Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures, with an Apple iPhone event on Wednesday. The struggling stock market rally lost more ground as Treasury yields soared.
Major indices fell further from their 50-day moving averages. The Nasdaq, extending its losing streak to seven days, undermined its late June intraday lows.
Now is not a good time to add exposure, but investors should look for stocks with solid relative strength. Enphase Energy (ENPH), Ultimate beauty (ULTA), Cigna (THIS), waste connections (WCN) and Waste Management (WM) all have relative lines of force to 52-week highs. The RS line tracks a stock’s performance against the S&P 500 Index and is an easy way to spot leaders and laggards in any type of market. An RS line reaching a new line on or before a stock breaks out is particularly bullish.
ENPH, Waste Connections and Ulta Beauty stocks are giving off flashing buy signals, although the market environment makes any purchase risky at the moment.
The video embedded in this article discussed Tuesday’s market action and analyzed Enphase, sunrun (CLASSES) and WCN shares.
Chinese electric vehicle start-up Nio (NIO) and sporting goods retailer Academy Sports and Outdoors (ASO) will report ahead of Wednesday’s opening. Nio’s stock is struggling with most Chinese EV makers. The ASO stock is trying to hold support at its 50-day line. A strong rebound from this level could offer an early entry.
Apple iPhone event
Apple (AAPL) will be unveil iPhone 14 and a new Apple Watch at an event Wednesday at 1 p.m. ET. Apple’s latest iPhone is expected to offer incremental improvements – faster processor, better camera and improved battery life – over the game-changing changes. Still, new products are essential for the holiday shopping season.
Apple stock fell 0.8% to 154.53 after hitting resistance at the 50-day line. Shares fell below 200 days and then 50 days last week. The RS line for AAPL stocks is not far from the highs, but the market has weakened.
Dow Jones Futures Today
Dow Jones futures fell 0.45% from fair value. S&P 500 futures fell 0.5% and Nasdaq 100 futures fell 0.55%.
The 10-year Treasury yield rose 1 basis point to 3.35%.
Crude oil futures fell slightly while natural gas futures fell 1%.
Stock market rally
The stock market rally started with modest gains, but the indices quickly retreated. Despite an intraday rebound, stocks again faltered.
The Dow Jones Industrial Average fell 0.55% on Tuesday stock market trading. The S&P 500 index fell 0.4%. The Nasdaq composite lost 0.7%. Small cap Russell 2000 fell 0.9%.
U.S. crude oil prices rose 1 cent from Friday’s close of $86.88 a barrel. But that’s after rising 4% on Monday morning when OPEC+ unexpectedly cuts production quotas slightly. Natural gas futures fell 7.3%, adding to Friday’s solid losses and continuing to retreat from 14-year highs. This is despite Russia saying it will not restore natural gas flows to Europe unless sanctions are lifted.
The 10-year Treasury yield jumped 15 basis points to 3.34%, closing in on June’s 11-year high of 3.48%. The 10-year yield hit a recent low of 2.52% on August 2.
SPDR S&P Metals & Mining ETF (XME) rose 0.7% and the Global X US Infrastructure Development ETF (PAVE) increased slightly by 0.2%. The SPDR Energy Select ETF (XLE) fell 0.9% and the Financial Select SPDR ETF (XLF) fell 0.2%. SPDR Healthcare Sector Fund (XLV) increased slightly by 0.1%
High RS stocks
Enphase stock jumped 4.9% in above-average volume, bouncing off the 21-day moving average and breaking the downtrend in a short consolidation. Investors could buy ENPH shares here. It is a leading stock of the Energy-Solar Group, ranked No. 1, with Network Technologies (ARRY), sunrun (CLASSES) and the Invesco Solar ETF (TANNING) among those who settle. But any market rebound could quickly be pushed back.
ENPH stock could have a flat bottom on a weekly chart after this week.
ULTA stock rose 1.1% to 427.82, holding above 417.08 double bottom point of purchase. Shares of the beauty retailer struggled to close above a previous buy point of 429.58. ULTA stock has been limited over the past year.
Cigna stock fell 0.5% to 285.25, finding support around its 21-day moving average and just above its 10-week line. CI stock is just within the range of 273.67 point of purchase cleared for the first time in early July. Shares of the health insurer are just above an alternative entry at 282.43. Cigna stock could work on a tight three weeks while a traditional base might take a few more weeks.
The Waste Management stock edged up 0.4% to 169.12. Shares hit 170.28 intraday, exactly matching a still valid consolidation buy point, according to MarketSmith. It also encounters resistance at the 21-day moving average and a short downtrend. WM stock saw three above-average volume declines last week.
Shares of Waste Connections broke the downtrend by a handful on Tuesday, offering early entry. But shares closed 0.5% higher at 141.30, a far cry from intraday highs. WCN stock has a buy point of 144.56 cups with handle. Other stocks in the highly rated group Pollution Control are doing well.
Market rally analysis
The Nasdaq has now fallen for seven consecutive sessions. The same goes for the Russell 2000. The Dow Jones and the S&P 500 only have one day up in this sequence. All are starting to lose sight of their 50-day moving averages.
It can be said that the market is due for a rebound. But that wouldn’t be so significant.
The major indices getting their 50-day and 21-day lines back would only be a first step. The 200-day moving average would be the real hurdle.
The 10-year Treasury yield jumped again, near long-term highs and rising since early August. It’s hard for stocks to resist higher Treasury yields, especially when it’s also pushing the dollar higher.
Solar and anti-pollution values are among the leaders. Health insurers, energy stocks and biotechs are doing relatively well.
What to do now
Investors should have minimal exposure and not seek to add a lot of exposure if necessary. If you haven’t cut spending much in the past two weeks, you might consider taking profits or cutting losses.
Staying largely on the sidelines until there are real signs of market strength can mean missing out on some buying opportunities, some of which may work well. But if the market really has legs, there will be plenty of chances to make money. If the market goes up and down or sells off, a high cash holding will be key.
If you can’t resist and take a position in, say, ENPH or Waste Connections stocks, be aware of the high risks with the struggling market and key indices facing multiple resistance zones.
Enphase Energy and other solar names are worth watching. The same is true for stocks with strong relative strength overall. This is where the next round of potential leaders will likely be. So build your watchlists with high RS stocks.
But in a tough market, relative winners can be absolute losers.
Lily The big picture every day to stay in tune with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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