Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
The stock market took another heavy hit this past week as the hawkish Federal Reserve pushed Treasury yields higher again. The Dow Jones Industrial Average fell to a June low on Friday with the other major indexes closing. Growth leaders are finally starting to break down.
With the market correction increasing, it is time for investors to stay on the sidelines but look for potential leaders. Several health stocks are showing relative strength, including Eli Lilly (ONLY). Chinese e-commerce giant Pinduoduo (PDD) is calm again. Apple (AAPL), Tesla (TSLA), Enphase Energy (ENPH) and Albemarle (ALB) is under increasing pressure, but is still worth a look in the future.
The video embedded in the article discussed the strong sell-off of the market and also analyzed Neurocriminal Biosciences (NBIX), Albemarle and PDD shares.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Stock market action
The stock market suffered ferocious losses again last week, closing near weekly lows despite a slight rally near the end of Friday.
The Dow Jones Industrial Average fell 4% last week stock market trading. The S&P 500 index rose 4.6%. The Nasdaq composite fell 5.1%. The small-cap Russell 2000 fell 6.6%.
The yield on the 10-year Treasury note rose 25 basis points to 3.7%, capping its eighth consecutive weekly gain.
U.S. crude oil futures fell 7.1% to $78.74 a barrel last week, hitting their lowest level since January.
Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) fell 10.8% last week, while the Innovator IBD Breakthrough Opportunity ETF (BOUT) slipped 6.5%. iShares Expanded Software-Technology Sector ETF (IGV) decreased by 5.4%. VanEck Vectors Semiconductor ETF (SMH) lost 5.7%.
SPDR S&P Metals & Mining ETF (XME) fell 8.3% last week. The United States X Global Infrastructure Development Fund (SAVE) decreased by 5.3%. US Global Jets ETF (JETS) gradually decreased by 9.1%. SPDR S&P Homebuilders ETF (XHB) back 4.2%. The Energy Select SPDR ETF (XLE) fell 10.15% and the financial SPDR ETF (XLF) lost 6.1%. SPDR Fund for the Healthcare Sector (XLV) down 3.6%
Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) fell 11.2% last week and the ARK Genomics ETF (ARKG) 10.1%. TSLA stock remains among the top holdings on Ark Invest ETFs.
Apple stock closed near weekly lows, but fell only 0.1% to 150.54. On Wednesday, AAPL stock hit resistance near the 10-week and 40-week lines and is back near recent lows. But relative strength line hit a new high on Friday. Apple stock still has a 176.25 handlebar buy point, but the first test will reclaim its 50-day and 200-day lines.
Shares of Eli Lilly actually jumped 0.9% to 311.60 in the past week. Shares rose nearly 5% on Thursday, following positive drug news and an analyst upgrade. LLY is a stock that is on the wrong side of its 50-day line, hitting resistance there on Friday. But the RS line is racing higher. The drug giant has 335.43 flat sole buy points, follow MarketSmith Analysis. There is a potential trend line entry slightly above the 50-day line, but this is not a good time to make any buys.
Enphase stock fell 12.1% last week to 279.49, cutting its 50-day line modestly and only dropping recent lows. Ideally, ENPH stock will consolidate for a while, possibly creating a new base.
Pinduoduo stock fell 8.5% to 60.08, breaking below the 21-day and near 50-day levels. PDD stock has given up nearly all of its gains since the Chinese e-commerce giant reported bearish results in late August, booming for a short while.
But the RS line remains near the 52-week high. A pullback to the 50-day line could be bullish, with a new base possibly forming.
Of course, China’s risk is always high, while PDD stock is a big winner against e-commerce names or Chinese stocks in general.
Albemarle stock fell 6.1% to 269.69 last week, but found support at the 50-day line on Friday. ALB stock is still above 250.25 buy points from a small handle in early August, while up significantly from a replacement entry of 273.78 from a cup base with handle. There is no clear entry for ALB stock right now.
Lithium prices are on the rise and will likely remain in place indefinitely with increased EV demand and limited lithium production. But there’s no doubt that ALB stock and other lithium play products can be very volatile, possibly experiencing a massive sell-off.
Tesla shares fell 9.2% to 275.36, with an even bigger loss than Wednesday’s peak. TSLA stock broke below the 200-day and 50-day lines, but held above recent lows. The EV giant has now legally consolidated with a buy point of 316.74 in a much deeper consolidation. On the weekly chart, Tesla stock has a handle entry of 313.90.
The RS line has been trending higher until the end of last week.
Weekly China sales data, likely to be released on Tuesday, could ease concerns about Tesla demand there or strengthen them. Global production and shipping data for the third quarter will follow in early October.
Stock market analysis
The stock market continued to suffer another week of big losses. The Dow Jones Industrial Average fell to a June low on Friday, along with the NYSE Composite. Nasdaq, S&P 500 and Russell 2000 didn’t, but just another bad day to break lower.
Can we get a return mail? To be sure, the market looks oversold by various measures, while the June low is a logical location for a recovery attempt. The CBOE Volatility Index rose to a three-month high on Friday, although the market’s fear gauge is not at extremes.
Of course, a bounce doesn’t come immediately. And a good day or two won’t mean much if the indicators quickly resume selling.
Any stock market rally may need Treasury yields and the US dollar to pause or fall back.
Over the past few weeks, the market’s rallies, including intraday, were lackluster, trading volume was low, followed by strong selling.
There is a very high probability that the bear market will continue to drop another significant move. Even if the market eventually bottoms out, it can take a long time to gain strength.
What can change the dynamics? On September 30, the Federal Reserve will release the August PCE index, its favorite inflation gauge. The September jobs report will be released a week later. Positive results will be a relief, but the Fed wants to see a continued decline in core inflation and a weakening of the job market.
In the meantime, expect major warnings over the next few weeks. High labor costs, supply chain troubles, rising interest rates, a soaring dollar and a stagnant economy are to blame for the earnings disappointment.
Some areas are doing relatively well, but the emphasis is relative.
That includes pharmaceutical giants like LLY stock, as well as other pharmaceuticals including some biotech and medical names. Pollution control is still underway. But even many stocks with RS lines either rising or at new highs are faltering and moving on the wrong side of the 50- and 200-day lines.
Just because a stock has rallied doesn’t mean it will continue to do so during a market correction. A large number of stocks with the ability to recover unexpectedly sold off sharply in the past week. That includes growth stocks that are starting to sell off, such as Enphase and TSLA stocks.
If these stocks suffer significant further damage, that could mean an extended repair period, at best. Then again, the same can be said about the overall market.
What to do now
Investors should stay on the sidelines. There are very few stocks that hold up, even with relatively few winners reeling from the market correction.
Continue building your watch list with a focus on relative strength. Nearly all charts, with a few exceptions like LLY stock, will look terrible, but for now it’s fine.
If you’re looking for shorts, it’s probably best to wait for a bounce back, when a stock or major index runs back to key levels and hits resistance. But let’s work on those potential lists.
Remember, it is very difficult to make money in a bear market. Time to hit big gains will follow in the next big market rally. Staying engaged and prepared for that uptrend is key.
Read Big picture every day to stay in sync with market trends and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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