Dow Jones futures rose modestly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally attempt showed resilience on Wednesday. The major indices fell sharply on Wednesday morning as government yields and the dollar rebounded, but equity indices rebounded to close only slightly lower.
The market recovery has still not proven itself, although it may happen soon. Patience—and cash—remains key.
Tesla (TSLA) continued to slide, with Elon Musk-Twitter (TWTR) takeover saga still not quite over. Enphase Energy (ENPH) plunged, breaking below recent lows on a bad day for solar.
Medical names held up well, included Vertex Pharmaceuticals (VRTX), Cigna (CI), Shockwave Medical (SWAV), Sarepta Therapeutics (SRPT), Cardinal health (CAH), Option Care Health (OPCH) and Neurocrine Life Sciences (NBIX). Meanwhile, At Semiconductor (ON), Imp (PI) and Arista Networks (ANET) are technical names that measure up.
Oil stocks were strong, and OPEC+ agreed to a significant production cut at Wednesday’s meeting. Exxon Mobil (XOM) also signaled strong results for the third quarter. XOM stock gave a buy signal on Wednesday.
VRTX shares and Neurocrine Biosciences are on the IBD Leaderboard, with PCTY shares and Shockwave on the watch list. SWAV stock, Vertex, Paylocity, Sarepta and Onsemi are on the IBD 50. Arista Networks, Vertex, On Semiconductor and ENPH stock are on the IBD Big Cap 20. On Semi was Wednesday’s IBD Stock Of The Day, with Paylocity, Enphase and ANET stocks also recent elections.
Dow Jones Futures today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures rose 0.5% and Nasdaq 100 futures rose 0.7%.
The 10-year government yield fell 3 basis points to 3.73%.
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 on Wednesday
The attempted stock market rally fell on Wednesday morning, but the major indexes recovered well from session lows, briefly turning positive before fading to small losses.
The Dow Jones Industrial Average fell 0.1% in Wednesday’s trading. The S&P 500 index fell 0.2 percent. The Nasdaq composite fell 0.25 percent. Small-cap Russell 2000 lost 0.6%
U.S. crude oil prices rose 1.4% to $87.76 a barrel, extending strong weekly gains. OPEC+ agreed to cut production quotas by 2 million barrels, at the high end of expectations for Wednesday’s meeting.
The 10-year Treasury yield jumped 14 basis points to 3.76%, erasing most of this week’s losses.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.45%. The VanEck Vectors Semiconductor ETF (SMH) rose 1%.
The SPDR S&P Metals & Mining ETF ( XME ) fell 0.3%. The Energy Select SPDR ETF (XLE) rose 2.1%, with XOM shares a massive holding. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.3%.
As a result of more speculative stock stocks, the ARK Innovation ETF (ARKK) fell 1.8% and the ARK Genomics ETF (ARKG) fell 1.9%. Tesla stock remains a top holding across Ark Invest’s ETFs.
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XOM shares rose 4% to 99.12, extending a move above the 50-day line, now up 14% for the week. Exxon shares broke a downtrend line in a four-month consolidation. Investors can use 101.66 as another early entry, with 105.67 as the official buy point. The relative strength line for XOM stock is already at a new high.
Rising energy prices are fueling the latest revival in Exxon stock. Late Tuesday, Exxon signaled strong third-quarter results.
Stocks that hold up
VRTX shares, Neurocrine Bio and Option Care Health are all near buy points and can arguably be acted upon now. SWAV stocks, Cigna and Sarepta are all very close to being actionable from trendline entries. So are the ANET shares and On Semiconductor, which flashed early buy signals, but on light volume. The PI share is close.
Enphase shares plunged 9.25% to 261.60, breaking well below recent lows in the heaviest volume since the July 27 earnings gap. ENPH stock, which peeked above its 50-day line and gave a buy signal on Tuesday, is now decisively below that key level, according to MarketSmith analysis.
First Solar ( FSLR ), which went through a brief consolidation Tuesday, fell 5.9% on Wednesday, with several other solar plays selling off.
Tesla shares fell 3.5% to 240.81, but were off their intraday low of 233.27. For the week, TSLA shares have fallen 9.2%, extending significant losses since reversing lower on September 21. Shares are still on the up after Sunday’s weak third-quarter deliveries, which reflected weak demand in China.
Meanwhile, CEO Elon Musk’s alleged intention to move forward with the $44 billion Twitter deal is raising concerns that he will sell more TSLA stock to pay for it.
The Musk-Twitter saga is not quite over. While Musk says he’s willing to move forward with the original $54.20 per share deal, Twitter isn’t just going to take him at his word and agree to drop the lawsuit. The two sides are in talks with the aim of agreeing on terms that provide real assurances.
Musk could own Twitter in just a few days.
But for now, the Musk-Twitter takeover trial is still set to start on October 17. Twitter’s lawyers are set to depose Musk starting Thursday, though it’s an open question whether he will actually appear.
Twitter shares fell 1.35% to 51.30. That’s after rising 22% to 52 on Tuesday, after Musk resigned.
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Market rally analysis
The share trial is at an important time. Is this the start of a meaningful uptrend or just a short-term bounce from oversold conditions?
Wednesday’s action didn’t answer those questions, but it was encouraging.
The market went up on Monday and Tuesday. On Wednesday, bulls showed that they were not going to give up at the first sign of trouble.
The Dow Jones, S&P 500 and Nasdaq fell from near their 21-day moving averages at the open, soon giving up the bulk of Tuesday’s gains. But they regularly chipped away at losses and became positive before a last-minute move back into red.
The Dow Jones and S&P 500 briefly peeked above their 21-day lines as the Nasdaq composite closed higher.
The Russell 2000 managed to hold its 21 days, which looks set to be a key near-term level for all indices.
Losers easily outpaced winners on Wednesday, as market breadth was weaker than the index’s close suggests.
Meanwhile, a falling 10-year yield and sliding dollar were major catalysts for the Monday-Tuesday market rally. So it’s no surprise that stocks sold off Wednesday morning with Treasury yields and the dollar roaring back.
The major indexes pared losses despite returns staying close to session highs. It can happen on a specific day. But over time, stocks are unlikely to advance meaningfully, or even sustain, if Treasury yields move higher.
Oil, gas and coal stocks such as Exxon are on the rise, thanks to reviving energy prices.
Medical names such as Vertex and Option Care Health held up relatively well, even at the market’s intraday lows. So did Arista, PCTY and ON stock. A few agriculture and metal plays are shaping up.
A number of leading shares fell sharply, at least intraday. Some still have decent charts, while others like ENPH stock suffered significant damage.
Investors can now look for a follow-up day to confirm the new rally. Friday’s jobs report could be the catalyst for a strong market rally or sell-off.
A follow-up day will be a positive signal, but not a guarantee. For now, it is still a stock market rally attempt in a sharp bear market.
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What to do now
Investors must be patient. An attempted market rally has seen some strong gains this week, with a number of leading stocks triggering or nearing buy points. But it has done nothing to signal its staying power.
Being all in cash, or with minimal exposure, is still a good strategy. If this turns out to be a meaningful market rally, there will be plenty of opportunities after a follow-up day.
For investors who have dipped into some promising names this week, be ready to pull out if trades turn against them.
All that said, a confirmed stock market rally could come at any time. A number of stocks are showing strength and are likely to be actionable with further market strength. So investors need to stay engaged and work on their watch lists.
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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