Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally had another weak session, with Apple (AAPL) and ExxonMobil (XOM) breaks below key levels while amazon.com (AMZN) and Tesla (TSLA) is starting to move towards the bottom of the bear market.
The S&P 500 and other key indexes are testing or cutting key levels, circling major gains last Wednesday following a speech by Fed chief Jerome Powell.
This stock market rally saw some big one-day gains, followed by drops. That makes it difficult for stocks with buy signals to go first. This is not a good time to increase exposure, but investors should look for stocks that are setting up.
Dow Jones Futures Today
Dow Jones futures contract is 0.2% above fair value. S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.25%.
The yield on the 10-year Treasury note rose 3 basis points to 3.54%.
Stock market recovers
The stock market rally quickly receded after Tuesday’s open and continued to trend lower during the day before easing losses near the end of the session.
The Dow Jones Industrial Average fell 1% on Tuesday stock market trading. The S&P 500 index rose 1.4%. Nasdaq composite fell 2%. The Russell 2000 Small Cap Index is down 1.5%.
Shares of Apple, a member of the Dow Jones, S&P 500 and Nasdaq composite indexes, fell 2.5% to 142.91, back below their 50-day moving average. XOM stock is down 2.8%, also below its 50-day moving average as well as below a buy point. Exxon stock is struggling as oil, gasoline and natural gas prices all fall.
Amazon shares fell 3% to 88.25, closing Nov. 9 with a low of 85.87.
Tesla shares fell 1.4% to 179.82, down from the intraday low, but after falling 6.4% on Monday. TSLA is heading towards a 52-week low but there is still a gap before it drops to that 166.19 mark.
There have been online reports of even more modest Chinese price cuts.
US crude oil prices fell 3.5% to $74.25 per barrel.
The yield on the 10-year Treasury note fell 9 basis points to 3.51%, back near its lowest level since September 20.
The stock market’s inverse relationship with Treasury yields could be disrupted. The lower and lower 10-year Treasury yields may reflect growing recession risks relative to falling inflationary pressures. The yield curve continues to invert also indicating recession concerns.
SPDR S&P Metals & Mining ETF (XME) rose 0.25% and the Global X US Infrastructure Development ETF (PAY THE ROAD RED) decreased by 0.3%. US Global Jets ETF (jet plane) hold altitude. SPDR S&P Homebuilders ETF (XHB) decreased by 1.4%. Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) 0.9%. SPDR Foundation for healthcare sector (XLV) decreased by 0.8%.
Stocks near the buy point
Shares of United Rentals rose 0.5% to 347.29, just above the 21-day moving average. URI stock has a handle buy point of 368.04 from a consolidation from November 2021. Breaking of the handle downtrend could provide an early entry opportunity. Several heavy equipment plays, including Deere (DE), caterpillars (CAT) and Titanium Machinery (TITN), are also looking strong.
UNH shares rose 0.8% to 539.32. Dow Jones giant has a buy point of 558.20 from one flat sole The side of the fused cup has a handle.
Analysis of market recovery
The stock market rally continues to follow a nasty trend of jumping four steps ahead, then backing down over the next few days.
The major indexes fell sharply for two straight sessions, wiping out or cutting off major gains in Fed Chair Jerome Powell’s speech last Wednesday.
The S&P 500, which fell below the 200-day line on Monday, extended Tuesday’s losses to cut the 21-day line. The Russell 2000 index fell below the 200-day and 21-day lines, sliding to its lowest close since November 9, with the 50-day line back in action.
The S&P MidCap 400 closed below the 21-day line for the first time since Oct. 20 and corrected to test its 200-day line.
The Dow Jones, leading the market rally, fell below the 21-day line for the first time since October 14, but much higher than the 200-day line.
The lagging Nasdaq cut its 21-day line and is once again close to the 50-day line, just above the 11,000 level.
All of these indexes closed at their worst levels since October 9, just before the October 10 difference in the October CPI inflation report.
At the time, the market’s massive gains last Wednesday were confusing, because Fed Chair Powell didn’t say anything particularly different or dovish. The major indexes remained bullish on Friday, with Treasury yields finally closing lower, despite the compelling jobs report being even more confusing.
But the technical picture is familiar.
Since the stock market started to recover on October 13, the major indexes have had some big intraday gains — such as October 28 and November 30, but then they quickly fall back, wiping out most, all, or more of all that big gain.
So, as soon as the major indexes hit higher highs and the top stocks signaled to buy, the market rally started to fade again.
What to do now
So far, the market rally has ultimately recovered each time, setting higher highs along the way. But that doesn’t mean it will happen this time. More importantly, that doesn’t mean your stock will recover.
Until the S&P 500 moves definitively above the 200-day line, investors should be wary of adding to the level of risk. Nasdaq and Russell 2000 dips below their 50-day lines and the S&P 500 is testing October highs, which should be signs to reduce exposure.
Also note that the November CPI inflation report is released on December 13, with the Fed raising interest rates later in the year and Powell’s press conference the next day. Those major events could provide the catalyst for a market rally higher or lower.
Therefore, investors should be ready to act. That means having a watch list ready, but it also means staying interactive and flexible.
Read Big picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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