Dow Jones futures rose slightly overnight, as did S&P 500 and Nasdaq futures. The stock market rally attempt showed resilience on Wednesday. Major indexes fell sharply on Wednesday morning as Treasury yields and the dollar rebounded, but stock indexes rebounded to close only slightly lower.
The market rally is still untested, although it could happen soon. Patience – and money – remains the key.
You’re here (TSLA) continued to slide, with the Elon Musk-Twitter (TWTR) the takeover saga is still not entirely over. Enphase Energy (ENPH) plunged, breaking below recent lows on a bad day for solar games.
Medical names held up well, especially Vertex Pharmaceuticals (VRTX), Cigna (CI), medical shock wave (SWAV), Sarepta Therapeutic (SRPT), Cardinal Health (HAC), Health Care Option (OPCH) and Neurocrine Biosciences (NBIX). Meanwhile, On semiconductor (ON), Impinj (IP) and Arista Networks (A NET) are technology names that hold their own.
Oil inventories were strong, with OPEC+ agrees to major production cut at Wednesday’s meeting. Exxon Mobil (XOM) also reported strong third-quarter results. XOM stock issued a buy signal on Wednesday.
VRTX action and Neurocrine Biosciences are on the IBD classification, with PCTY and Shockwave stocks on the watch list. SWAV, Vertex, Paylocity, Sarepta and Onsemi shares are on the INN 50. Arista Networks, Vertex, On Semiconductor and ENPH stocks are on the IBD Big Cap 20. The Semi was Wednesday IBD stock of the daywith Paylocity, Enphase and ANET stocks also recent picks.
Dow Jones Futures Today
Dow Jones futures were up 0.3% relative to fair value. S&P 500 futures climbed 0.4% and Nasdaq 100 futures rose 0.5%.
The 10-year Treasury yield fell 1 basis point to 3.75%.
Stock Market Rally Wednesday
The attempted stock market rally tumbled on Wednesday morning, but the major indices pulled well off session lows, briefly turning positive before fading to small losses.
The Dow Jones Industrial Average fell 0.1% on Wednesday stock market trading. The S&P 500 index fell 0.2%. The Nasdaq composite fell 0.25%. Small cap Russell 2000 lost 0.6%
U.S. crude oil prices rose 1.4% to $87.76 a barrel, extending strong weekly gains. OPEC+ agreed to cut production quotas by 2 million barrels, high on expectations ahead of Wednesday’s meeting.
The 10-year Treasury yield jumped 14 basis points to 3.76%, erasing most of the losses this week.
From best ETFsthe Innovator IBD 50 ETF (FFTY) fell 1%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) fell 0.4%. The iShares Expanded Tech-Software Sector ETF (VIG) increased by 0.45%. The VanEck Vectors Semiconductor ETF (SMH) gained 1%.
XOM stock rose 4% to 99.12, extending a move above the 50-day line, now up 14% for the week. Exxon stock broke a descending trendline during a four-month consolidation. Investors could use 101.66 as another early entry, with 105.67 as the official buy point. The relative force line for stock XOM is already at a new high.
Rising energy prices are fueling the latest rally in Exxon shares. Late Tuesday, Exxon reported strong third quarter results.
Stocks hold up
VRTX, Neurocrine Bio and Option Care Health stocks are all close to buy points and are arguably exploitable now. SWAV, Cigna and Sarepta stocks are all very close to being actionable from trendline entries. The same goes for ANET and On Semiconductor shares, which issued early buy signals, but on light volume. PI stock is close.
Enphase stock plunged 9.25% to 261.60, breaking well below recent lows in the heaviest volume since the July 27 earnings gap rise. ENPH stock, which broke above its 50-day line and issued a buy signal on Tuesday, is now significantly below that key level, according to MarketSmith Analysis.
First Solar (FSLR), which topped a short consolidation on Tuesday, fell 5.9% on Wednesday, with several more solar plays selling off.
Tesla stock fell 3.5% to 240.81 but broke off its intraday low of 233.27. For the week, TSLA stock fell 9.2%, extending deep losses since its September 21 reversal. Stocks are still reeling from Sunday’s weak third-quarter shipments, which reflected weak Chinese demand.
Meanwhile, CEO Elon Musk’s stated intention to move forward with the $44 billion Twitter deal is raising fears he may sell more TSLA stock to help pay for it.
The Musk-Twitter saga isn’t quite over. While Musk says he’s ready to move forward with the initial $54.20 per share deal, Twitter isn’t just going to take him at his word and agree to stop the lawsuit. The two parties are in talks with the aim of agreeing on terms offering real assurances.
Musk could own Twitter in just days.
But, for now, the Musk-Twitter takeover trial is still scheduled to begin on October 17. Twitter lawyers are due to depose Musk starting Thursday, though it remains open whether he will actually show up.
Twitter stock fell 1.35% to 51.30. That’s after climbing 22% to 52 on Tuesday, after Musk fell back.
Market rally analysis
The stock market rally attempt is at a key moment. Is this the start of a meaningful uptrend or just a short-lived bounce from oversold conditions?
Wednesday’s action didn’t answer those questions, but it was encouraging.
The market made big gains on Monday and Tuesday. On Wednesday, the bulls showed they weren’t going to give up at the first sign of trouble.
The Dow Jones, S&P 500 and Nasdaq fell close to their 21-day moving averages at the open, soon giving up most of Tuesday’s gains. But they steadily pared losses and turned positive before a last-minute return to the red.
The Dow Jones and S&P 500 briefly broke above their 21-day lines as the Nasdaq composite edged closer.
The Russell 2000 managed to hold its 21 days, which is shaping up to be a key near-term level for all indices.
The losers easily beat the winners on Wednesday as the market breadth was weaker than the indices close suggested.
Meanwhile, a falling 10-year yield and falling greenback were the main catalysts for the market rally Monday through Tuesday. It’s no surprise, then, that stocks sold off on Wednesday morning as Treasury yields and the dollar returned.
Major indices pared losses despite returns near session highs. It can happen on a specific day. But over time, equities are unlikely to make any significant gains, or even resist, if Treasury yields rise.
Oil, gas and coal stocks like Exxon are rising on the back of rising energy prices.
Medical names such as Vertex and Option Care Health held up relatively well, even at the market’s intraday low. Just like Arista, PCTY and ON stock. Some agricultural and metallurgical deposits are emerging.
A number of leading stocks fell sharply, at least intraday. Some still have decent charts, while others like ENPH stocks have suffered significant damage.
Investors can now search for a follow-up day to confirm the new rally. Friday’s jobs report could be the catalyst for a strong market rally or a sell-off.
A follow-up day would be a positive signal, but not a guarantee. For now, this is still an attempt at a stock market rally in a strong bear market.
What to do now
Investors need to be patient. An attempted market rally saw strong gains this week, with a number of top stocks triggering or approaching buy points. But he has done nothing to signal that he has power.
Going all cash, or with minimal exposure, is still a good strategy. If this turns out to be a significant rally in the market, there will be plenty of opportunities after a day of tracking.
For investors who tiptoed into some promising names this week, be prepared to exit if the trades backfire.
That said, a confirmed stock market rally could occur at any time. A number of stocks are showing strength and would likely be exploitable with greater market strength. So investors need to stay engaged and work on their watchlists.
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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