Dow Jones Futures: Market Rally Holds Key Levels, Salesforce Rises Late; Do not fall for this

Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. Salesforce.com (CRM) led to key revenues after the closing, with Nio and other Chinese electric car manufacturers releasing sales data before the opening. The stock market closed mixed on Tuesday after retiring first, with Nasdaq holding a key level after last week’s great progress.

X

The market is in a confirmed upward trend, and investors have the green light to add some exposure. But do not fall into the trap of buying hot stocks that expand, such as Schlumberger (SLB) and the Albemarle share.

Key income

Salesforce and HP Inc. (HPQ) reported after closing.

Salesforce revenue fell, but beat impressions. The guidance was medium to light. But the CRM stock jumped 9% overnight. Shares recently hit a two-year low, but the business software giant is still an industry watch.

HP revenues also topped the impressions as the printer and PC giant raised the low end of the year-round EPS target, although the overall outlook was roughly in line. HP shares rose in expanded trading. Shares rose 0.2% in Tuesday’s regular session to 38.84, the fourth straight in a row as they retreated from the 200-day line and took back the 50-day line. The HP stock has a consolidation buying point of 41.57, but 39.81 can serve as an early entry.

China EV sales

Meanwhile, China EV manufacturers Nio (NIO), Xpeng (XPEV) and Li Auto (LI) should report May deliveries before Wednesday’s market opening.

The nine-share jumped on Tuesday, along with Xpeng and Li Auto, to ease Covid restrictions, improve financial data and various new EV incentives. But all three are in downward trends.

China EV and battery giant BYD (BYDDF) will probably release May sales on Friday, after defying the Covid influences with record sales in April. The BYD share is still within an early buy point.

Tesla (TSLA) China sales will be launched in a week or two as production at the Shanghai plant recovers. The TSLA share has declined from the 2022 lows in recent days.

The video embedded in this article discussed Tuesday’s market action and analyzed the Schlumberger stock, Albemarle (ALB) and ADM (ADM).

The ALB stock is on the IBD Leaderboard. The ADM stock is on SwingTrader.

Dow Jones Futures today

Dow Jones futures rose 0.6% at fair value. The CRM stock is a Dow Jones component. S&P 500 futures rose 0.4% and Nasdaq 100 futures rose 0.3%.

The 10-year government interest rate rose 2 basis points to 2.86%.

Futures for crude oil in the US rose slightly.

China’s private Caixin manufacturing index rose 2.1 points in May to 48.1, just above estimates. It follows a much stronger than expected official factory meter. Both were below the 50 level, but pointed to a slower decline as Covid restrictions eased. Shanghai largely closed lockdowns from June 1.

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

Stock market rally

The stock market rose somewhat on Tuesday, but closed by low intraday levels.

The Dow Jones Industrial Average fell 0.7 percent in Tuesday’s trading session. The S&P 500 index fell 0.6 percent. The Nasdaq composite retreated 0.4%. Small-cap Russell 2000 cut 1.3%.

The US crude oil price fell 0.4% to $ 114.67 a barrel, after recovering above $ 119 short. The European Union’s move to partially block Russian crude oil imports strengthened prices on Tuesday morning, along with China easing shutdowns. But OPEC is considering whether to exclude Russia, which has seen production fall under import bans and sanctions, from OPEC + production limits, according to The Wall Street Journal. This could pave the way for Saudi Arabia and the United Arab Emirates, which have some surplus capacity, to pump significantly more.

Futures on natural gas fell 6.7 percent.

The 10-year government interest rate rose 10 basis points to 2.84%, and recovered from the 50-day line. China, which eased Covid restrictions, and Fed Governor Christopher Waller supported “several” more half-point rate hikes helped stimulate government interest rates, which had been lower for several weeks.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.75%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.2%. iShares Expanded Tech-Software Sector ETF (IGV) released 2%. CRM is a large IGV portfolio. VanEck Vectors Semiconductor ETF (SMH) was down 0.4%.

SPDR S&P Metals & Mining ETF (XME) fell 3.5% and Global X US Infrastructure Development ETF (PAVE) 1.4%. US Global Jets ETF (JETS) fell 0.6%. SPDR S&P Homebuilders ETF (XHB) fell 1.3%. Energy Select SPDR ETF (XLE) gave up 1.5%, with the SLB share a remarkable stake. Financial Select SPDR ETF (XLF) fell 0.3%. Health Care Select Sector SPDR Fund (XLV) decreased 1.3%.

As a result of more speculative history shares, the ARK Innovation ETF (ARKK) fell 2.9% and the ARK Genomics ETF (ARKG) 4.1%. The Tesla stock is the largest holding across Ark Invest’s ETFs. Ark also owns some BYD shares.

Schlumberger action

The Schlumberger share on Tuesday rose briefly to 48.67, a three-year high and increased just from the official consolidation buy point of 46.37 which was cleared last Thursday. At that time, the SLB share was more than 15% above its 50-day line. But when crude oil prices erased large rises in the morning, the SLB share turned lower, and fell short of the official buying point. Investors who bought the oil service giant from early buy points, including 44.61, are still somewhat positive, although they may have wanted to make a partial profit on Friday or Tuesday morning. But the SLB stock shows the risk of buying breakouts, especially when the stock expands from the 50-day line.

Albemarle action

The Albemarle share fell 3.9% to 260.42 on Tuesday after large gains last week and for May. After flashing an early entry around 248 on Thursday, the ALB share was clearly expanded from that level on Friday. Maybe the lithium giant will form a handle.

Five best Chinese stocks to see now

China EV sales

EV startups Nio, Xpeng and Li Auto were to show improved production and sales from a gloomy April, when Covid shutdowns shut down production and supply chains. A full recovery could take place in June, as Shanghai greatly eases curbs of Covid from Wednesday.

Li Auto shares rose 3.25% to 25.07 on Tuesday, after regaining its 50-day line on Friday. The stock is still in a downward trend, with some distance to their 200-days.

The nine-share climbed around 5% to 17.39, just below its long-sliding 50-day line. Xpeng shares fell 4.4% to 23.50, also below the 50-day line.

BYD stood out with record sales in April, thanks to its own battery and chip production. The BYD share rose 2.8% to 35.80, a high in 2022. Last week, shares removed an early entry of 34.60 from a not quite finished handle. The BYDDF share has a buy point of 41.34 from a deep cup base.

Tesla Shanghai production is approaching normal, but production in May was still far below normal. Sales data from Tesla China will not come until a week or two later as part of industrial trade data. Tesla shares fell 0.2% on Tuesday to 758.26, after reaching a 10-month low on May 24, but rose back for a weekly rise of 14%.

China EV Giant flashes buy signal as it takes on Tesla Model 3

Market Rally Analysis

The stock market rise made no progress on Tuesday, but did not lose much ground.

The major indices fell on Tuesday morning, not a big surprise after last week’s strong gains, especially when government interest rates rose sharply to start the week. But the Nasdaq found support at its 21-day moving average, while the Dow Jones and S&P 500 never got that far down.

Still, it was a distribution day, with volume increases on the NYSE and Nasdaq.

The rise in shares is in a confirmed upward trend thanks to Nasdaq’s follow-up day on Thursday. Nasdaq followed up with another large price gain in rising volume on Friday. The Dow Jones and S&P 500 have not had follow-up days so far, but are approaching their 50-day moving average.

The 50-day line can be a key test for the stock market rise. This may be where the major indices return to their lowest levels. A crucial move over the 50-day limit suggests that this may be more than a rally in the bear market. But there will still be plenty of overhead resistance, with the 200-day line and the peaks at the end of March also important levels.

Growth stocks, especially speculative growth, had a tough Tuesday, although China EV and internet stocks in general picked up again. Drug producers and some large biotechnology companies withdrew. Mining and metal stocks, some of which showed only signs of life, had a tough day.

Time market with IBD’s ETF market strategy

What to do now

Tuesday’s market action was normal. With few stocks to buy on Tuesday, there was no good reason to increase slim to modest exposure.

It is never a good idea to buy extended stocks, but especially in a flimsy, volatile market. Oil stocks were high on Tuesday morning. But many were extended from purchase points or from 50-day lines, such as Schlumberger.

While investors should look for opportunities, there is still a time to be cautious. Keep your head straight and work on your watch lists.

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.

CAN YOU ALSO LIKE:

Why this IBD tool simplifies the search for top stocks

Get the next big winning stock with MarketSmith

Best growth stocks to buy and look at

IBD Digital: Unlock IBD’s Premium Stock Lists, Tools, and Analyzes today