What to do in the new stock market correction ahead of the Fed meeting

Dow Jones futures rose 120 points after Monday’s rally ahead of the Federal Reserve’s two-day policy meeting. Despite Monday’s rise, the stock market trend is still in a correction after last week’s big market losses.


The stock market today

On Monday, the Dow Jones Industrial Average rose 0.6%, while the S&P 500 gained 0.7%. The technology-heavy Nasdaq composite rose 0.8 percent. And the small-cap Russell 2000 also gained 0.8%.

Among exchange-traded funds, Nasdaq 100 tracker Invesco QQQ Trust ( QQQ ) rose 0.6%, and the SPDR S&P 500 ( SPY ) rose 0.8%.

US Stock Market Today Overview

Index Symbol Price Profit/loss % Change
Dow jones (USD 0) 31019.82 +197.40 +0.64
S&P 500 (0S&P5) 3900.00 +26.67 +0.69
Nasdaq (0NDQC) 11535.02 +86.62 +0.76
Russell 2000 (IWM) 180.52 +1.53 +0.85
IBD 50 (FFTY) 27.06 +0.10 +0.37
Last update: 4:28 PM ET 9/19/2022

Key earnings reports this week come from Costco (COST), Darden Restaurants (DRI), General Mills (GIS), KB Home (KBH) and Lennar (LEN).

EV giant Tesla ( TSLA ) rose 1.9% Monday. Among Dow Jones leaders, apple (AAPL) traded up 2.5%, while Microsoft (MSFT) lost 0.1% in today’s stock market.

In the current market weakness, Continental resources (CLR), DoubleVerify (DV) and Vertex Pharmaceuticals (VRTX) – as well as Dow Jones stocks Chevron (CVX) and Merck (MRK) — is among the best stocks to watch. Remember, the new stock market correction is a good reason for investors to be mostly, if not completely, on the sidelines.

DoubleVerify is an IBD Leaderboard stock, but its position size was trimmed during last week’s losses. Tesla was featured in this week’s Stocks near a buy zone column.

Dow Jones Futures Today: Treasury Yields, Oil Prices

Ahead of Tuesday’s open, Dow Jones futures rose 0.4% against real value. S&P 500 futures rose 0.45% and Nasdaq 100 futures traded 0.55% 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 ticked higher to 3.49% on Monday, topping the 11-year high of 3.48% set on June 14. a barrel.

Fed meeting to be kicked off

The Federal Reserve’s two-day meeting starts on Tuesday, with an interest rate decision on Wednesday. The markets show an 82% chance of the central bank raising interest rates by 75 basis points and an 18% chance of a 100 basis point increase.

Investors will be looking for hints about the pace of future rate hikes, and how high the central bank will eventually go.

What to do in the stock market correction

After last week’s big losses, IBD downgraded its market outlook from “uptrend under pressure” to “market in correction”. That means investors should be mostly, if not entirely, in cash.

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. The first day the index closes higher counts as day 1 of the attempted rally. (Monday is day 1 of rally trials). 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.

While waiting for a new uptrend, build a watchlist of potential market leaders using the relative strength line. The RS line measures a share’s price development vs. S&P 500. If the stock outperforms the broader market, the RS line angles upward. If a stock lags the broad market, the line will point lower.

Friday’s The Big Picture column commented: “Since rejecting near its 200-day moving average, the Nasdaq has swan dived below all of its major moving averages. It is now down nearly 28% so far in 2022.”

If you are new to IBD, consider taking a look at the stock trading system and CAN SLIM basics. Recognizing chart patterns is a key to investment guidelines. IBD offers a wide variety of growth stock lists, such as Leaderboard and SwingTrader.

Investors can also create watch lists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Five Dow Jones stocks to watch now

Dow Jones stocks to watch: Chevron, Merck

Dow Jones stock Chevron is building a cup-with-handle that has a buy point at 166.93, according to IBD MarketSmith chart analysis, amid a strong performance by energy stocks so far this year. The stock rose 0.3% on Monday, finding much-needed support at its 50-day line.

CVX stock scores a strong 97 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.

Drug giant Merck is also fighting the stock market downturn. Shares are building a flat base that has a buy point at 95.82. But the MRK share is stuck below the 50-day mark. The Merck share lost 1.2 percent on Monday.

4 top growth stocks to watch right nowrent stock market correction

Top stocks to watch: Continental, DoubleVerify, Vertex

Oil explorer and producer Continental Resources is building a cup-with-handle with a buy point of 72.80, according to IBD MarketSmith chart analysis. The relative strength line hit a recent high last week, but remains slightly off its 52-week high. The CLR share rose 0.6 percent on Monday.

IBD Leaderboard stock DoubleVerify remains below the 28.07 buy point in a bottom base despite Monday’s 0.55% gain. While the stock’s breakout attempt falters, it found support around its 50-day line.

Vertex Pharmaceuticals is back below its 50-day line after Monday’s 1.6% loss. The stock has held up well during the ongoing market weakness, as indicated by an RS line approaching new highs. There’s no new base yet, but 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 1.9% on Monday, recovering from Friday’s slight losses. The shares are approaching the short base’s 314.74 buy point. In the meantime, look for more buy points if the stock is able to climb further up the right side of its larger consolidation, which stretches back to January.

Bullishly, the stock’s RS line is at its highest level since early April. Shares are about 25% off their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among the Dow Jones stocks, Apple climbed 2.5% on Monday, ending a two-day losing streak and recovering some of last week’s losses. Last week, the stock closed at its lowest level since July 18.

Microsoft lost 0.1% on Monday, paring losses after hitting a new 52-week low. The software giant is about 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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