Dow Jones futures fell early Wednesday, along with S&P 500 futures and Nasdaq futures. Tesla shares retreated as the EV giant offered yet another price incentive in China.
The stock market rise had another weak increase, with apple (AAPL) and Exxon Mobil (XOM) breaks below key levels on Tuesday while Amazon.com (AMZN) and Tesla (TSLA) is starting to move towards the bear market.
The S&P 500 and other key indexes tested or breached key levels, paring last Wednesday’s big gains after Fed Chair Jerome Powell’s speech.
This stock market rise has had several large one-day gains followed by pullbacks. That has made it difficult for stocks that are flashing buy signals to make progress. It’s not a good time to add exposure, but investors should look for stocks.
United Rentals (URI), UnitedHealth Group (UNH) and United Airlines (UAL) are all trading near buy points.
UAL stock is on the IBD Leaderboard, while URI stock is on the Leaderboard watchlist. United Airlines, Charles Schwab and UNH stocks are on the IBD 50. United Rentals was Tuesday’s IBD Stock Of The Day.
Database software manufacturer MongoDB (MDB) rose early Wednesday with a surprising profit. The MDB share has plunged over the past year.
Manufacturer of driver assistance systems Mobileye (MBLY) beat views in its first report since it was released in late October. MBLY stock was up and down.
Ollie’s Bargain Outlet ( OLLI ) fell after the retailer missed revenue and sales.
Dow Jones Futures today
Dow Jones futures retreated 0.3% relative to fair value. S&P 500 futures fell 0.6% and Nasdaq 100 futures fell 1%.
The 10-year government yield rose 4 basis points to 3.55%.
Crude oil futures rose higher. The prices of natural gas rose 3 percent. The US agreed to send more LNG to the UK
China scrapped some more Covid rules, as expected, but trade data came in weaker than expected. Hong Kong’s Hang Seng, which had risen, fell 3.2 percent.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally retreated quickly after Tuesday’s open and continued to trend lower throughout the day before paring some losses near the close.
The Dow Jones Industrial Average fell 1% in Tuesday’s trading. The S&P 500 index gave up 1.4 percent. The Nasdaq composite fell 2%. Small-cap Russell 2000 retreated 1.5%
The US crude oil price fell 3.5 percent to $74.25 a barrel.
The 10-year Treasury yield fell 9 basis points to 3.51%, back near the lowest levels since September 20.
The stock market’s inverse relationship with government interest rates may be about to break down. A lower 10-year government interest rate may increasingly reflect increasing recession risk versus decreasing inflationary pressure. The yield curve, which continues to invert further, also indicates recessionary concerns.
Apple shares, a member of the Dow Jones, S&P 500 and Nasdaq composite, fell 2.5% to 142.91, back below the 50-day line. XOM shares fell 2.8%, also below the 50-day line, as well as below a buy point. Exxon shares struggle as oil, gasoline and natural gas prices fall.
Amazon shares fell 3% to 88.25, nearing a Nov. 9 low of 85.87.
Tesla shares fell 1.4% to 179.82, off intraday lows but after falling 6.4% on Monday. TSLA is moving towards its 52-week low, but still has some way to go before falling to 166.19.
Tesla is now offering a 6,000 yuan ($860) discount on stock cars in China, on top of an existing 4,000 yuan insurance subsidy. Along with other incentives, Tesla China is offering over 20,000 yuan in incentives, and that’s before government subsidies of 11,088 yuan.
Meanwhile, there are more signs that Tesla will reintroduce radar to its vehicles. Elon Musk removed radar from new Tesla EVs in 2021, amid the chip crisis, saying that vision alone would be better for self-driving. Almost all other autonomous driving players use a variety of sensors.
TSLA stock fell 3% early Wednesday.
Among key tech ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) returned 1.7%. The VanEck Vectors Semiconductor ETF ( SMH ) fell 2.2%.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.25% and the Global X US Infrastructure Development ETF ( PAVE ) was down 0.3%. US Global Jets ETF (JETS) held high. The SPDR S&P Homebuilders ETF ( XHB ) fell 1.4%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) fell 0.9%. The Health Care Select Sector SPDR Fund ( XLV ) was down 0.8%.
As a result of more speculative stock stocks, the ARK Innovation ETF (ARKK) fell 4% and the ARK Genomics ETF (ARKG) fell 3%. Tesla stock is a large holding across Ark Invest’s ETFs.
Top five Chinese stocks to watch now
Shares close to buy points
United Rentals shares rose 0.5% to 347.29, just above the 21-day mark. URI stock has a buy point at 368.04 from a consolidation going back to November 2021. Breaking the downtrend of the handle could offer an early entry. Several plays with heavy equipment, included Deere (OF), larva (CAT) and Titan Machinery (TITN), also looks strong.
The UNH share rose 0.8% to 539.32. The Dow Jones giant has a buy point at 558.20 from a flat base next to a cup-with-handles consolidation.
UAL shares climbed 2% to 45.92, just above the 45.67 cup-with-handle buy point, according to MarketSmith analysis. Some other airline and travel stocks look strong.
Why this IBD tool simplifies the search for top stocks
Market rally analysis
The stock rally continues a frustrating trend of jumping four steps ahead, then giving it back over the next few days.
The major indexes have fallen solidly for two straight sessions, wiping out or undermining the big gains on Fed Chairman Jerome Powell’s speech last Wednesday.
The S&P 500 index, which fell back below the 200-day line on Monday, extended its losses on Tuesday to undercut the 21-day line. The Russell 2000, which fell below the 200-day and 21-day lines, crashed to its lowest trade since Nov. 9, with the 50-day line coming back into play.
The S&P MidCap 400 closed below its 21-day line for the first time since Oct. 20 and pulled back to test its 200-day.
The Dow Jones, which has led the market rally, fell below its 21-day line for the first time since Oct. 14, but is well above its 200-day mark.
The lagging Nasdaq broke below its 21-day line and is once again approaching its 50-day line, just above the 11,000 level.
All of these indices closed at their worst levels since October 9, just before the gap from the October 10 CPI inflation report.
Last Wednesday’s big market gains were puzzling at the time, because Fed Chair Powell didn’t say anything particularly different or dovish. The major indexes held up on Friday, with Treasury yields eventually closing lower, despite the hot jobs report being even more puzzling.
But the technical picture is known.
Since the stock market rally started on 13 October, the major indices have had several large one-day gains – such as on 28 October and 30 November. But then they soon fell back, and wiped out most, all or more than all of the great gain.
So just as the major indexes are hitting higher highs and leading stocks are flashing buy signals, the market rally is starting to fade again.
Time the market with IBD’s ETF market strategy
What to do now
So far, the market rally has eventually rebounded each time, setting higher highs along the way. But that doesn’t mean it will happen this time. More importantly, it doesn’t mean your stocks will rise again.
Until the S&P 500 moves decisively above the 200-day line, investors should be cautious about adding exposure. The Nasdaq and Russell 2000 are falling below their 50-day lines, and the S&P 500 testing its October highs will be signs of reducing exposure further.
Also note that the November CPI inflation report will be out on December 13th, with the year-end Fed rate hike and Powell’s press conference the following day. These major events can provide the catalyst for a market move higher or lower.
So investors should be ready to act. That means having watch lists ready, but it also means being engaged and flexible.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
YOU MAY ALSO LIKE:
Do you want to make quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s premium stock lists, tools and analysis
Tesla vs. BYD: Which EV giant is the best buy?