Dow Jones futures rose slightly Wednesday night, along with S&P 500 futures and Nasdaq futures. The attempted rally in the stock market had quite a session on the major indices, nearing highs as 10-year Treasury yields retreated.
Again, a large number of growth stocks showed strength at best in a lackluster market. That offset weakness in Apple stocks, financials and airlines.
AMD stocks, CrowdStrike (CRWD), bill.com (ACCOUNT) and Sea Limited (I KNOW) moved to points of sale. All four rebounded from their 50-day or 10-week lines, while breaking down trends. In the meantime, Snowflake (SNOW) released a mini-consolidation that could be seen as a handle on a long, deep base.
Taiwan Semiconductor (TSM) the earnings are on tap. Although TSM stocks have struggled since its peak in February, the world’s largest chip foundry is still a key driver of its industry. It makes chips for Advanced micro-devices (AMD), Apple (AAPL), Nvidia (NVDA) and much more.
TSM’s insights into the chip shortage and its own investment plans will be important to the industry and beyond, even if TSM stocks don’t make a big move.
UnitedHealth (UNH) and Domino’s Pizza (DPZ) also report at the beginning of Thursday. So do it bank of America (BAC), Citigroup (C), Morgan Stanley (MRS), Wells Fargo (WFC) reports earnings early Thursday. They track better-than-expected earnings from Dow Jones giant JPMorgan Chase (JPM).
Financials were notable losers on Wednesday, likely as 10-year Treasury yields fell for a second consecutive session. Shares of JPM fell 2.4%, below a recent buying point. BofA, Citigroup and Wells Fargo fell slightly, while Morgan Stanley rose higher.
Delta Airlines (BY) led to a sell-off in airline shares. Delta reported gains after six quarters of pandemic losses, but forecast a small loss in the fourth quarter due to rising fuel costs. DAL shares fell 5.8%, the biggest loser for the day on the S&P 500 index. Other airlines also fell sharply.
The video embedded in this article reviewed and analyzed Wednesday’s market rally data dog (DOG), Sea Ltd. and CRWD stocks.
Dow Jones Futures Today
Dow Jones futures rose 0.35% above fair value. S&P 500 futures were up 0.35% and Nasdaq 100 futures were up 0.45%.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
stock market rally
The stock rally attempt ended Wednesday with small to solid gains, but best of all, the indices finally closed close to session highs.
The Dow Jones Industrial Average closed close to trading on Wednesday. JPMorgan and American Express (AXP) weighed in on the Dow. The S&P 500 index climbed 0.3%, despite financial institutions, airlines and many energy stocks weighing on the broad index. The Nasdaq composite was up 0.7%. The small-cap Russell 2000 rose 0.5%.
The consumer price index came in a little warm, with inflation at 5.4% at its 13-year high. But core inflation was in line, stable at 4%.
Ten-year Treasury yields rose briefly to 1.6% after the CPI report and before the stock market opened, but returned to close 3 basis points, 1.55%.
The 10-year yield didn’t move much after the Fed minutes from its September meeting were released at 2 p.m. ET. Policymakers said a “phasing out process” could begin in mid-November, with asset purchases coming to a complete halt by mid-2022. Several members were in favor of a more aggressive bond reduction. The Fed’s minutes gave some more detail, but didn’t change expectations for an official bond tapering decision at its early November meeting.
The price of crude oil in the US fell slightly, but recovered from lows and remained above $80 a barrel. Copper futures were up nearly 4%.
One of the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.7% and closed just above the 50-day line. The Innovator IBD Breakout Opportunities ETF (BOLT) fell by 0.35%. The iShares Expanded Tech Software Sector ETF (IGV) rose just over 2%. CRWD stock and Bill.com are IGV components. The VanEck Vectors Semiconductor ETF (SMH) gained 0.85%, with TSM shares and AMD leading positions.
SPDR S&P Metals & Mining ETF (XME) won 1.5% and Global X US Infrastructure Development ETF (PAVE) increased by 0.3%. US Global Jets ETF (JETS) slipped 2.5% as DAL shares and other airlines took their toll. SPDR S&P Homebuilders ETF (XHB) increased by 0.5%. The Energy Select SPDR ETF (XLE) fell 0.1% and the Financial Select SPDR ETF (XLF) slipped 0.6%.
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Shares in Buying Zones
Shares of Bill.com rose 5.2% to 294.71, extending the 21-day, 10-week line. Volume remained modestly below average. By the end of the week, BILL could be at a base with a buy point of 302.09.
CRWD shares rose 7% to 270.44 in heavy volume, rebounding from its 50-day line and breaking a trendline, with early entries. The official buy point for CrowdStrike stock is 289.34 from a base that started in late August.
SE shares rose 7.5% to 349.35, leaping from the 21 and 50 day line and easily broke a downtrend. Both offered early access to the SE Asian e-commerce giant. Volume was strong. The relative strength line hit a new high, while SE stocks remain in the base. That is a bullish sign and marks it as a “blue dot” stock in MarketSmith.
AMD shares rose 3.9% to 109.16, again regaining their 50-day line and this time surpassing some near-term resistance. Investors could use 107.95, the October 7 high, as an early entry. Volume ended below average for AMD stocks, but it was the heaviest in a month.
AMD has a double bottom with a buy point of 115.59.
The share of SNOW rose by 4.8% to 327.85, the highest close of the year. Intraday, Snowflake stock reached 329.75, above the peak of a short-term consolidation. That could be seen as a handle on a huge deep foundation dating back to last December when SNOW stock hit a record 429. But the stock released a small resistance within the “handle” and hit a trendline. Volume was below average, but picked up steam late in the afternoon.
Market rally analysis
The stock rally attempt eventually ended near session highs, with the Nasdaq leading the way, even with Apple stock’s mega cap slipping slightly. That ended a four-day run of the major indices that closed badly, especially the Nasdaq. But the major indices all remain below their falling 21-day moving averages, with the 50-day line moving even further ahead. There has been nothing close to a follow-up day to confirm the new rally attempt.
Some of this reflects the weakness among the tech megacaps. Apple stocks were able to make up for losses on Wednesday but are near recent lows and not far from the 200-day line. Microsoft (MSFT) is the only one of the trillion dollar stocks above the 50-day line, and only barely.
The market remains in correction.
But don’t tell that to leading stocks. The number of growth stocks flashing buy signals or extending gains in recent days has been impressive. With the Nasdaq actually rising and closing near intraday highs, it’s not surprising that growth had another strong session, as AMD, CRWD stocks and more showed.
Financial stocks are shrinking due to government bond yields, even though 10-year yields have still risen sharply in recent weeks. Energy stocks and fertilizer names are also at a standstill, but that could be healthy after vigorous moves over the past few weeks.
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What to do now
Still, the major indices remain below their 21-day and 50-day lines. The market has not yet proven itself. Major indices could easily lower a decisive move over the next few sessions – perhaps after a promising head-fake – to undercut recent lows. By then, many of the growth names that have been doing so well lately would likely come under pressure.
There is no doubt that buying opportunities have increased this week. In general, those trades have worked out well in the short term.
If the temptation to add exposure was strong on Monday and Tuesday, when the major indices closed close to lows, that Wednesday may have been irresistible.
If you’ve made some new purchases in the past few days, consider taking partial profits after relatively modest gains to ensure you win. Reduce losses quickly.
For those who have largely been on the sidelines, there will be a time, be it tomorrow, next week, next month or even next year, when there will be a confirmed market rally. Then there are plenty of opportunities.
Read The Big Picture every day to stay up to date on market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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