Nasdaq rises after rocket attack, but key resistance looms

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Tuesday morning’s strong stock market rally fizzled, briefly turning mixed after Russian missiles reportedly hit Poland.




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Target (TGT) headlines gains on Wednesday morning while chip giant Nvidia (NVDA) looms on Wednesday night.

The stock market rose on Tuesday morning after another moderate inflation report. Walmart (WMT) profits also helped. So did Warren Buffett’s Berkshire Hathaway, revealing it had taken a large new position in the Taiwan Semiconductor (TSM).

Major indexes pared gains somewhat, but then quickly turned mixed on reported Russian missile news. But the Dow recovered to turn positive again.

Missile attack in Poland

In mid-afternoon, stocks faltered on reports that Russian missiles had hit Przhevodov, a Polish village just over the border with Ukraine. The rockets reportedly killed two people. It is possible that the Russian missiles deviated from targets in Ukraine, or that the Ukrainian military shot down the missiles landing in Poland. Moscow launched massive attacks on Ukrainian cities on Tuesday.

Russia denied any responsibility. Poland said the strike appeared to be an “isolated incident”.

Deliberately hitting Poland would be extremely dangerous. All NATO members are committed to protecting all other members from attack. NATO ambassadors will meet Wednesday morning to consult on Article 4, rather than the more aggressive defense provision of Article 5. But a much broader conventional war would raise the risks of nuclear weapons, creating an existential threat to the world and, of course se, for the stock market.

News of the missile attack in Poland aside, the market’s rally could be due for a pause after a strong run and the S&P 500 near key resistance.

Still, MercadoLibre (MELLY) and Clean storage (PSTG) cleared buy points on Tuesday, although PSTG shares gave up a formal entry for the second session in a row.

Retail profits

goal, Lowe (LOW) and TJX Cos. (TJX) report earnings early Wednesday, along with October retail sales. This follows Dow Jones giants Walmart and Home Depot (HD) earnings early Tuesday. WMT shares jumped 6.5% on strong earnings, guidance and a big buyback, breaking out of a buy position. HD shares rose 1.6%, trying to forge a handle.

Shares of TGT rose 3.6% on Tuesday, but hit resistance at the 200-day line, near a buy low. Lowe’s advanced 2.15%, working on a bottoming handle. TJX shares rose 2.9%, still in a 10-month range cup-with-handle base.

Nvidia announced on Wednesday evening. Shares of Nvidia rose 2.3% on Tuesday, adding to big gains over the past month, supporting the chip sector. Strong earnings and guidance from Nvidia as well as the chip giant Applied materials (AMAT) on Thursday night, will be important for the sector and the broader market rally.

The video embedded in this article discusses Tuesday’s market rally and analyzes shares of MELI, Pure Storage and Albemarle (ALB).

MercadoLibre shares joined IBD ranking and it was on tuesday IBD Stock of the Day. ALB shares are on the ranking’s watch list. MercadoLibre and PSTG shares are included SwingTrader. Pure Storage is on IBD 50.

Dow Jones futures today

Dow Jones futures were down 0.2% at fair value. S&P 500 and Nasdaq 100 futures were down 0.2%.

The yield on 10-year government bonds fell 1 basis point to 3.79%.

Amazon.com (AMZN) began laying off corporate and technical workers on Tuesday, according to LinkedIn posts from affected Amazon staff. The e-commerce and cloud computing giant is reportedly planning to cut 10,000 jobs. Shares of AMZN fell 1% overnight.

On Tuesday night, former President Donald Trump announced his 2024 bid for the White House.

October retail sales are expected at 8:30 am ET. Economists had expected the Commerce Department to report a 1% rise, or just 0.2% excluding autos and gasoline.

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 got off to a strong start as the producer price index fell lower than expected, with the core PPI unchanged from September. Walmart’s earnings also helped. Shares of TSM skyrocketed 10.5% on Tuesday night’s news that Warren Buffett had taken a stake. Buffett’s Berkshire also took new positions in, as well as new stakes in Louisiana-Pacific (LPX) and Jeffries (JEFF).

But the major indexes pared gains, with the Dow briefly turning negative after the report of Russian missiles hitting Poland.

The Dow Jones Industrial Average rose 0.2% on Tuesday Exchange Trading, even with a WMT warehouse and Home Depot providing an elevator. The S&P 500 rose 0.5%. The Nasdaq Composite jumped 1.45%. The small-cap Russell 2000 gained 1.5%.

The 10-year Treasury yield fell 7 basis points to 3.8%. The US dollar also fell.

U.S. crude oil prices rose 1.2 percent to $86.92 a barrel after briefly jumping more than 3 percent on news of Russian missiles. Natural gas futures advanced 1.7%.

ETFs

Avg the best ETFsInnovator IBD 50 ETF (FFTY) increased by 1.4%. iShares Expanded Tech-Software Sector ETF (IGV) gained 2.3%. VanEck Vectors Semiconductor ETF (SMH) jumped 3.15%, with Taiwan Semi and Nvidia stockpiling huge components, along with AMAT.

SPDR S&P Metals & Mining ETF (XME) rose 0.85%. SPDR S&P Homebuilders ETF (XHB) advanced 2.1%, with shares of HD and Lowe’s significant holdings. Energy Select SPDR ETF (XLE) rose just over 1%, and the Financial Select SPDR ETF (XLF) rose by 0.2%. Select Healthcare Sector SPDR Fund (XLV) submerged 0.1%.

Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) gained 2.7%, and the ARK Genomics ETF (ARKG) was slightly above break-even.


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Stocks near points of purchase

MELI shares rose 6.4% to 1,020.68, clearing a cup-handled buy point of 1,018.10. MercadoLibre’s volume was below normal, but the recent consolidation has seen a number of gains on above-average volume. The Latin American e-commerce giant has enjoyed strong revenue growth.

Shares of PSTG rose 1.6% to 31.56. Intraday, Pure Storage reached 32.47, clearing a cup-with-handle buy point of 32.07 for the second session in a row, but failed to close above that entry. according to MarketSmith. Shares of PSTG finished right at an early entry of 32.57.

The data storage firm also enjoyed strong revenue growth.

Market Rally Analysis

The stock market rally got off to a strong start on Tuesday, buoyed by the PPI inflation report. But major indexes retreated from intraday highs before turning mixed on reports of the missile attack in Poland.

Perhaps the inflation/Fed narrative has changed. But that doesn’t mean the major indexes can’t hit resistance, especially after a strong recent move. And as Tuesday’s action showed, there’s always the potential for geopolitics or other wild cards to change the market trend.

The Dow Jones and Russell 2000 both broke above their 200-day moving averages. The S&P 500 is approaching the 200-day line, where it hit powerful resistance on August 16.

The Nasdaq is moving from its 50-day line to its 200-day line, but it has a long way to go.

In particular, the Invesco S&P 500 Equal Weight ETF (RSP) is just above its 200-day line. Direxion Nasdaq-100 Equal Weighted Index ETF (QQQE) is approaching this key long-term level.

The tech giants are recovering with the market, but they are definitely not leading the way. Many titans bottomed out in a bear market just last week. The only semi-exception is Nvidia stock, which has rallied over the past month. But even the chip giant is still working towards its 200-day line.

However, many sectors are showing strength.

Solar, grid, contract electronics manufacturers and several medical product companies are doing well. The same goes for a select number of chips, with several others trying to set up. A host of housing-related stocks look interesting, from builders to suppliers to housing retailers.

Other retailers that look good including WMT Warehouse, BJ’s Wholesale (BJ) and Ultra beauty (ULTA). Reports on BDZ Thursday.

Freight companies are moving higher as investors bet the worst is over, or at least is, in the shipping industry’s share price.

Biotech and health insurers have paused or retreated, but are generally in decent shape. Energy stocks are also doing well, although many appear overextended.


Time the Market with IBD’s ETF Market Strategy


What should we do now

Major indexes look strong, more stocks are flashing buy signals and adjusting. Inflation data may have reached a tipping point, raising the prospect of a slowdown in Fed rate hikes and – perhaps – an end to tightening in the not-too-distant future.

So investors should take advantage of the current rally in the market. But they want to be cautious about how much they add in the short term, given the possibility of a pullback or resistance in the market.

Don’t chase extended stocks. Beware of buying stocks that are significantly extended from their 50-day moving averages, even if they are in official buy zones. Don’t be too focused. A portfolio focused on lithium reserves as Albemarle would be burned on Tuesday.

But work on those watch lists, stay engaged, and be ready to act.

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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