Dow Jones futures edged higher early Wednesday, along with S&P 500 futures and Nasdaq futures. The stock market rally picked up again on Tuesday, and the S&P 500 regained the 4,000 level. A huge Apple iPhone factory in China faced riots overnight amid Covid restrictions.
Deere (DE) reported better-than-expected earnings early Wednesday. DE shares jumped in pre-market trading, signaling a move out of the buy zone.
Deere earnings and guidance is important for a number of agricultural stocks, including CF Industries (CF) and Archer-Daniels-Midland (ADM), as well as machine manufacturers such as e.g larva (CAT).
Energy stocks continue to do well. Solar conductor Enphase Energy (ENPH), coal producer Peabody Energy (BTU), refiner CVR Energy (CVI), natural gas producer EQT Corp. (EQT) and LNG storage Excelerate energy (EE) are all near buy points.
EE stock broke out on Wednesday, and Enphase moved back into a buy zone. BTU shares, CVR Energy and EQT are actionable.
The ENPH share is on the IBD Leaderboard. EQT stock is on SwingTrader. Deere stock is on the IBD 50. Peabody Energy is Tuesday’s IBD Stock Of The Day.
Apple iPhone Factory Riots
Riots broke out overnight at one of Apple’s biggest iPhone factories in China, as hundreds of workers clashed with security. Over 100,000 workers have been forced to stay at the Foxconn campus in Zhengzhou for several weeks due to Covid concerns, with many reportedly not being paid during that time.
Protests are also taking place elsewhere amid renewed lockdowns and strict restrictions across much of China as Covid cases rise.
Apple recently warned that Apple iPhone 14 Pro models would be in short supply due to the Foxconn factory in Zhengzhou.
Apple shares fell a fraction early Wednesday. AAPL rose 1.5% to 150.18 on Tuesday, finding support near its 50-day line but still below its 200-day moving average.
Dow Jones Futures today
Dow Jones futures rose 0.1% relative to fair value. S&P 500 futures rose 0.1 percent. Nasdaq 100 futures rose 0.1 percent.
The 10-year government rate rose 1 basis point to 3.77%.
Crude oil futures fell more than 2%. Natural gas prices in the US rose by 7 percent. On Tuesday, Europe released details of a natural price cap, starting for one year from January 1, which is more than double current levels.
New Zealand’s central bank raised interest rates by a record 75 basis points, as expected.
Fed minutes from the November meeting will be published on Wednesday.
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 opened mixed on Tuesday, but received power for broad-based gains, and closed near session highs.
The Dow Jones Industrial Average rose 1.2% in Tuesday’s trading. The S&P 500 index and the Nasdaq composite both rose nearly 1.4%. The small-cap Russell 2000 rose 1.1%.
The 10-year government yield fell 7 basis points to 3.76%. But the two-year Treasury yield, more closely tied to Fed policy, was roughly flat at 4.53%.
The dollar fell back on Wednesday, after gaining in the previous three sessions. The dollar has fallen significantly since the end of September, especially from the beginning of November.
U.S. crude oil prices rose 1.1% to $80.95 a barrel, continuing to recover from Monday’s brief dip. Gasoline futures rose 4.3%, good news for refiners. Natural gas futures rose after falling more than 2% intraday.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) jumped 3.4%, helped by a number of energy and metals stocks. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 2.9%.
The SPDR S&P Metals & Mining ETF (XME) rose 3.2%, and the Global X US Infrastructure Development ETF (PAVE) rose 1.3%. The SPDR S&P Homebuilders ETF (XHB) rose 1.9%. The Energy Select SPDR ETF (XLE) rose 3.1%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.9% to a seven-month high.
Reflecting stocks with more speculative stories, ARK Innovation ( ARKK ) gained 0.3% and ARK Genomics ( ARKG ) fell 0.4%.
Top five Chinese stocks to watch now
Energy stocks close to buy points
Enphase shares rose 4% to 320.44, closing above a 316.97 cup-with-handle buy point for the first time. But the last three times ENPH stock reached these levels, it turned lower. Enphase stock tends to have large daily swings. So investors can watch to see if ENPH stock pulls back to its rapidly rising 21-day moving average.
Some other LNG stocks are showing strength, with Flex LNG (FLNG) breaks out and Cheniere energy (LNG) regains its 50-day line.
BTU shares jumped 6.7% to 29.62, just below a 30.15 buy point in a seven-month consolidation. Tuesday’s move broke the trend line of the handle, providing an early entry. However, BTU stock is 9.3% above the 21-day line and 17% above the 50-day. The handle was formed following strong Peabody Energy earnings.
CVR Energy shares rose 4.85% to 40.85, back above an old buy point of 39.81 that can still be seen as valid. The CVI share also has a three-week tight pattern with an entry of 42.31. Getting above 41.31 could provide an early entry into the tight pattern.
EQT stock jumped nearly 6% to 43.79, breaking back above the 50-day line after rallying from the 200-day on Monday. Stocks are breaking a downward trend line. The official buy point is 52.07.
EE shares rose 9.6% to 30, clearing a buy point at 28.49 cups on above-average volume, according to MarketSmith analysis. That move to a record close removed a lot of trading that took place back to Excelerate Energy’s IPO in April. EE shares had flashed early on Friday and Monday, although trading was below normal on those days. Excelerate is now slightly extended from the buy zone and well extended from the 21-day line.
Market rally analysis
The stock rally continues to show constructive action, trading in a narrow range after a modest pullback and support last week. On Tuesday, the major indices bounced back from Monday’s losses.
The S&P 500 bounced back from its 10-day line, right at the 4,000 level, as it moves toward its 200-day line. While not above the Nov. 15 intraday high, it was the index’s best close in more than two months.
The 50-day line is just is starting to turn higher on the S&P 500.
The Russell 2000 is approaching 200 days. The S&P MidCap 400, which held its 200-day line last week, rose further.
The leading Dow Jones topped the 34,000 level for the first time in three months, just below its August 16 peak. The lagging Nasdaq found support at its 21-day line, just above the 50-day, but did not recoup all of Monday’s losses.
All of these indexes are working hand in hand, with the Dow sneaking up on them. Most stocks follow the actions of the major indexes, so many handles are formed on stocks near buy points. A slightly longer break, perhaps until key economic reports late next week, would allow moving averages to begin to catch up.
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What to do now
Until the S&P 500 moves decisively above its 200-day line, investors may not want to add much exposure right now. With the Thanksgiving holiday dampening trade and Fed-critical economic data next week, the market rally may be limited in the short term.
It can help stocks from a variety of sectors set up handles and make moving averages gain ground. Investors should build their watch lists. It’s definitely a time to look past traditional tech growth stocks, which are largely lagging right now.
Given that many leaders are extended from moving averages, such as Excelerate Energy or BTU shares, it is all the more important to watch for early entries and act quickly.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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