The S&P
500 broad market index took up a defense position at 4390 points. This is the
lowest possible support level for this week, but it is strong enough to hold
amid moderate pressure. However, it is not strong enough to tackle serious
threats. So, it is of paramount importance that corporate earnings reports and the
Federal Reserve’s (Fed) Chairman Jerome Powell do not give us any dramatic surprises.
More than
7% of companies from the S&P 500 index list have delivered their Q1 2022
earnings reports, while 75-77% of them managed to beat the consensus of Wall
Street analysts. However, this level should not be overestimated, as it has
been seen to be the average for the recent years. More interesting is the
expected rise of the average net profit level for Q1 2022 that is at 5.1%, the
lowest since the pandemic Q4, 2020.
So,
positive data could be attributed to low expectations rather than to the positive
dynamic of financial results. Even such tricks are of minor significance amid
blistering inflation at 8.5% as profit could not compensate for the risks
associated with stocks.
This week
Netflix (NFLX) and Tesla (TSLA) are scheduled to deliver their reports. No
positive results are expected from the streaming giant as consensus suggest the
slowing down of new clients with only 2.5 new subscribers being added to the
list of clients over the first three months of 2022. This is definitely a weak
number, but it could turn out to be an optimistic view as pessimistic figures suggest only 1.6 new
customers were added after the company left Russia. The report will be
published on Tuesday and investors should buckle up and be prepared for a
possible corporate failure of Netflix. However, this misfortune will unlikely lead
to the S&P 500 index to breaking through
the 4390-support level, but it may temporarily dive below that landmark.
Tesla
(TSLA) may come to the rescue as the corporate story here seems to be rather
optimistic. The company is expected to boost vehicle deliveries by 68% compared
to the Q1 2020. Such a deliveries expansion level could provide a good push-up for the stock
market. However, we should stop here as long positions for Tesla stocks are not
justified right now. We should not underestimate a temporary shutdown of
Tesla’s gigafactory in Shanghai. Moreover, Tesla’s current stock prices are not
justified by its fundamentals. Elon Musk has recently announced a bid to take
over Twitter for $43 billion. In case he succeeds in this take over, he would
need to sell part of his Tesla shares. Last time he did this, in December 2021,
Tesla’s stocks plummeted by 30% over a few months.
If we see a
mixed corporate earnings story this week the S&P 500 index may survive above
4390 points. Statements by Mr. Powell from the Fed, President Christine Lagarde
from European Central Bank and Andrew Bailey, the Governor of Bank of England,
may not add any volatility to the market if they continue to reiterate what
they previously said without any hints to further monetary tightening.
Next week
the countdown to the Fed meeting on May 3-4 will begin, so it is premature to
discuss short positions on the S&P 500 index. A matter for discussion will
arise if the index rebounds to 4480-4530 points or if it drops below 4300
points during the coming weeks.
Brent crude
prices are testing the first resistance level at $112-115 per barrel. This is a
key level to activate the scenario to boost Brent crude prices towards $160-180
per barrel. However, a swift breakthrough of this resistance seems premature.
The more likely timing for such a scenario may appear in May as the European
Union could announce a ban on crude from Russia and International Energy Agency
member states could release 240 million barrels of oil from their reserves. A
breakthrough of the $124 level would confirm that the scenario has been
activated.
Gold prices
rose to $2000 per troy ounce amid soaring combat action in Eastern Ukraine and
Chinese military exercises around Taiwan. Investors fear such exercises may
easily expand to a full-scale warfare following the model of military drills
announced by Russia just before it invaded Ukraine. With this in mind, sell
positions opened at $1950-1960 should be closed once opportunities to close
them without losses occur. We may expect a drop of gold prices at the end of
May or the month of June.
The EURUSD
is running alongside an aggressive downside pattern with a target at 1.07000-1.08000.
The downward movement may continue below 1.07000, but there are no good entry
points for the deal now.
The GBPUSD
is going down to 1.28000-1.28500 by the end of April. This week the primary
support level is located at 1.29000-1.29300, while a good entry point for short
positions is far above – at 1.31000-1.31200.