Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Stocks rallied sharply on Wednesday, with the Nasdaq ending a seven-day slide as energy prices fell and government yields retreated. The major indexes are moving back towards their 50-day moving averages, but face this big test.
apple (AAPL) unveiled its new iPhone 14 and several other products. Solar energy stocks continued to lead the way. Enphase Energy (ENPH), Array technologies (ARRY), Shoals Technologies (SHLS), Sun run ( RUN ) and Invesco Solar ETF ( TAN ) were all flashing buy signals on Wednesday.
Meanwhile, Twitter ( TWTR ) jumped as the social media firm won some, but not all, lawsuits settled Wednesday in a Delaware court regarding Tesla (TSLA) CEO Elon Musk’s takeover bid.
Apple unveiled the iPhone 14 and iPhone 14 Plus on Wednesday at a “Far Out” product event, along with new Apple Watch and Air Pod options. The Apple iPhone 14 and other products had long been expected and offer largely incremental improvements. The new iPhone will have satellite communication capabilities. The big surprise? Apple iPhone prices are not going up.
Apple shares rose 0.9% to 155.96, still below the 50-day mark. Beyond that, AAPL needs to clear the 200-day moving average before moving toward a buy point at 176.25.
TWTR shares rose on Wednesday after the Delaware Chancery Court rejected Elon Musk’s bid to delay the Twitter takeover trial, which is set to begin in October. But it will let him add a recent whistleblower’s allegations to his countersuit. Twitter is suing Musk to force him to close the takeover. Musk has failed to pay $44 billion, or $54.20 per share, and is trying to get out of the deal. Legal experts continue to see Twitter as making a strong case, with the Delaware judge’s comments and rulings underscoring that argument.
Twitter stock jumped 6.6% to 41.21 on Wednesday, back above the 50-day and 200-day lines. TSLA shares rose 3.4% to 283.70, rebounding from the 50-day line but still below some other key levels. A decisive move above the 200-day line and short-term highs would offer an aggressive entry.
TAN, the Invesco Solar ETF, was added to SwingTrader and was Wednesday’s IBD Stock Of The Day. The RUN stock was Tuesday’s Stock Of The Day. Enphase and Tesla stock are on the IBD 50. ENPH stock is also on the IBD Big Cap 20.
Dow Jones Futures today
Dow Jones futures rose a fraction relative to fair value. S&P 500 and Nasdaq futures were roughly flat.
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 market rally started little changed on Wednesday, but gained momentum throughout the day.
The Dow Jones Industrial Average rose 1.4% in Wednesday’s trading. The S&P 500 index rose 1.8 percent. The Nasdaq index rose 2.1 percent. The small-cap Russell 2000 rose 2.2%.
US crude oil prices plunged 5.7% to $81.94 a barrel, the lowest close since January 11. Natural gas futures continued to decline, down 3.7%. Although these declines reflect, among other things, economic weakness, they signal further large falls in overall inflation into at least September.
The 10-year Treasury yield fell 7.5 basis points to 3.265% after rising 15 basis points on Tuesday.
Markets are locking in a third straight Fed rate hike of 75 basis points on September 21, even though the consumer price index for August is due out next week. Markets currently expect quarter-point Fed rate hikes in November and December.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.3% as energy names took a toll. Innovator IBD Breakout Opportunities ETF (BOUT) rose 1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 2.1%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 1.6%.
The SPDR S&P Metals & Mining ETF (XME) rose 0.9% and the Global X US Infrastructure Development ETF (PAVE) rose 2%. The US Global Jets ETF (JETS) rose 3.5 percent. The SPDR S&P Homebuilders ETF (XHB) jumped 2.8%. The Energy Select SPDR ETF (XLE) fell 1.2% and the Financial Select SPDR ETF (XLF) retreated 2%. Health Care Select Sector SPDR Fund (XLV) rose 1.6%
ARK Innovation ETF ( ARKK ), reflecting more speculative history stocks, rose 3.4% and ARK Genomics ETF ( ARKG ) rose 4.7%.
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Enphase shares jumped 8% to 316.31 on Wednesday, breaking out to a new high as it continued a pullback from its 21-day line. Shares had consolidated strongly in recent weeks and were close to forging a flat base before Wednesday’s move. ENPH stock has now jumped x% so far in this short week. Investors can still buy Enphase, although it is approaching extended from the 21st. It is well extended from the 50-day.
The relative strength line has reached new highs, reflecting Enphase stock’s strong outperformance compared to the S&P 500 index.
ARRY shares rose 6.1% to 22.03, bouncing from a 21-day high. Investors can use it as an early entry for the maker of ground-mount solar systems, or wait to see if Array can break the downtrend in a handle in a very deep cup bottom. The official purchase point is 24.10.
SHLS stock jumped 7.6% to 27.76 on Wednesday, continuing a pullback from the 21-day line and hitting a 2022 high, making an aggressive entry.
RUN stock rose 10.5% to 36.58, rebounding from its 21-day moving average and breaking the downtrend into a brief consolidation. It provided an early entry into the solar installation specialist. On Tuesday, Sunrun shares found support just above the 10-week moving average.
Invesco Solar ETF TAN jumped 6.2% to 87.46, moving above its 21-day line and breaking above the downtrend of a brief consolidation in heavy volume. It continues Tuesday’s bounce from the 50-day line. The TAN ETF’s top holding is ENPH stocks, with components from Sunrun, Shoals and ARRY.
The TAN ETF has big moves, but is less risky and volatile than buying an individual solar stock.
Market rally analysis
The not-quite-dead stock market rally showed some signs of life, with the Nasdaq snapping a seven-session losing streak as the major indexes rebounded. However, volume was down compared to the previous session on both the Nasdaq and NYSE.
The market was no doubt overdue for a bounce after losing so much ground in a short period of time. But that does not mean that the downward pressure is over. If the stock market continues to bounce, the major indexes will soon run into the 50-day and 21-day moving averages. Decisively moving above these levels would be a good first step. But the 50-day line has acted as a ceiling recently.
Above all, there is the 200-day moving average.
One reason for Wednesday’s stock market rise was a modest decline in government interest rates, after a sharp rise on Tuesday. But the upward trend in government interest rates is still well intact.
Solar stocks are hot, while pollution control names clean up. Health insurers, some retail names look solid. Nevertheless, the lead is relatively narrow for now.
Oil and gas names struggled with heavy losses in crude oil and natural gas.
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What to do now
Investors who chose not to do anything on Wednesday had good reasons. A one-day bounce in a downtrend below key support is hardly a clear signal.
In contrast, there were more buying opportunities on Wednesday. But investors who got into some of these names might want to consider taking partial profits quickly, perhaps with an initial sell for a 5% gain, or if the major indexes hit their 50-day lines. That can help reduce the very real risk that the major indexes will soon continue to decline, along with possible sector rotation or stock-specific news.
If new trades start to go your way, be quick to trade. If you’re going to be aggressive about getting into a questionable total market, you need to be just as quick to get out, if not faster.
Whether you added exposure on Wednesday or not, the risk of buying could be higher in the near future. The market rally has had a bounce, while the 50-day line is now much closer.
Continue working on watchlists. Look for stocks with strong relative strength. If the market builds momentum and clears some initial hurdles, such as the 50-day line, a number of stocks with strong RS lines will flash buy signals.
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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