Dow Jones futures were lower Wednesday morning, along with S&P 500 and Nasdaq futures. The rally in the stock market closed slightly lower on Tuesday after big pullbacks in the previous two sessions. Investors are cautious about placing big bets ahead of Fed Chairman Jerome Powell’s big speech in Jackson Hole on Friday.
X
Apple (AAPL) is cutting a handle, narrowing its potential buy point. Apple stock technically already has a buy point on a weekly chart.
Tesla ( TSLA ) surged toward an aggressive buy point on Tuesday. Outside of Tesla stock, most EV makers are struggling. However, several EV-related plays are close to purchase points or actionable now. It includes lithium producers Albemarle (ALB) and Livent (LTHM). It also plays chips on On Semiconductor ( ON ), Axcelis Technologies ( ACLS ), and Monolithic Power Systems ( MPWR ).
This comes ahead of chip giant Nvidia’s ( NVDA ) earnings on Wednesday night, with its data center comments also important to Monolithic Power.
On Tuesday night, TurboTax maker Intuit ( INTU ) rose with strong gains, while La-Z-Boy ( LZB ) boosted its results. Luxury homebuilder Toll Bros. ( TOL ) and youth apparel retailer Urban Outfitters ( URBN ) fell with mixed results, while Advance Auto Parts ( AAP ) reversed with disappointing EPS and sales. Nordstrom ( JWN ) fell as it cut guidance amid excess inventory.
ALB shares are classified as IBD. MPWR stock is listed in IBD’s Long Term Leaders. Tesla, Monolithic Power, Axcelis and Onsemi stocks are in the IBD 50. Albemarle, Monolithic and ON stocks are in the IBD Big Cap 20. Monolithic Power was the IBD stock of the day Tuesday. Livent was the stock of the day on Monday.
Dow Jones futures today
Dow Jones futures fell less than 0.1% from fair value. S&P 500 and Nasdaq 100 futures lost a fraction.
The 10-year Treasury yield fell 1 basis point to 3.04%.
Crude oil futures rose about 1%. Natural gas futures rose more than 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
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Stock Exchange meeting
The stock market rally eased on Tuesday, continuing a pullback, but with the major indexes near their 21-day moving averages.
The Dow Jones Industrial Average fell 0.5% in Tuesday’s trading. The S&P 500 lost 0.2%, and TWTR stock was easily the worst performer. The Nasdaq composite, up for most of Tuesday’s session, closed down less than 1 point. The small-cap Russell 2000 rose 0.2%.
U.S. crude rose 3.4% to $93.74 a barrel, continuing to bounce off Monday’s lows after Saudi Arabia suggested OPEC may cut output.
Natural gas futures fell 5%, retreating from 14-year highs, even as Freeport LNG delayed the restart of its Texas facility from early October to mid-November.
The 10-year Treasury yield rose 2 basis points to 3.05%. The 10-year yield hit 3.08% intraday, then briefly dipped 3% after several weak economic reports.
Powell’s policy speech will likely change Treasury yields and the odds of a rate hike. Markets are pricing in a total of at least 50 basis points for Sept. 21, but are split on whether policymakers will opt for a third consecutive Fed rate hike of 75 basis points.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.6%. The iShares Expanded Technology Software Sector ETF ( IGV ) fell 0.2%, with CRM shares as the main component of the IGV. The VanEck Vectors Semiconductor ETF (SMH) rose 0.65%. Nvidia stock is a major SMH holding.
SPDR S&P Metals & Mining ETF (XME) gained 2.45%. The Energy Select SPDR ETF ( XLE ) rose 3.6% and the Financial Select SPDR ETF ( XLF ) retreated 0.4%. The Select Healthcare Sector SPDR Fund ( XLV ) fell 1.4%.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) was down 0.55% and the ARK Genomics ETF ( ARKG ) was up 1.8%. Tesla stock is a major holding in Ark Invest’s ETFs.
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Apple stock
Apple shares fell 0.2% to 167.23, trading just above its 21-day moving average. On August 17, AAPL shares erased a downtrend line, but then pulled back on Friday. Now tech giant Dow Jones is working on a handle. Apple stock needs one more day on a daily chart to get a proper handle with a buy point at 176.25. On a weekly chart, AAPL stock already has that handle.
The relative strength line for Apple stock is at an all-time high, a bullish sign.
EV shares near points of purchase
Lithium Plays Albemarle and Livent reported strong earnings and guidance earlier this month.
Albermarle shares rose 1.9% to 281.03, following a reversal to the upside on Monday. ALB stock is expanding from a 250.25 buy point from a handle within a huge handle. However, shares are in the range of an alternative entry at 273.78, just above the high of the 31% depth handle. Investors could use this as an opportunity to buy ALB shares or add some shares.
LTHM shares rose 5.1% to 30.33. Livet’s stock has a buy point of 31.63 mugs with handle, but with a downtrend on the handle. This would offer early entry, although low volume is an issue.
In Semiconductor, Axcelis Technologies and Monolithic Power, the chip plays with electric vehicle exposure, all performed well in early August.
ON shares rose 3.6% to 71.25 on Tuesday. This returns above a buy point at 69.36, although the +10 cent consolidation high of 71.35 is also a legitimate entry.
Shares of ACLS rose 2.2% to 72.22, working toward a 79.93 buy point from a deep cup-with-handle base. Axcelis handle has been volatile, but the chip gear maker has been finding support at the 21-day line. Axcelis stock could have an early entry to break the handle’s downtrend.
Shares of MPWR advanced 1.2% to 497.51, around its 21-day line. Monolithic Power shares have a buy point of 541.49 mugs with handle, according to MarketSmith analysis. Shares retreated on Friday and Monday, undercutting the 21-day line, giving it a bit more of a jolt after a strong advance.
Monolithic Power is found in several markets, including data centers, industrial applications and electric vehicles.
Tesla stock
Tesla shares rose 2.3% to 889.36, bouncing off the 21-day moving average, slightly below the 200-day line. TSLA stock could have an aggressive entry if it clears near-term highs, with an emphasis on the aggressive.
Tesla shares will split 3-for-1 after trading on Wednesday.
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Analysis of market concentration
Stock market rally was mixed on Tuesday, with all major indexes touching resistance at the 21-day moving average. The Nasdaq lost a fraction after falling 2% on Friday and 2.55% on Monday. The Dow Jones, which closed just below its 21-day high on Monday, lost a little more ground on Tuesday.
Nvidia and Salesforce.com ( CRM ) earnings will be in focus Wednesday night. But the market rally may be limited until Fed Chairman Powell’s big speech on Friday morning. Volume has been particularly light this week.
The stocks of electric vehicle suppliers like Albemarle and Axcelis look interesting.
Energy stocks have been the leaders, but many have already passed buy points. Energy prices are subject to large daily or even intraday swings, with the bearish reversal of natgas futures on Tuesday a clear example.
Some steel works are being set up along with fertilizer and agriculture actions.
Biotechs and drugmakers like Vertex Pharmaceuticals ( VRTX ) and Eli Lilly ( LLY ) had a rough session, but aren’t broken for now.
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what to do now
The market rally is retracing within an uptrend within a bear market. In the very near term, investors should be cautious about adding exposure, especially to Fed chief Powell.
More stocks are forming bullish setups, so investors should run screens and update watchlists.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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