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Dow Jones Futures is waiting for the Fed to raise rates, but this is what matters; Tesla flirts with point of purchase

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, with the announcement focused on the Fed meeting. The major indexes fell on Tuesday as the Federal Reserve began its two-day policy meeting.




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Tesla shares flash a positive buy signal, despite more signs of weakness than expected Tesla (TSLA) demand in China. That comes between a Ford Motor (F) warnings about supply costs, as well as unfinished vehicles. Ford stock fell 12%, with Synthetic engine (GM) down 5.6% despite having an EV supply agreement with Hertz (HTZ).

In addition to Tesla, chip manufacturers On semiconductors (ABOVE) and Impinj (Pi) is showing strength with Neurocriminal Biosciences (NBIX) and the lithium giant SQM (SQM).

Apple (AAPL) rose for the second consecutive session. Apple stock remains below key levels. Meanwhile, copper megacap tech stocks Microsoft (MSFT) and Google’s parent Alphabet (GOOGLE) is at a 52-week low.

NBIX stock is on IBD Rankings. TSLA stock and On Semiconductor, also known as Onsemi, are located on IBD 50. ON stock is on IBD Big Cap 20. Impinj is Tuesday IBD shares of the day.

The video embedded in this article discusses Tuesday’s market action and analysis of Neurocriminal Bioscience, Wolfspeed (WOLF) and PI shares.

Fed meeting

Policymakers seem locked in a Fed’s third rate hike in a row 75 basis points, with announcement due at 2pm ET on Wednesday. The markets see a small chance of a very large all-out rally.

The key is what the Fed sees now. The quarterly projections will dictate where the central bank views lending rates by the end of 2023 and under what economic conditions. Fed Director Jerome Powell, in his August 26 speech in Jackson Hole, made it clear that the Fed is willing to accept recession risks to keep inflation under control.

Powell will speak at 2:30 p.m. ET, perhaps offering some hint of a near-term rate hike by the Fed. Currently, the markets are betting on a fourth 75 basis point hike in November, followed by 50 basis points in December. That would push year-end fund rates to 4.25% -4, 5% from 2.25% -2.5% now. Before the August consumer price index on September 14, markets were looking for 3.75%-4% by the end of 2022.

Dow Jones Futures Today

Dow Jones futures contract is roughly unchanged from fair value. S&P 500 futures and Nasdaq 100 were unchanged.

The yield on the 10-year Treasury note fell 2 basis points to 3.55%.

Remember that action overnight in Dow futures contract and elsewhere it doesn’t necessarily translate into actual trading the next week stock market meeting.


Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live


Stock Market Tuesday

Stock markets fell on Tuesday ahead of the Fed’s meeting announcement. A late afternoon fades to the end.

The Dow Jones Industrial Average fell 1% on Tuesday stock market trading. The S&P 500 index lost 1.1%. The Nasdaq composite index fell 0.95%. The small-cap Russell 2000 lost 1.4%.

Shares of Apple, a member of the Dow Jones, S&P 500 and Nasdaq composite indexes, rose 1.6 percent to 156.90. AAPL stock has hit resistance at 21 days and remains below the 50-day and 200-day lines after a major downside reversal last week. But a decisive move above the 50-day and 200-day lines could provide a fresh early entry.

US crude for October delivery fell 1.5% to $84.45 a barrel. Crude oil futures for November, now a near-month contract, fell 1.7% to $83.94.

The yield on the 10-year Treasury note rose 8 basis points to 3.57%, another 11-year high.

ETF

Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) back 1.3%. iShares Expanded Software-Technology Sector ETF (IGV) slip 1.5%. VanEck Vectors Semiconductor ETF (SMH) decreased by 1.4%.

SPDR S&P Metals & Mining ETF (XME) decreased by 2.7%. SPDR Select Energy ETF (XLE) fell 0.7% and the Financial SPDR ETF (XLF) 1.5%. SPDR Fund for the Healthcare Sector (XLV) dropped 1.2%.

Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) fell 2.5% and the ARK Genomics ETF (ARKG) pulled back 1.6%. TSLA stock is the primary holding on Ark Invest ETFs.


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PI Stocks

Impinj shares fell 2.5% to 89.66 on Tuesday. The tracker chip maker’s stock is finding support at the 21-day and 10-week levels. PI stock is doing a fresh round of consolidation that would be an appropriate base late Friday with a 99.10 buy point. Investors can use 93.46, just above the short-term high, as an early entry still close to the 10-week line.

The relative strength line is right at a high, a bullish sign for PI stock as it outperforms the S&P 500 index.

ON stock

On Semiconductor shares fell 2.4% to 68.48 after gaining 1.8% on Monday. Shares of the EV-focused chipmaker closed just below their 21-day and 10-week levels.

The RS line for Onsemi stock is right around the high.

After breaking out in late August from a long affected base, ON stock could have a fresh, shallow base by the end of next week. Investors can use 73.03 as a positive entry, which will also return to the top of the previous consolidation.

NBIX Stocks

Neurocrime stock fell 0.7% to 107.09, once again finding support at the 21-day moving average. NBIX shares have a flat base with 109.36 buy points, follow MarketSmith Analysis. The flat base is just above the previous fixed part, making this formation on the basis of. Investors can use the rise above Monday’s high of 108.71 as a slightly lower entry. The RS line for NBIX stock is at a new high.

SQM . stock

SQM stock fell 2.4% to 104.66, right at its 21-day line. Shares of Chilean fertilizer and lithium giant try to get out of the mess cup with handle base earlier this month, but never closed above 113.80 buy points. The good news is that the 50-day line is starting to catch up.

The RS line for SQM stock is near the high.

Tesla shares

Tesla stock rallied as high as 313.33, extending the gains slightly and moving above a very aggressive buy level of 309.22. But the stock edged lower to end 0.1% at 308.73. TSLA stock is close to a 314.74 buy point from a short-term consolidation, in a much larger consolidation that could be an appropriate base later this week.

The RS line has recently risen just below its peak in early April.

Buying TSLA stock, or any stock, in the current market environment would be extremely drastic.

CEO Elon Musk on Tuesday tweeted about Optimus, the humanoid Tesla Bot he will likely showcase at the company’s AI Day on September 30. Most experts say a humanoid robot has useful general purpose is decades away. He also hints at an improved Smart Summon or auto-mark feature, which has been problematic for years.

However, Tesla’s sales in China are lagging behind expectations. Domestic sales will still hit record levels in September, as Shanghai’s capacity has been expanded again. But Sign up for Tesla car insurance fell in the most recent week, when they are usually strong.

Tesla China’s wait times have plummeted over the past few weeks, with the EV giant resorting to a large insurance subsidy to fuel quarter-end sales. That could herald an actual price drop later this year.


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Stock market analysis

Yes, it was a stock market correction. The S&P 500 and Dow Jones on Tuesday cut last Friday’s lows, before paring losses somewhat.

The good news on Tuesday is that stocks haven’t rallied on big Fed-related news. That contrasts with Fed Director Powell’s August 26 Jackson Hole speech or the September 14 CPI inflation report.

It’s no coincidence that the stock market is grappling with rising Treasury yields.

The summer bull run revolves around the Fed. First, the Fed is expected to slow down rate hikes soon, then start cutting rates in 2023. There is then hope that the Fed will ease the rate hikes and pause at the end. five.

But now the Fed is on track to raise rates aggressively through the end of the year, possibly more into 2023. That means more pain for the economy.

The current low growth, high inflation environment is not really easy for companies. Ford, FedEx (FDX) and General Electric (GE) were among the warnings over the past week.

Tuesday’s sell-off in Ford stock, following last week’s FDX and GE, shows investors haven’t appreciated substantial earnings. Expect more warnings over the next few weeks.

Given the weakness of the past few weeks, it is possible that the market will recover on Wednesday after the Fed meeting and Fed Director Powell talk. Keep in mind that the market usually reverses the reaction in the two days leading up to the Fed meeting.

Until there is clarity on when the Fed might start to slow down and pause tightening, it’s hard to see markets making a meaningful move. It’s not hard to see the major indexes testing or cutting their June lows.


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What to do now

The market correction is returning with the Fed about to raise rates sharply again, with no end in sight. Companies are issuing big warnings amid tough macroeconomic conditions that are likely to worsen.

Investors should have little or no exposure and no new purchases. Wait until there is a confirmed uptrend, which could involve the major indexes retrieving their 50-day moving averages. Even in that scenario, other technical hurdles, as well as the Fed and economic landscape, should keep investors cautious.

For now, investors should work on their watchlists, focusing on relative strength like NBIX, On Semi, and Tesla stocks. Remember, today’s relative winners could initiate a breakout if the correction intensifies.

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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