Summary:
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Mild gains seen in US indices ahead of cash open
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US500 trades less than 1% from record peak
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Tesla shares called to open sub $300; JP Morgan turns bearish
It’s been a fairly upbeat start to the new week for stock indices with the majority of Europe trading higher and US indices also in the green ahead of the Wall Street open. The US500 is on track for another day of gains, which would make it 3 in a row and in taking out last week’s high the market has already made a higher high and higher low today. Price pulled back into the 8 and 21 EMAs at the start of last week but buyers defended the 2800 level once more and market is now less than 1% from it’s all-time high of 2878 set back in January.
The US500 looks set to make another attempt at its all-time high of 2878 but the high from earlier this month at 2863 will need to be breached before that can occur. The recent pullback to the EMAs attracted buyers last week and the market remains well supported. Source: xStation
There are some obstacles which need to be overcome before that milestone can be recorded however with the high seen earlier this month at 2863 the most obvious. Despite the developments of recent weeks seen in Turkey and the talk of contagion as other emerging markets have got hammered, the world’s largest stock benchmark remains well supported and a decline of just a little over 2% on these concerns is actually measured by all accounts. As the summer draws towards a close, traders may be starting to look for another push higher once this lull has passed with November’s mid-term US elections providing plenty of incentive for positive US political shocks in the coming months.
In terms of individual stocks, Tesla is attracting more attention than most of late with the revelations just a couple weeks ago that CEO Elon Musk was considering taking the firm private at $420/ share with “funding secured” creating some wild swing in the price. Unsurprisingly the initial reaction was a strong move higher towards the quoted price, but since then the market has come back under pressure as questions were raised as to whether the deal was really as near to completion as Musk alluded to on Twitter.
JP Morgan are the latest bank to offer their opinion on Tesla’s stock, predicting that the share price will dramatically for the rest of this year. The stock has got hit in the pre-market and is called to open lower by more than 7% as investors are seemingly growing increasingly concerned. The firm slashed it December price target for Tesla back to $195, from $308, a mark-down of 36%. "We are reverting to valuing Tesla shares on the basis of fundamentals alone, which entails a $113 reduction in our price target back to the $195 level where it stood prior to our August 8 note," analyst Ryan Brinkman said in a new analysis. He told clients the price target increase to $308 on that date had been based on a 50 percent probability that Musk had in fact secured funding to take Tesla private at $420 a share. Musk made that claim in a tweet on Aug. 7.
"Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal," Brinkman said in his latest note.
Shares in Tesla jumped sharply higher after Musk tweeted that the firm had “funding secured” but these gains have since been handed back and some. The market is called to open lower by around 7% today after the latest note from JP Morgan. Source: xStation
