tunnel and further signals for a possible de-escalation of the US-Sino trade war, could improve market sentiment further thus supporting riskier assets like US stockmarkets. On the flip side a possible reescalation of the tensions could weigh on US equities. The overall uncertainty on both sides could enhance the positive or negative effect depending on the developments. On a monetary policy level we note that the Fed’s next meeting is nearing on the 7th of May and market expectations for the time being are dovish.
Despite the market expecting the bank currently to remain on hold in its next meeting, it also expects the bank to deliver at least three rate cuts until the end of the year. Hence should we see Fed policymakers reiterating their doubts for the necessity of extensive rate cuts, we may see it weighing on US Equities.

Tesla in the epicenter of attention again

Tesla’s share price edged higher yesterday despite the disappointing earnings report. The company’s revenue fell short of the market’s expectations reaching $19.3 billion if compared to $21.4 billion expected while the EPS figure was even worse reaching 0.27, If compared to the market’s expectations of 0.42. It’s characteristic that the revenue figure missed its target by almost 10%, while the EPS figure missed its target by 35.7%, implying that the cars of the company are less sought after yet that there is a profitability issue as well. It’s characteristic of the dire situation for the company that its share price despite rising yesterday is still 51% lower from its high point on the 19th of December last year and 42% lower since he end of past year. Intensifying competition from Chinese car makers like BYD, whispers the quality of Tesla cars, market worries that competitors may surpass Tesla technology and the engagement of Elon Musk’s in politics may have been the main factors behind the drop of the company’s share price. It should be noted that Musk stated that “Starting next month, May, my time allocation to DOGE will drop significantly,” which may have sparked the rise of Tesla’s share price along with an easing of market worries for the fundamentals of the market in general. For the time being we still see fundamentals weighing on Tesla’s share price and it would take a considerable rise of its share price to shake off the bearish outlook.

Technical analysis

US500 daily chart

Support: 5345 (S1), 5155 (S2), 4930 (S3).

Resistance: 5520 (R1), 5710 (R2), 5900 (R3).

Since our last report, S&P 500 dropped, bounced on the 5155 (S2) support line and managed today to resurface once again above the 5345 (S1) level, largely matching if not even surpassing the level it was in our prior report. Currently the index’s price action seems to have shrug off the death cross (red elipse) presented on the 9th of April on its chart, while the RSI indicator (red circle) has risen nearing the reading of 50, yet not surpassing it. So the indicator may be implying an easing of the bearish sentiment for the index, yet a bullish sentiment has still to be build up for the index. For the time being we expect further stabilisation of the index, yet we also tend to issue a warning for any possible bullish tendencies of the index. For the adoption of a bullish outlook we would require the index’s price action to break the downward trendline limiting the index’s upward movement since the 20th of February, in a first signal of the index’s bullish tendencies and continue to break the 5520 (R1) resistance line and we set as the next possible target for the bulls being set at the 5710 (R2) resistance level. Should the bears regain control over the index, we may see S&P 500 breaking the 5345 (S1) support line and continue to break also the 5155 (S2) support level, while we note further down the line for the bears the 4930 (S3) support barrier.