Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market suffered heavy losses yet again in the past week as a hawkish Federal Reserve sent Treasury yields soaring yet again. The Dow Jones undercut June lows on Friday with the other major indexes getting close. The final growth leaders started breaking down.
With the market correction intensifying, it’s a time for investors to be on the sidelines, but looking for potential leaders. Some medical stocks are showing relative strength, including Eli Lilly (LLY). Chinese e-commerce giant pinduoduo (PDD) is pulling back somewhat calmly. Manzana (AAPL), Tesla (TSLA), Enphase Energy (ENPH) and Albemarle (ALB) are coming under increasing pressure, but are still worth watching for the future.
Tesla stock, Enphase Energy and Albemarle are on the IBD 50. Enphase and ALB stock are on the IBD Big Cap 20. Eli Lilly was Friday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures open at 6 pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Share
The stock market suffered intense losses yet again last week, closing near weekly lows despite a mini-bounce near Friday’s close.
The Dow Jones Industrial Average fell 4% in last week’s stock market trading. The S&P 500 index gave up 4.6%. The Nasdaq Composite tumbled 5.1%. The small-cap Russell 2000 plunged 6.5%.
The 10-year Treasury yield spiked 25 basis points to 3.7%, capping an eighth straight weekly gain.
US crude oil futures plunged 7.1% to $78.74 a barrel last week, hitting their lowest levels since January.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) plunged 10.8% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) skidded 6.5%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 5.4%. The VanEck Vectors Semiconductor ETF (SMH) lost 5.7%.
SPDR S&P Metals & Mining ETF (XME) tumbled 8.3% last week. The Global X US Infrastructure Development ETF (PAVE) shed 5.3%. US Global Jets ETF (JETS) fell 9.1%. SPDR S&P Homebuilders ETF (XHB) retreated 4.2%. The Energy Select SPDR ETF (XLE) dived 10.15% and the Financial Select SPDR ETF (XLF) lost 6.1%. The Health Care Select Sector SPDR Fund (XLV) declined 3.6%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dived 11.2% last week and ARK Genomics ETF (ARKG) 10.1%. TSLA stock remains among the top holdings across Ark Invest’s ETFs.
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Apple stock closed near weekly lows, but finished down only 0.1% to 150.54. On Wednesday, AAPL stock hit resistance near its 10-week and 40-week lines and is back near recent lows. But the relative strength line hit a new high Friday. Apple stock still has a 176.25 handle buy point, but the first test will be reclaiming its 50-day and 200-day lines.
Eli Lilly stock actually rose 0.9% to 311.60 in the past week. Shares leapt nearly 5% on Thursday, following positive drug news and an analyst upgrade. LLY is stock is on the wrong side of its 50-day line, hitting resistance there Friday. But the RS line is racing higher. The drug giant has a 335.43 flat-base buy point, according to MarketSmith analysis. There’s a potential trendline entry slightly above the 50-day line, but it’s not a good time to be making any buys.
Enphase stock dived 12.1% last week to 279.49, undercutting its 50-day line modestly and just undercutting recent lows. Ideally, ENPH stock would consolidate for a time, perhaps forge a new base.
Pinduoduo stock sank 8.5% to 60.08, breaking below its 21-day line and nearing its 50-day. PDD stock has given up nearly all of its gains since the Chinese e-commerce giant reported blowout results in late August, briefly breaking out.
But the RS line is still near 52-week highs. A pullback to the 50-day line could be bullish, with a new base perhaps forming.
Of course, China risks are always high, while PDD stock is an outlier among e-commerce names or Chinese stocks in general.
Albemarle stock skidded 6.1% to 269.69 in the last week, but found support at its 50-day line on Friday. ALB stock is still above a 250.25 buy point from a tiny handle in early August, while round-tripping gains from a 273.78 alternate entry from a massive cup-with-handle base. There’s no clear entry for ALB stock right now.
Lithium prices are hot and will likely remain so indefinitely with EV demand rising and lithium production constrained. But there’s no question that ALB stock and other lithium plays can be very volatile, subject to big sell-offs.
Tesla stock tumbled 9.2% to 275.36, with even bigger losses from Wednesday’s peak. TSLA stock broke below its 200-day and 50-day lines, but held above recent lows. The EV giant now has a legitimate consolidation with a 316.74 buy point within a much deeper consolidation. On a weekly chart, Tesla stock has a handle entry of 313.90.
The RS line had been trending higher until late last week.
Weekly China sales data, likely out by Tuesday, may ease Tesla demand fears there or reinforce them. Third-quarter global production and deliveries data will follow in early October.
Stock Market Analysis
The stock market suffered yet another week of huge losses. The Dow Jones undercut its June lows on Friday, along with the NYSE Composite. The Nasdaq, S&P 500 and Russell 2000 have not done so, but just need one more bad day to break lower.
Could we get a bounce? Sure, the market seems oversold by various measures, while the June lows are a logical place for a rebound attempt. The CBOE Volatility Index rose to a three-month high on Friday, though the market fear gauge isn’t at extreme levels.
Of course, a bounce doesn’t have to come right away. And one or two good days won’t mean much if the indexes quickly resume selling.
Any stock market bounce would likely need Treasury yields and the US dollar to pause or pull back.
In the past few weeks, market rallies, including intraday, have been lackluster, low-volume affairs, followed by heavy selling.
There’s a strong chance that the bear market stages yet another significant leg down. Even when the market finally does bottom, it could take a long time to power higher.
What could change the dynamic? On Sept. 30, the Federal Reserve will get the August PCE index, its favorite inflation gauge. The September jobs report will follow a week later. Positive readings would be a relief, but the Fed wants to see sustained declines in core inflation and job market weakness.
Meanwhile, expect big warnings over the next few weeks. High labor costs, supply chain woes, rising interest rates, a soaring dollar and a stalling economy is a recipe for earnings disappointment.
Some sectors are performing relatively well, but the emphasis is relative.
That includes drug giants such as LLY stock, as well as other medicals including certain biotechs and medical names. Pollution control is still looking OK. But even many stocks with RS lines that are rising or at new highs are faltering and on the wrong side of the 50-day and 200-day lines.
Just because a stock has been holding up doesn’t mean it will keep doing so in a market correction. A large number of resilient stocks suddenly sold off hard this past week. That includes growth holdouts that are starting to sell off hard, such as Enphase and TSLA stock.
If these stocks suffer significant further damage, that could mean extended repair time, at best. Then again, the same could be said about the overall market.
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What To Do Now
Investors should be on the sidelines. There are very few stocks holding up, with even relative winners reeling from the market correction.
Keep building your watchlists with an emphasis on relative strength. Nearly all the charts, with a few exceptions like LLY stock, will look terrible, but that’s OK for now.
If you’re looking for shorts, it’s probably best to wait for a bounce, with stocks or the major indexes running back up to key levels and hitting resistance. But work on those potential lists as well.
Remember, it’s very hard to make money in a bear market. The time for big gains will follow in the next strong market rally. Staying engaged and preparing for that uptrend is key.
Read The Big Picture every day to stay in sync with the 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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