The market is finally getting a rebound, now what?

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded strongly on Wednesday, with the Nasdaq ending a seven-day slide as energy prices tumbled and Treasury yields retreated. The major indexes are back to their 50-day moving averages, but they face this big test.




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An apple (AAPL) introduced its new iPhone 14 and several other products. Solar stocks continued to lead. Enphase Energy (ENPH), Massive technologies (ARRIE), Shoals Technologies (SHLS), Sunrun (RUN) and Invesco Solar ETF (TAN) all flashing Wednesday buy signals.

Meanwhile, Twitter (TWTR) bounced back as the social media firm won some, but not all, preliminary issues decided Wednesday in a Delaware court over Tesla (TSLA) CEO Elon Musk’s takeover bid.

Apple iPhone

Apple introduced the iPhone 14 and iPhone 14 Plus on Wednesday at a “Far Out” product event, along with new Apple Watch and Air Pod options. The Apple iPhone 14 and other products have been long anticipated and largely offer incremental improvements. The new iPhone will have emergency satellite communication capabilities. The big surprise? Apple iPhone prices are not going up.

Apple shares rose 0.9% to 155.96, still below the 50-day line. Above that, AAPL will need to clear the 200-day moving average before moving to 176.25 point of purchase.

Musk-Twitter

Shares of TWTR soared on Wednesday after a Delaware court rejected Elon Musk’s bid to delay the acquisition process for Twitter, which is set to begin in October. But it would allow him to add to his counterclaim the claims of a recent whistleblower. Twitter is suing Musk to force him to close the acquisition. Musk refused to pay $44 billion, or $54.20 per share, and is trying to get out of the deal. Legal experts continue to think Twitter has a strong case, with the Delaware judge’s comments and rulings underscoring that argument.

Shares of Twitter jumped 6.6% to 41.21 on Wednesday, breaking above its 50-day and 200-day lines. Shares of TSLA rose 3.4% to 283.70, bouncing off the 50-day line but still below some other key levels. A decisive move above the 200-day line and near-term highs would suggest an aggressive entry.

TAN, the Invesco Solar ETF, was added to SwingTrader and it was on wednesday IBD Stock of the Day. RUN stock was the stock of the day on Tuesday. Shares of Enphase and Tesla are at IBD 50. ENPH shares are also at IBD Big Cap 20.

Dow Jones futures today

Dow Jones futures rose a fraction to fair value. S&P 500 and Nasdaq futures were mostly flat.

Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.


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Stock market rallies

The stock market rally that started on Wednesday was little changed but gained momentum during the day.

The Dow Jones Industrial Average rose 1.4% on Wednesday Exchange Trading. The S&P 500 index jumped 1.8%. The Nasdaq composite jumped 2.1%. The small-cap Russell 2000 gained 2.2%.

U.S. crude oil prices fell 5.7 percent to $81.94 a barrel, the lowest close since Jan. 11. Natural gas futures continued to fall 3.7%. While these declines reflect economic weakness, among other factors, they signal further large declines in core inflation at least through September.

The yield on the 10-year Treasury fell 7.5 basis points to 3.265 percent after jumping 15 basis points on Tuesday.

Markets are bracing for a third consecutive Fed rate hike of 75 basis points on Sept. 21, even though the consumer price index for August is due out next week. Markets currently expect the Fed to raise interest rates by a quarter point in November and December.

Avg the best ETFsInnovator IBD 50 ETF (FFTY) rose 0.3% as energy names took a hit. The Innovator IBD Breakout Opportunities ETF (BOOTH) grew by 1%. iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.1%. VanEck Vectors Semiconductor ETF (SMH) advanced by 1.6%.

SPDR S&P Metals & Mining ETF (XME) rose 0.9%, and the Global X US Infrastructure Development ETF (PAVING) 2%. US Global Jets ETF (STREAMS) rose by 3.5%. SPDR S&P Homebuilders ETF (XHB) rebounded by 2.8%. Energy Select SPDR ETF (XLE) sank 1.2%, and the Financial Select SPDR ETF (XLF) rebounded by 2%. Select Healthcare Sector SPDR Fund (XLV) grew by 1.6%

Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) jumped 3.4%, and the ARK Genomics ETF (ARKG) jumped 4.7%.


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Solar stocks

Enphase shares jumped 8% to 316.31 on Wednesday, hitting a new high as it continued to pull away from a 21-day line. The stock has been consolidating tightly in recent weeks and was close to forging a flat base ahead of Wednesday’s move. ENPH shares are up x% so far this short week. Investors can still buy Enphase even though it is close to being extended from the 21-day. It is well extended from the 50-day one.

The line of relative strength hit new highs, reflecting the strong performance of Enphase shares against the S&P 500 index.

Shares of ARRY rose 6.1% to 22.03, bouncing off its 21-day low. Investors could use this as an early entry into the ground-mount solar system maker or wait to see if Array can break the downtrend into a very deep cup hold. The official point of purchase is 24.10.

Shares of SHLS jumped 7.6% to 27.76 on Wednesday, continuing the bounce from the 21-day line and reaching a 2022 high, suggesting an aggressive entry.

Shares of RUN jumped 10.5% to 36.58, bouncing off its 21-day moving average and breaking a short consolidation downtrend. This offered early entry into a solar installation specialist. On Tuesday, shares of Sunrun found support just above the 10-week moving average.

Invesco Solar ETF TAN jumped 6.2% to 87.46, moving above the 21-day line and breaking above a short-term consolidation downtrend on high volume. This continues Tuesday’s bounce off the 50-day line. The TAN ETF’s largest holding is ENPH stock, with Sunrun, Shoals and ARRY stocks also components.

The TAN ETF has big moves, but is less risky and volatile than buying an individual solar stock.

Market Rally Analysis

The not-quite-dead stock market rally showed some signs of life, with the Nasdaq snapping a seven-game losing streak while the major indexes rallied. However, volume was down from the previous session on both the Nasdaq and the NYSE.

Perhaps the market was overdue for a rebound after losing so much ground in a short period. But that doesn’t mean the downward pressure is over. If the stock market continues to bounce, the major indices will soon touch the 50-day and 21-day moving averages. Moving decisively above these levels would be a good first step. But the 50-day line has been acting as a ceiling lately.

First of all, it is the 200-day moving average.

One reason for the stock market’s bounce on Wednesday was a modest pullback in Treasury yields after Tuesday’s jump. But the upward trend in government bond yields remains fairly intact.

Solar stocks are hot as pollution control names are cleaned up. Health insurers, some retail names look solid. Yet for now, leadership is relatively limited.

Oil and gas names struggled with heavy losses in crude oil and natural gas.


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What should we do now

Investors who chose not to take action on Wednesday had good reasons. A one-day downtrend spike below key support is hardly a clear signal.

On the other hand, there were few buying opportunities on Wednesday. But investors who have gotten into some of these names might consider taking partial profits quickly, perhaps with an initial 5% profit sell-off or if the major indexes hit their 50-day lines. This could help mitigate the very real risk that the major indexes will soon resume their downward trend, along with possible sector rotation or stock-specific news.

If new trades start going against you, act fast. If you’re going to be aggressive about entering a dubious overall market, you need to be just as fast, if not faster.

Whether you added exposure on Wednesday or not, buying risks may be higher in the very near term. The market’s rally got a bounce while the 50-day line is now much closer.

Keep working on the watchlists. Look for stocks with strong relative strength. If the market builds momentum and clears some initial hurdles, such as the 50-day line, a number of stocks with strong RS lines will be flashing buy signals.

Read it The 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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