Dow Jones futures fell modestly overnight, along with S&P 500 futures and Nasdaq futures, with an Apple iPhone event in the spotlight on Wednesday. The weakened stock market rally lost more ground as Treasury yields soared.
Major indices fell further from their 50-day moving averages. The Nasdaq, extending its losing streak to seven days, undermined its intraday lows from late June.
This is not a good time to increase exposure, but investors should look for stocks with strong relative strength. phase energy (ENPH), ultra beauty (ULTA), Cigna (IQ), waste connections (WCN) Y Waste management (wm) Everybody has lines of relative force at 52-week highs. The RS Line tracks a stock’s performance against the S&P 500 Index and is an easy way to spot leaders and laggards in any type of market. An RS line that hits a new line when, or before, a stock breakout is especially bullish.
ENPH, Waste Connections and Ulta Beauty stocks are showing signs of buying, although the market environment makes any purchase risky at this time.
The video embedded in this article discussed Tuesday’s market action and analyzed Enphase, Sunrun (RUN) and WCN shares.
Commissioning of Chinese electric vehicles child (LITTLE BOY) and sporting goods retailer Academy Sports and Outdoors (AOSO) will report before the opening on Wednesday. Nio shares are struggling along with most of China’s electric vehicle makers. ASO shares are trying to hold support at their 50-day line. A strong bounce from that level could offer an early entry.
apple iphone event
Apple (AAPL) Will present the iPhone 14 and a new Apple Watch at an event on Wednesday at 1 pm ET. Apple’s latest iPhone is expected to feature incremental improvements (faster processor, better camera, and longer battery life) in the face of revolutionary changes. Still, new products are key to the holiday shopping season.
Apple shares fell 0.8% to 154.53 after hitting resistance at the 50-day line. Stocks fell below 200 days and then 50 days last week. The RS line for AAPL shares is not far off the highs, but the market has weakened.
Dow Jones Futures Today
Dow Jones futures fell 0.5% against fair value. S&P 500 futures sank 0.6% and Nasdaq 100 futures fell 0.65%.
The 10-year Treasury yield rose 1 basis point to 3.35%.
Crude oil futures fell slightly, while natural gas futures fell 1%.
The stock market rally started with modest gains, but the indices soon fell back. Despite an intraday bounce, stocks faded again.
The Dow Jones Industrial Average fell 0.55% on Tuesday stock trading. The S&P 500 index fell 0.4%. The Nasdaq Composite lost 0.7%. The small-cap Russell 2000 was down 0.9%.
US crude prices rose 1 cent from Friday’s close to $86.88 a barrel. But that’s after going up 4% on Monday morning as OPEC+ unexpectedly cut production quotas slightly. Natural gas futures fell 7.3%, adding to Friday’s solid losses and continuing to pull back from 14-year highs. That is despite Russia saying it will not restore natural gas flows to Europe unless sanctions are lifted.
The 10-year Treasury yield rose 15 basis points to 3.34%, closing at June’s 11-year high of 3.48%. The 10-year yield hit a recent low of 2.52% on August 2.
SPDR S&P Metals & Mining ETF (XME) rose 0.7% and the Global X US Infrastructure Development ETF (TO PAVE) rose 0.2%. The Energy Select SPDR ETF (XLE) sank 0.9% and the Financial Select SPDR ETF (XLF) submerged 0.2%. The SPDR Fund of the Select Sector of Health Care (XLV) rose 0.1%
RS High Stocks
Shares of Enphase rose 4.9% on above-average volume, bouncing from the 21-day moving average and breaking the downtrend in a brief consolidation. Investors could buy ENPH shares here. It is one of the main stocks in the Energy-Solar group rated No. 1, with Matrix Technologies (ARRY), Sunrun (RUN) and the Invesco Solar ETF (TAN) among those that are installed. But any market rebound could quickly be reversed.
ENPH’s shares could have a flat bottom on a weekly chart after this week.
ULTA shares rose 1.1% to 427.82, holding above 417.08 false bottom buy point Shares of the beauty supply retailer have struggled to close above a previous buy point of 429.58. ULTA shares have been range bound for the past year.
Cigna shares fell 0.5% to 285.25, finding support around its 21-day moving average and just above its 10-week line. CI shares are right in the 273.67 range point of purchase first cleared in early July. Shares of the health insurer are just above an alternative entry at 282.43. Cigna stock could be running in a three weeks tight pattern while a traditional base might take a couple more weeks.
Waste Management shares rose 0.4% to 169.12. Shares hit 170.28 intraday, exactly coinciding with a still valid consolidation buy point, according to marketsmith. It is also reaching resistance at the 21-day moving average and a short downtrend. WM shares had three above-average volume declines last week.
Shares of Waste Connections broke a one-mange downtrend on Tuesday, offering an early entry. But shares closed 0.5% higher at 141.30, a far cry from intraday highs. WCN shares have a cup-with-a-handle buy point of 144.56. Other highly rated stocks in the Pollution Control group are doing well.
Market recovery analysis
The Nasdaq has already been falling for seven sessions in a row. So has the Russell 2000. The Dow Jones and S&P 500 have only one day up in that stretch. Everyone is starting to lose sight of their 50 day moving averages.
Arguably the market is due for a rebound. But that would not be so significant.
Major indices claiming their 50 and 21 day lines would be just a first step. The 200 day moving average would be the real hurdle.
The 10-year Treasury yield rose again, near long-term highs and rising since early August. It’s hard for stocks to withstand higher Treasury yields, especially when that also pushes the dollar higher.
Solar power and pollution control stocks are among the leaders. Health insurers, energy stocks and biotech companies are doing relatively well.
What to do now
Investors should have minimal exposure and not seek to add much exposure, if any. If you haven’t cut back much in the last two weeks, you could look to take a profit or cut your losses.
Staying largely on the sidelines until there are real signs of market strength may mean missing out on some buying opportunities, some of which may work out well. But if the market really has legs, then there will be plenty of chances to make money. If the market goes up and down sharply or sells off, a high holding of cash will be key.
If you can’t resist taking a position in, say, ENPH or Waste Connections stocks, be aware of elevated risks with the struggling market and key indices facing multiple resistance areas.
Enphase Energy and other solar names are worth checking out. So are stocks with strong relative strength across the board. That’s where the next round of potential leaders will likely be. So build your watchlists with high RS stocks.
But in a tough market, relative winners can be outright losers.
Read The panorama every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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