Dow Jones futures rose modestly overnight, along with S&P 500 futures and Nasdaq futures, with Zscaler (ZS) and DocuSign (DOCU) among notable earnings reports. The stock market rally was up and down on Thursday, eventually closing near session highs, putting a big test to their 50-day moving averages.
But while these five stocks are leading the market, they are not independent of it. Shares of the NBIX and Vertex were still active at the close, but were off their intraday highs as the indices retreated sharply from their best levels. Centene shares have given up and may need a little more strength. BMRN shares saw strong action, closing high in the intraday range but on thin volume. Only AXNX stock closed with a really strong advance, and that came after the news of Axonics product cornerstone.
On the other hand, An apple (AAPL) withdrew a day after the rise of the new iPhone 14 and other products. Megacaps are lagging in the current market environment, with all trading below their 200-day moving averages. Tesla (TSLA) is the only way to make a real move to the 200-day period right now.
After market close, cybersecurity firm Zscaler and document software specialist DocuSign announced better than expected quarterly results and gave solid guidance. ZS shares jumped overnight, while DOCU shares soared. The former leaders are well below the highs and far from actionable, but the reports are a good sign for software stocks and IT spending.
Dow Jones futures today
Dow Jones futures were up 0.2% at fair value. S&P 500 futures rose 0.2%. Nasdaq 100 futures advanced 0.6%.
The yield on the 10-year Treasury note rose 3 basis points to 3.32%.
Stock market rallies
The stock market rally had an up-and-down session, a selloff near the open, a rebound for solid gains and a back-and-forth before finally breaking through with decent gains after Wednesday’s strong rally.
Just before the market opened, Fed chief Jerome Powell reiterated that he was “strongly committed” to fighting inflation, boosting expectations for a third straight 75 basis point interest rate hike on September 21. Shortly before that, the European Central Bank raised its key interest rate by 75 basis points. ECB sources later hinted that another 75 basis points could come in October.
Meanwhile, initial jobless claims defied forecasts, falling for a fourth straight week, sending another signal to Fed chief Powell that labor markets are still very tight.
The Dow Jones Industrial Average and Nasdaq composite rose 0.6% on Thursday Exchange Trading. The S&P 500 rose 0.7%. The small-cap Russell 2000 led with a 0.8% advance.
U.S. crude oil prices rose 2 percent to $83.54 a barrel after falling to their lowest levels since January on Wednesday.
The yield on the 10-year Treasury note rose 3 basis points to 3.29%.
Avg the best ETFsInnovator IBD 50 ETF (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOOTH) gained 1%. iShares Expanded Tech-Software Sector ETF (IGV) and the VanEck Vectors Semiconductor ETF (SMH) rose 1.4%.
SPDR S&P Metals & Mining ETF (XME) rose by 0.6%. Energy Select SPDR ETF (XLE) advanced 0.4% and the Financial Select SPDR ETF (XLF) 1.8%. Select Healthcare Sector SPDR Fund (XLV) gained 1.7%. The CNC material and Vertex are XLV components.
Apple shares fell 1% to 154.45 on Thursday. Shares hit their lowest levels since late July. The line of relative strength it is now rapidly declining after record highs as recently as August 17th. As the most valuable U.S.-listed company and a member of the Dow Jones, S&P 500 and Nasdaq composite, if AAPL’s stock declines, it’s hard for the major indexes to make much headway. Other mega-cap stocks are also struggling.
Tesla shares were a partial exception to the megacap malaise, rising nearly 2% to 289.26. It is now up 7% this week, bouncing off its 50-day moving average. But this week’s gains are on thin volume. And TSLA shares remain below their declining 200-day line. A decisive move above the 200-day line, perhaps clearing the 300 level or the August 14 high at 314.64, would suggest an early entry.
Market Rally Analysis
The stock market rally shrugged off early heavy losses, unwilling to give up Wednesday’s big gains. Despite some multiple intraday swings, all major indices closed near session highs.
After appearing to hit resistance at their morning highs, the S&P 500 and Russell 2000 finished just below their 50-day moving averages. That being said, the S&P 500 touched one point off its 200-day line on Aug. 16 — with the small-cap Russell just above the level — marking the top of the current rally. On September 2, the S&P 500 and Russell 2000 touched their 50-day line and then reversed sharply.
So the 50-day moving average is not just a line on a chart. A move decisively above this level would be a bullish sign. Note that the 21-day moving average is trending down towards the 50-day for all key indices.
Above these lines, the market rally may have some room to move, but the 200-day moving average would be the ultimate test.
Investors should follow the market primarily through major indices and leading stocks. In recent days, the leading stocks have looked better than the major indexes.
But Neurocrine, Centene and Vertex hit highs as the market initially hit resistance, even as the Nasdaq, S&P 500 and Dow Jones closed near Thursday’s best levels. If the major indexes go south again, most stocks will follow suit.
Solar energy and pollution control stocks are doing well. As well as the wide variety of medical names from biotech, product/system and health insurers. Lithium games are hot, but fluctuating rankings make them difficult to handle.
A few technical names are setting up, but generally no buy signals are flashing yet. But the market’s continued strength could prompt techs to trigger buy points, along with stocks from various sectors.
It’s fine if mega-cap stocks like Apple don’t lead the market up, but it would be healthy for some of them to actively participate.
What should we do now
More stocks are flashing buy signals, at least intraday. So it is understandable if investors choose to bite into some new positions, aiming to get an early ticket to some big series.
Remember, with the major indices so close to their 50-day lines, taking a new position becomes even more risky – unless and until the major indices decisively break higher. So consider taking small positions, at least to start with, and be prepared to take quick profits and ruthlessly cut losses.
If you move on to taking new positions for now, there will be other buying opportunities if the market gains momentum. A large number of actions are close to being taken or close to being taken.
So work on your watch lists. Be alert and be nimble.
Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.
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