Market Rally Wipes Out Powell Gains As Apple, Exxon Skid; What To Do Now

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Dow Jones futures rose overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally had another weak session Apple (AAPL) and Exxon Mobil (XOM) breaking below key levels while Amazon.nl (AMZN) and Tesla (TSLA) are starting to move towards bear market lows.




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The S&P 500 and other major indices tested or undermined key levels, surpassing the big gains made last Wednesday after Fed Chief Jerome Powell’s speech.

This stock market rally has produced several large one-day gains followed by pullbacks. That made it difficult for stocks that are sending buy signals to move forward. It’s not a good time to add exposure, but investors should look to set up stocks.

United Rental (URI), UnitedHealth group (UNH) and United Airlines (UAL) are all traded near buying points.

UAL stocks are on IBD Leaderboard, while URI stocks are on Leaderboard watch list. Shares of United Airlines, Charles Schwab and UNH are on the IBD 50. United Rentals was the day’s IBD stock on Tuesday.

Dow Jones Futures Today

Dow Jones futures were just above fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.15%.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The stock market rally quickly reversed after Tuesday’s open and continued to fall throughout the day before slightly offsetting losses at the close.

The Dow Jones Industrial Average fell 1% during Tuesday’s stock trading. The S&P 500 index lost 1.4%. The Nasdaq composite fell 2%. The small-cap Russell 2000 retreated 1.5%

Apple shares, a member of the Dow Jones, S&P 500 and Nasdaq composite, fell 2.5% to 142.91, back below the 50-day line. XOM shares fell 2.8%, also below the 50-day line and below a buy point. Exxon shares are struggling as oil, gasoline and natural gas prices are all falling.

Amazon shares fell 3% to 88.25, approaching the Nov. 9 low of 85.87. Shares of Tesla fell 1.4% to 179.82, off the day’s lows but after falling 6.4% on Monday. TSLA is moving towards 52-week lows, but has a long way to go before it drops to that 166.19 mark.

US crude oil prices fell 3.5% to $74.25 a barrel.

10-year government bond yields fell 9 basis points to 3.51%, back near their lowest levels since September 20.

The stock market’s inverse relationship to government bond yields may be crumbling. Lower 10-year Treasury yields may increasingly reflect rising recession risks versus easing inflationary pressures. The yield curve, which continues to invert, also signals recession concerns.

ETFs

Among the leading technology ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) lost 1.7%. The VanEck Vectors Semiconductor ETF (SMH) fell 2.2%.

SPDR S&P Metals & Mining ETF (XME) was up 0.25% and the Global X US Infrastructure Development ETF (PAVE) was down 0.3%. US Global Jets ETF (JETS) held high. SPDR S&P Homebuilders ETF (XHB) fell 1.4%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) fell 0.9%. The Health Care Select Sector SPDR Fund (XLV) fell 0.8%.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was down 4% and ARK Genomics ETF (ARKG) was down 3%. Tesla stock is a major stock in Ark Invest’s ETFs.


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Stocks near buying points

Shares of United Rentals rose 0.5% to 347.29, just above the 21-day line. URI stock has a buy point of 368.04 from a consolidation going back to November 2021. Breaking the handle downtrend could offer early entry. Several heavy equipment plays including Deere (THE), Caterpillar (CAT) and Titan machines (TITN), also looking strong.

The share of UNH increased by 0.8% to 539.32. The Dow Jones giant has a buy point of 558.20 from a flat base alongside a cup-with-handle consolidation.

UAL shares rose 2% to 45.92, just above the buy point of 45.67 cups with handle, according to MarketSmith’s analysis. Some other aviation and travel stocks are looking good.


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Analysis of the market rally

The stock market rally continues a frustrating trend of jumping four steps forward and returning it in the coming days.

Major indices fell sharply for two straight sessions, negating or undermining the big gains made on Wednesday by Fed Chief Jerome Powell’s speech.

The S&P 500 index, which fell below the 200-day line on Monday, extended losses on Tuesday to undercut the 21-day line. The Russell 2000, which fell below the 200-day and 21-day lines, fell to its lowest close since Nov. 9, with the 50-day line coming back into play.

The S&P MidCap 400 closed below the 21-day line for the first time since Oct. 20 and pulled back to test the 200-day line.

The Dow Jones, which led the market rally, fell below the 21-day line for the first time since Oct. 14, but is well above the 200-day line.

The trailing Nasdaq broke its 21-day line and is once again approaching its 50-day line, just above the 11,000 level.

All of these indices closed at their worst levels since Oct. 9, just ahead of the Oct. 10 gap-up on the October CPI inflation report.

Last Wednesday’s big market gains were confusing at the time, as Fed Chief Powell said nothing particularly different or lenient. Major indices held firm on Friday, with government bond yields eventually closing lower, despite the hot jobs report being even more puzzling.

But the technical picture is known.

Since the stock market rally began on October 13, major indices have posted several large one-day gains, such as on October 28 and November 30. all those big wins.

So the moment the major indices reach higher highs and leading stocks send buy signals, the market rally begins to fade again.


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What to do now

So far, the market rally has eventually recovered each time, with higher highs along the way. But that doesn’t mean it will happen this time. More importantly, it doesn’t mean your stocks will recover.

Until the S&P 500 moves decisively above the 200-day mark, investors should be wary of adding exposure. If the Nasdaq and Russell 2000 fall below their 50-day lines and the S&P 500 tests its October highs, these would be signs to further reduce exposure.

Also note that the November CPI inflation report is due on December 13, with the Fed rate hike at the end of the year and the Powell press conference the following day. Those big events could be the catalyst for a market rally that goes higher or lower.

So investors need to be ready to trade. That means you have watchlists ready, but also stay involved and flexible.

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 market updates and more.

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The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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