Dow Jones futures rose slightly late Thursday, along with S&P 500 futures and Nasdaq futures. The stock rally came from highs on Thursday morning as the major indexes neared new resistance levels, while energy prices and government yields rallied.
Shares of Rivian ( RIVN ) fell more than 2% overnight after the EV startup reported mixed results for its second quarter after the close. The RIVN share rose 4.1% in Thursday’s session. Illumina ( ILMN ) plunged 17% after missing analysts’ Q2 estimates and giving weak guidance.
As we move into the late earnings season, most of June’s quarterly earnings so far have met or exceeded expectations. But the market continues to treat missteps mercilessly. It’s a healthy reminder that investors should stay nimble, ready to react to market strength or weakness.
All together (ON), EQT Corp. (EQT), Penske Automotive Group (ON G), Builders FirstSource (BLDR) and Tesla (TSLA) works with handles or handle-like patterns. EQT and BLDR shares are actionable, while ON shares quickly supported an early entry on Thursday.
Builders FirstSource is on SwingTrader and was Thursday’s IBD Stock Of The Day. The ON stock is at the IBD 50.
Dow Jones Futures today
Dow Jones futures rose 0.1% relative to fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.15%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Stock market rally
The stock rally started strong, then faded, with the indexes mixed.
The Dow Jones Industrial Average settled up less than 0.1% in Thursday’s trading. The S&P 500 index posted a fractional loss. The Nasdaq composite closed down 0.6% with software names Workday (WDAY) and Octa (OKTA) at the bottom of the index. The small-cap Russell 2000 ended with a gain of 0.3%.
US crude oil prices rose 2.6% to $94.34 a barrel. The prices of natural gas rose by 8.2 per cent.
Rising oil and gas prices are good news for energy stocks, which helped prop up Thursday’s stock action. But if the energy price rise continues, it could halt or reverse some relief at the pump and inflation in general.
The 10-year Treasury yield opened lower but rebounded 10 basis points to 2.89%, the highest rate in three weeks. That despite another tame inflation report.
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Shares close to buy points
Onsi stock took advantage of this week’s Nvidia (NVDA) and Microns (MU) warnings to stop the big run and carve out a handle. It now has a buy point at 69.36 within a seven-month consolidation. On Thursday, ON shares broke the downtrend in the handle, reaching 68.74 intraday, but shares closed down 0.2% at 66.36.
EQT stock is working with a 46.81 cup handle buy point. The natural gas play has found support around the 21-day and 50-day lines. On Thursday, EQT shares rose 5.3% to 45.80, extending a bounce from the 21-day line. But the volume was below average.
BLDR stock has a buy point of 74.58 cup with handle. Shares rose 2.8% to 70.26 on Thursday in above-average trading. The rebound from the 200-day line and break of the downtrend to the handle provided an aggressive entry.
PAG shares rose 0.8% to 118.28, moving toward a buy point of 121.55 cup handle, according to MarketSmith analysis.
Tesla shares fell 2.6% to 859.89. Unlike the other stocks mentioned here, the EV giant doesn’t have a real handle, trading below the 200-day line. A bullish move above the 200-day line, perhaps clear of last week’s high of 940.82, could offer an aggressive entry.
Market Rally Analysis
The stock market rally started on Thursday with a solid rise, built on Wednesday’s great progress. But key indexes retreated, with the Nasdaq closing lower. Trading was higher, and Nasdaq volume rose significantly.
The Russell 2000 hit an intraday high just below the 200-day mark. The big-cap indexes are a little further from the long-term average, but the Nasdaq hit resistance at the 13,000 level.
While the market rally just entered a power trend after Wednesday, the most recent power trend went almost immediately in early April. The market direction seems uncertain in the very short term.
Perhaps the market will quickly go higher, as the major indices did on Wednesday after the reversal on Monday morning. Or maybe this is the start of a retreat.
A pullback would allow more stocks to form handles and allow moving averages to catch up. But the setback may turn out to be somewhat more serious.
The market management has been expanded.
The energy sector is reviving again, especially natural gas like EQT shares. The prices of oil and natural gas are on the way back. If it continues, fossil fuel stocks could lead again.
But as energy stocks thrive, other sectors have struggled in 2022, due to broader economic concerns. If inflation concerns send government interest rates sharply higher, growth stocks in particular may be affected.
For now, hot chip stocks like Onsemi have taken a breather recently, but they could easily go higher, especially if the market rally continues to climb.
Lithium plays are strong, while some metal stocks look interesting. Medicines continue to be an area of strength, although different healthcare segments will shift in leadership.
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What to do now
It’s not necessarily a good time to add exposure in the very short term, except possibly the energy sector. Consider taking some partial profits.
Work on your watch lists, long and short. With the major indexes and many stocks coming up to key levels, often in low volume, there can be a number of shorting opportunities if the market pulls back.
If nothing else, just considering short setups can help temper an overly bullish mindset. Keeping an open mind is the key to long-term investment success.
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.
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