Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally came under further pressure on Tuesday, with all major indexes falling below their 50-day moving averages and leading stocks struggling.
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A surprise jump in job openings raised expectations of big interest rate hikes from the Fed, sending the market retreating on Tuesday. Crude oil and natural gas prices fell, sending energy stocks lower, with other commodities also falling. Antero Resources (AR), Steel dynamics (STLD) and CF Industries (CF) all fell below buy points or early entries. Hot chip names like Phototronics (PLAB) have sold out hard.
Investors should aim to reduce exposure and minimize losses.
Enphase Energy (ENPH) behaves well but tests a key level. Pinduoduo (PDD) is holding close to a buy point after Monday’s earnings gap, but is somewhat alone on China’s Internet. Celsius (CELH) finds support in its 21-day line.
Meanwhile, An apple (AAPL) breaks below its 200-day moving average. Tesla (TSLA), which had hit resistance around the 200-day line, is now heading towards its 50-day line.
After closing, CrowdStrike (CRWD) reported better-than-expected second-quarter earnings and revenue, with the cybersecurity firm also leading modestly higher. Shares of CRWD were down in overnight trading. Shares fell 0.5% to 62.83 in the regular session on Tuesday, just above the 50-day line. CrowdStrike shares are well below the moving 200-day line.
CELH and Steel Dynamics shares are included IBD ranking. Shares of Tesla, CF Industries, Celsius and Enphase Energy are included IBD 50. Shares of CF Industries and ENPH are at IBD Big Cap 20. Enphase is on Tuesday IBD Stock of the Day.
The video embedded in the article discusses Tuesday’s market action and analyzes shares of AR, Steel Dynamics and Pinduoduo.
Dow Jones futures today
Dow Jones futures rose 0.2 percent at fair value, while S&P 500 futures advanced 0.1 percent and Nasdaq futures rose 0.25 percent.
Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.
Join IBD’s experts as they analyze active stocks on IBD Live’s stock market rally
Stock market rallies
The stock market rally briefly struggled to find its footing, but then broke through key support levels on strong economic data. Major indices closed session lows.
Job vacancies unexpectedly rose in July, the Labor Department said on Tuesday, following a large upward revision from June. This signals a large, unfilled demand for labor. That will keep spiraling wages and prices high even as gas prices fall and commodity prices retreat. On Friday, the Labor Department will release the August jobs report.
The Dow Jones Industrial Average fell 1% on Tuesday Exchange Trading. The S&P 500 and Nasdaq composite lost 1.1%. The small-cap Russell 2000 gave up 1.4%.
U.S. crude oil prices fell 5.5 percent to $91.64 a barrel, more than erasing Monday’s solid gain. An OPEC+ representative told Russia’s state-run TASS news agency that the cartel and its allies are not considering cutting supply. Gasoline futures fell 6.4%. Natural gas prices fell 3.2 percent as Europe filled winter storage ahead of schedule and signaled action to intervene in energy prices to limit price spikes.
The 10-year Treasury yield was flat at 3.1%, off an intraday high of 3.15%. The yield on two-year Treasuries rose 3 basis points to 3.46% amid rising expectations for a Fed rate hike. Yield curve continues to invert, recession warning.
ETFs
Avg the best ETFsInnovator IBD 50 ETF (FFTY) fell 3.7% as energy and commodity names hit FFTY. iShares Expanded Tech-Software Sector ETF (IGV) decreased by 0.2%. VanEck Vectors Semiconductor ETF (SMH) gave up 1.1%.
SPDR S&P Metals & Mining ETF (XME) fell 4.3%, with STLD shares a major component. Global X US Infrastructure Development ETF (PAVING) fell by 2.2%. Energy Select SPDR ETF (XLE) fell by 3.4%. Select Healthcare Sector SPDR Fund (XLV) declined by 0.7%.
Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) fell 0.5% and the ARK Genomics ETF (ARKG) lost 1.9%. Tesla stock remains the top performer in Ark Invest’s ETF.
The five best Chinese stocks to watch now
Stocks to watch
Shares of ENPH rose 0.3% to 285.77, holding support at the 21-day line. Enphase shares have traded relatively tight over the past few weeks after a sharp jump in gains from late July to an Aug. 8 high of 308.88. Ideally, ENPH stock would make a new base, although investors could use a move above Friday’s high as an early entry.
Shares of PDD rose 0.7% to 66.50. On Monday, the stock jumped 15% to 66.04 on the back of Pinduoduo’s earnings. Shares of PDD briefly crossed a 68.81 buy point in an intraday cup, according to MarketSmith analysis. Shares of Pinduoduo surged 25% last week, fueled by an audit deal between the US and China that should end the threat of delisting of Chinese firms traded on the NYSE.
However, Pinduoduo stands out with an e-commerce competitor Ali Baba (GRANDMA) is struggling, along with most notable Chinese stocks.
Shares of CELH fell 0.5 percent to 104.43, a third straight decline. But shares of the energy drink maker found support at the 21-day line. Celsius shares are clearly below the 109.84 buy point on a huge basis, so investors who bought or added shares at this point may want to at least reduce those purchases. Still, CELH shares are holding up relatively well in the context of their huge move since early May.
AAPL stock was the only mega-cap stock to consistently trade above its 200-day line over the past month. But on Tuesday, the stock fell 1.5% to 158.91, below that key level that offered an early entry just a few weeks ago. Apple shares are eyeing a return to the 50-day line, already touching the 10-week moving average. While 176.25 handle point of purchase is still underway, the recent trend is no longer a friend of the tech titan Dow.
Shares of TSLA fell 2.5% to 277.70, the fourth straight loss since its 3-for-1 split, though all on anemic volume. As with AAPL shares, the EV giant dipped toward its 50-day line and tested its 10-week one. Tesla stock is starting to lose sight of its 200-day line high above it and some aggressive entries.
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Market Rally Analysis
The stock market rally has struggled since the S&P 500 hit resistance at its 200-day moving average on Aug. 16, with the sell-off fueled by Fed chief Jerome Powell’s hawkish speech last Friday.
On Tuesday, all major indexes fell below their 50-day moving averages. The small-cap Russell 2000 and S&P 400 MidCap are moving quickly toward this key level.
Odds for a third straight rate hike of 75 basis points in September actually fell on Tuesday, but to a still-high 68.5%. But markets are slightly more bullish on a half-point move in November and a quarter-point Fed rate hike in December, ending the year at 3.75%-4%, up from 2.25%-2.5% now.
Fed chief Powell and other policymakers have said they will keep interest rates high for an extended period of time and have hinted that a clear recession may be needed to cool labor markets and underlying inflationary pressures. And Fed rate hikes aside, super-tight labor markets are squeezing corporate profit margins.
Leading stocks are stumbling, with recent energy breakouts faltering or failing. Antero Resources fell 8.1% on Tuesday, under an early entry from too low a position. Shares of Steel Dynamics, after holding up well after last Thursday’s breakout, sank 5.6% on Tuesday. Fertilizer leader CF Industries lost 6.5 percent after falling 4.2 percent on Monday to close a fraction below a buy point.
Can these stocks recover and regain their buy points or quickly create new records? Of course, but they can also spoil.
Shares in Apple and Tesla show that even the better megacap names are faltering, which bodes poorly for the major indexes.
Solar stocks are winners. But even Enphase shares haven’t advanced in the past few weeks. Separately, Celsius hot stocks are doing relatively well, but are still losing some ground.
The recent uptrend looks more and more like a bear market rally in its last legs. Perhaps the major indexes will test or break their June lows. Perhaps they will be tied between mid-June lows and mid-August highs. Or perhaps the market rally will find its footing and soon break above the 200-day line and beyond.
But right now the market is not behaving well.
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What should we do now
This is a time to reduce overall exposure. Even portfolio management aside, investors should be cutting losses or taking small profits from recent new purchases that have gone lower.
For stocks that hold up like Celsius, and there are always a few, investors might still consider taking at least partial profits. If the market continues to weaken, there is a good chance that even resilient stocks will eventually succumb.
Keep working on the watchlists. The market rally may recover with new buying opportunities from handles or pullbacks. If you’re so inclined, you can also create watch lists of possible shorts in case the market tries to bounce and then falters.
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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