Dow Jones hits bear market after today’s selloff; What to do now

Dow Jones futures were higher before Tuesday’s open. The Dow Jones Industrial Average ended in a bear market, down 20% or more from a recent peak, selling off more than 300 points on Monday.

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The stock market today

On Monday, the Dow Jones Industrial Average sold off 1.1%, while the S&P 500 fell 1%. The technology-heavy Nasdaq composite fell 0.6 percent. And the small-cap Russell 2000 lost 1.4%.

Among exchange-traded funds, Nasdaq 100 tracker Invesco QQQ Trust ( QQQ ) fell 0.4%, and the SPDR S&P 500 ( SPY ) fell 1%.

Key earnings reports this week come from Jabil (JBL), Cal-Maine Foods (CALM), CarMax (KMX), band (CTAS), Jefferies (JEF), Micron technology (MU), the Dow Jones stock Nike (OF) and Paychex (PAYX).

EV giant Tesla ( TSLA ) rose 0.25% after reversing early losses on Monday. Among Dow Jones stocks, apple ( AAPL ) traded up 0.2%, while Microsoft (MSFT) lost 0.2% in today’s stock market.

In the ongoing weakness of the stock market, DoubleVerify (DV), Hostess Brands (TWNK), Neurocrine Life Sciences (NBIX), Tour (TTC) and Vertex Pharmaceuticals (VRTX) — as well as the Dow Jones stock UnitedHealth (UNH) — is among the best stocks to watch. Remember, the deeper stock market correction is a good reason for investors to sit on the sidelines.

DoubleVerify is an IBD Leaderboard stock. Hostess and Toro were featured in this week’s Stock Near A Buy Zone column.

Dow Jones Futures Today: Treasury Yields, Oil Prices

Ahead of Tuesday’s open, Dow Jones futures rose 0.35% versus the real value, while S&P 500 futures rose 0.3%. Nasdaq 100 futures rose 0.35% above fair value. Keep in mind that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular session.

The 10-year Treasury yield rose to 3.87% on Monday, reaching another new high. The 10-year Treasury yield is at its highest level since April 2010, when it peaked at around 4.01%. Meanwhile, US oil prices continued lower on Monday, falling almost 3%. West Texas Intermediate futures traded below $77 a barrel, the lowest level since early January.

What to do in the deteriorating stock market correction

Amid sustained selling across the major stock indexes, IBD’s market trend remains a “market in correction.” That means investors should be defensive and on the sidelines.

To prepare for another stock market rally, investors should wait for a follow-up day. When the market is in a correction, look for at least one major index to try for a bottom. We are still looking for the first day the index closes higher as Day 1 of the attempted rally. The action on day 2 and day 3 is irrelevant as long as the index does not undercut its most recent low. If the low is breached, the rally attempt has been made and the market must try again.

On day 4 and beyond, look for the Nasdaq or S&P 500 to rise sharply in higher volume than the previous session. It is a follow-up day. It gives investors the green light to start buying leading stocks that break out previous correct buy points. It should put your portfolio and mindset in sync with the stock market by gradually committing capital to leading stocks.

It is nevertheless important for investors to make good use of this downtime. Now is an ideal opportunity to study market bottoms and build a strong watchlist of top-performing stocks. Many long-term leaders tend to break out at or near the follow-through, the market’s bottom signal. Missing that early opportunity can be a costly mistake.

Monday’s The Big Picture column commented: “At one point Monday, the Nasdaq Composite was up 1.4%. That turned out to be a mirage, as stock market indices quickly faded and closed with more losses. The faux rally was symptomatic of bear markets, when stocks often find strength in the early hours, but buyers disappear towards the end.”

Five Dow Jones stocks to watch now

Dow Jones stocks to watch: UnitedHealth

Dow Jones stock UnitedHealth fell 1% on Monday, halting its decline around the long-term 200-day line. Shares are building a flat base that has a buy point at 553.23, according to IBD MarketSmith chart analysis. With shares about 8% off their 52-week high, they have their work cut out for them ahead of a potential breakout.

UNH stock scores a strong 95 out of a perfect 99 IBD Composite Rating, according to IBD Stock Checkup. Investors can use the IBD Composite Rating to easily measure the quality of a stock’s fundamental and technical metrics.

4 top growth stocks to watch right nowrent stock market correction

Top stocks to watch: DoubleVerify, Hostess, Neurocrine, Toro, Vertex

IBD Leaderboard stock DoubleVerify remains below the 28.07 buy point in a bottom base despite Monday’s 0.55% gain. Per Leaderboard commentary, DoubleVerify has reversed below an early trendline entry near 27 in a bottom base and is seeking support near its 50-day line.

Twinkie maker Hostess Brands is in 5% buy territory above a cup-with-handle buy point of 23.23, according to IBD MarketSmith chart analysis. Bullishly, the hostess RS line is at new heights. Remember, the weak market trend should keep you on the sidelines, but it is one of the best stocks to watch.

Wednesday’s IBD 50 Stocks To Watch pick, Neurocrine Biosciences, is building a flat base that has a buy point at 109.36. The stock finally gave up support around its 50-day line on Monday, falling 2.8%. Despite Monday’s slide, the RS line hit a new high last week, so the stock has avoided much of the market’s weakness.

The Toro share has a flat base and approx. 6% away from a 92.05 buy point. The shares are trading just below the 50-day line after Monday’s fall of 0.5%. The RS line is at new heights.

Vertex Pharmaceuticals fell further below its 50-day line after Monday’s loss of 2.35%. It forms a flat base with a buy point of 306.05. The stock’s resilience makes it a top idea to watch.

Join IBD experts as they analyze leading stocks in the current stock market correction on IBD Live

Tesla shares

Tesla shares rose 0.25% on Monday, snapping a four-day losing streak. Nevertheless, the shares are sharply below the 50-day mark after last week’s big losses.

Last week, the stock’s relative strength line reached its highest level since April, but has fallen sharply in recent sessions. Shares are about 34% off their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among the Dow Jones stocks, Apple shares rose 0.2% on Monday, ending a three-day losing streak. The stock is trading near recent lows, although the RS line hit a new high on Monday.

Microsoft lost 0.2% on Monday, ending close to Friday’s 52-week low. The software giant is more than 30% off its 52-week high.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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