US and European futures are trading steadily after being punished yesterday mainly due to Tesla’s stock price sell-off. Today is an important day for market players as two important economic events will be unfolding, which traders will be watching very closely. Firstly, it is the US ISM Manufacturing PMI number that we should pay attention to. Secondly, the FOMC Minutes will be released at 07:00 PM GMT.
Overall, the month of January is in for a rocky start, and the fundamentals that drove the price action last year are still very much calling the shots. If we continue to see another few days of sell-off, the US stock indices may revisit the lows that they formed last year.
Tesla’s Plunge is a Window of Opportunity
Tesla’s stock price plunged another 12% and continued its year-long sell-off that took place in 2022. Of course, the primary reason behind the fresh sell-off was its car delivery numbers which were much lower than the market expectations. Wall Street was expecting the number to be near the 427K mark for the fourth quarter of last year when the company reported 405,278K. If you look at the numbers, the difference isn’t oceans apart. The softness in the numbers can be blamed on a number of factors, such as higher inflation which has made consumers wary about their spending. Higher interest rates are another factor that consumers are mindful of before committing to a monthly payment.
Smart money believes that most of the bad news for Tesla is already priced in, such as the shaky deal that Elon Musk announced about buying Twitter for 44 billion. This made him sell a large portion of his stock in Tesla. In addition, Elon has been distracted or less focused on the company’s core product due to the stress of taking another company under his wing. Allocation of sources from Tesla to Twitter and the process of finding an appropriate CEO for Twitter took a toll.
In terms of technical price analysis, the price is extremely oversold on the daily and the weekly time frames according to the Relative Strength Index. This means that bargain hunters are more than likely to jump into this area.
The main event of the day today is the FOMC Minutes. Traders and investors will closely watch it, and every word of the minutes is likely to be looked at by the market players twice as they will draw their conclusion about the Fed’s monetary policy. It is widely anticipated that the Fed isn’t done with its monetary policy yet. The Fed certainly wants to increase the interest rates. The magnitude of the interest rates is also in question as some of them believe that economic conditions certainly warrant them to increase it at a rapid pace.
At 3 PM, GMT, we are also going to get the US ISM Manufacturing PMI data. The forecast is for 48.5. The previous reading was at 49. The forecast is already suggesting that the number is going to continue to remain in the contraction territory, but the slowdown in the number as compared to the previous is only marginal. This is certainly highly positive for price action.
Crude and Brent oil prices are on track to record their weekly losses as investors continue to question a number of important factors that are pinning the demand. On the positive side, yes, we have China relaxing its covid related policies. However, the covid cases are rising, and this means that a U-turn could be made at any time. As for other countries, they are highly cautious about China, and a large number of them have announced travelers coming from China to take the covid test or are banning travelers outright like those from Morocco.
The other important factor to note for today when it comes to oil prices is the Fed minutes. A hawkish tone is unlikely to be positive for oil prices as that would mean a further slowdown in economic growth.
In terms of price levels, crude oil price continues to trade above the important support level of $70 which really delineates the bull and bear territory. The price has only recently flirted with the $80 and the fact that it is trading near the $76 and the RSI is not overbought, we could see another run in oil prices.