Dow Jones Futures: Market Correction Shows No Grace; Fed Meeting, Apple Lead 5 Big Catalysts

Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures, heading into a massive week of earnings from Apple to Tesla, as well as a central Federal Reserve meeting. Bitcoin and other cryptocurrencies continued to sell out over the weekend.

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The stock correction took a good hold last week, with the large indices suffering heavy losses and breaking several important support levels. Even power sectors, especially finance, came under heavy pressure. So far, bulls have only made temporary accusations, with investors quick to sell returns instead of buying the downturn. It’s a time to be heavily defensive.

The Tesla stock and the Dow Jones giants apple (AAPL), Microsoft (MSFT) and larva (CAT) is in print this week, along with dozens of other quality companies. But the main event will probably be the Federal Reserve meeting on 25-26. January.

The announcement of the Fed meeting on Wednesday afternoon and Fed CEO Jerome Powell’s press conference could set the tone for the stock market and government interest rates for several weeks to come. The Fed is expected to continue its accelerated bond decline, and stay on track to complete asset purchases by mid-March.

But the real problem is what happens next. Fed chief Powell is likely to comment on the timing and pace of interest rate hikes and balance sheet reductions. Talk about reducing the balance, and with a quick cut, has been a big reason why the 10-year government interest rate has risen and the stock market has entered a correction.

Tesla (TSLA) and Microsoft stocks are on the IBD Leaderboard. The MSFT share is on IBD’s long-term leader list. The Tesla stock is on the IBD 50 list.

The video embedded in this article discusses the market correction in depth, while also analyzing the Apple stock, UnitedHealth (UNH) and JB Hunt transportation services (JBHT).

Dow Jones Futures today

Dow Jones futures open at 18.00 ET, along with S&P 500 futures and Nasdaq 100 futures.

Bitcoin continued to sell along with other cryptocurrencies. The Bitcoin price plunged to around $ 35,000 after cracking $ 40,000 on Friday. It peaked at $ 68,990.90 in early November.

Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live

Coronavirus news

Coronavirus cases worldwide reached 351.82 million. Covid-19 deaths topped 5.61 million.

Coronavirus cases in the United States have reached 71.89 million, with deaths above 888,000.

Coronavirus cases in the United States are falling, albeit from extremely high levels. New York and other states that were hit early by the omicron Covid variant are leading the decline. Deaths have picked up in recent weeks, but not nearly as much as new cases.

Stock correction

The market correction took hold last week and did not let go, with the large indices falling every day during the holiday shortened week.

The Dow Jones Industrial Average fell 4.6% in last week’s trading. The S&P 500 index fell 5.7 percent. The Nasdaq composite plunged 7.6 percent. Small-cap Russell 2000 fell 8%.

The 10-year government interest rate rose to a two-year high of 1.87% intraday on Wednesday, but ended the week slightly down to 1.75%.

Crude oil futures rose 2.2% to $ 85.14 a barrel, despite retreating slightly later in the week from the highest levels since 2014.

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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 11.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 8.6%. iShares Expanded Tech-Software Sector ETF (IGV) retreated 5.2%, with MSFT stock as a key component. VanEck Vectors Semiconductor ETF (SMH) plunged 11.5% as the previously resilient chip sector broke hard.

SPDR S&P Metals & Mining ETF (XME) fell 10% last week. Global X US Infrastructure Development ETF (PAVE) fell 6.4%. US Global Jets ETF (JETS) fell 6.2%. SPDR S&P Homebuilders ETF (XHB) was down 7.7%. Energy Select SPDR ETF (XLE) lost 3.2%, even due to rising energy prices. Financial Select SPDR ETF (XLF) withdrew 6.5%. Health Care Select Sector SPDR Fund (XLV) falls 3.45%

As a result of more speculative history shares, the ARK Innovation ETF (ARKK) fell 10.9% last week and the ARK Genomics ETF (ARKG) 9.7%. The Tesla share is still number 1 across ARK Invest’s ETFs.

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Microsoft action

Microsoft revenue matures Tuesday night, providing insights to other software vendors and cloud giants. Microsoft shares had looked strong at the end of 2021, but have fallen in the new year. Shares fell 4.6% to 296.03 last week, approaching the 200-day line. A sharp decline from the 200 days may offer a buying opportunity for MSFT shares as a long-term leader.

For a traditional position trading, investors should wait until Microsoft regains at least a 50-day line, which probably would not happen without the broader market staging a real upswing. The official buying point is 349.77 from a flat base, according to MarketSmith analysis.

The relative strength of the Microsoft stock has fallen over the past two months, but has not plummeted. The RS line, the blue line in the given charts, actually ticked up last week. It is a reflection of how poorly the S&P 500 performed last week.

Tesla shares

Tesla revenues fall due Wednesday night. The electricity giant should report strong earnings growth in the midst of booming vehicle deliveries and strong pricing. Investors may be more interested in guidance for 2022, including an overall delivery target and when the factories in Berlin and Austin will finally open. They will also learn when future vehicles can arrive. Cybertruck production has reportedly been postponed until 2023, but Tesla has not confirmed it. Any tangible guide on 4680 battery cells will also be greatly appreciated.

Tesla shares plunged 10.1% to 943.90 last week. The shares lose sight of a now sliding 50-day line and are back below the key level 1000. The TSLA share is still traded within a somewhat loose double-bottom base, but is in the lower half to be safe. The purchase point is just over 1200.

The RS line for Tesla shares has been trending lower in the last two weeks. On the plus side, the TSLA stock has held up much better than most growth stocks, especially those with three-digit price-earnings ratios.

Apple action

Apple shares fell 6.2% last week, falling through the 50-day and 10-week moving averages, a solid sell signal. But the RS line for AAPL shares fell slightly.

Apple revenue is due Thursday night. Comparisons from previous years are getting much tougher for the iPhone giant. Guidance will be the key. A positive reaction to Apple’s earnings would not only lift the AAPL stock, but probably a number of chipmakers and other companies in the iPhone ecosystem.

Caterpillar stock

Caterpillar revenue ends a busy week on Friday.

CAT shares fell 6.5% to 214.09 last week, testing its 200-day line again. But there are four straight weekly wins, the last two on strong volume. Caterpillar shares have now taken care of the consolidation back to the beginning of June. The CAT share purchase point is now 230.43.

The RS line for the Caterpillar stock is good at heights, but has moved solidly higher so far in 2022.

Stock market analysis

It is a stock market correction, make no mistake. The major indices closed at or near the lowest sessions during the week, with the Nasdaq composition and Russell 2000 down more than 1% each day.

Nasdaq has fallen below its 200-day line for the first time since April 2020. The composite did not stop there, below the October lows to the lowest levels since June. Russell 2000 is at a low point in 52 weeks. The Dow Jones fell through its 50-day and 200-day lines last week.

The S&P 500 index, which led the market rally in 2021, broke below its 200-day line on Friday.

The advance-decline line, which has been hanging for several months, has plummeted in recent weeks.

Growth stocks continue to lead sales, but finances were hit hard last week when bond yields were reduced and earnings reports were weak at best. Metals and mining stocks, which looked so strong a week ago, plunged last week, although a few names still look OK. Energy stocks gave up some ground.

A setback in the market would not be a surprise early next week, as bulls try to take a stand near the S&P 500’s 200 days. The CBOE volatility index, often known as the VIX, has risen in recent days, finally peaking in early December. When the so-called market fear meter reaches extreme levels, it can signal that a short-term bottom is close.

The market tried to pick up again several times in the last week, but the feedback lasted only a few minutes or hours.

At some point, the shares will have a positive session, but that does not mean that the market has reached the bottom. Wait to see if the stock market rally attempt conducts a follow-up day to confirm the new trend.

Time market with IBD’s ETF market strategy

What to do now

The earnings season is usually a nail-biter, as investors have to decide whether to hold positions in the quarterly results. But now most investors should mostly have cash apart from the core holdings of longtime winners.

Investors should look for stocks that are holding up relatively well in the market correction. Do not worry too much about whether the shares are in the right bases or set up close to buy points. When a market rally attempt is after a few days, you can start focusing more on stocks that create buying opportunities ahead of a follow-up day. Right now you’re looking for raw talent.

Right now, Apple is giving up shares, but is still holding up reasonably well. It can look much better or worse after earning. UnitedHealth, JB Hunt and Travelers (TRV) have already reported earnings, which removes a significant uncertainty, but that does not mean they will continue to hold targets.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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