Dow Jones futures fall after market rally;  Here Comes Fed Chief Powell

Dow Jones futures fall after market rally; Here Comes Fed Chief Powell

Dow Jones futures fell sharply early Wednesday, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell set to testify before Congress on Wednesday morning.



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There was a strong session on Tuesday for the stock market to try to rise. But it is still a rallying attempt within a bear market.

Chenier Energy (LNG), Exxon Mobil (XOM), Eli Lilly (LLY), dollar general (DG), Tesla (TSLA) Rivals lee auto (LI), unitedhealth (UNH) and Northrop Grumman (NOC) showed strong positive action with relative power lines at or near highs.

But some quality stocks are in position right now. This is one of the many reasons to live on the edge. While the rally attempt is underway, it is not yet a definite uptrend.

Northrop Stock and Eli Lilly are on the IBD leaderboard. Lee Auto Stock and Eli Lilly are at IBD 50. LLY stock is also at IBD Big Cap 20.

dow jones futures today

Dow Jones futures fell 1.15% versus fair value. The S&P 500 futures were down 1.4% and the Nasdaq 100 futures were down 1.6%.

The 10-year Treasury yield fell 8 basis points to 3.23%.

US crude oil prices are down 5%. President Joe Biden on Wednesday called on Congress to suspend the federal gasoline tax of 18.4 cents per gallon for three months to provide some temporary relief at the pump.

Copper prices have fallen by more than 3%.

Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.

Fed Chief Powell testifies

Fed chief Powell testifies on monetary policy before the Senate Banking Committee on Wednesday morning. Powell will appear before the House Financial Services Committee on Thursday.

It is unclear whether Powell will break new ground from last week. On June 15, the Federal Reserve raised interest rates by 75 basis points, with the Fed chief saying that 50 basis points, or 75 basis points, is on the table for a policy meeting in late July. The markets have almost completely paid the price in another three-quarter-point rate hike.

Fed chief Powell testifies at 9:30 a.m. ET, right at the opening bell, though the Federal Reserve may issue its prepared remarks earlier.

More Wall Street firms over the past few days are now predicting that the US or the world will hit a recession, or about 50-50.


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stock market rally tuesday

The stock market had a strong session trying to rally. The Dow Jones Industrial Average rose 2.15% in Tuesday’s stock market trading. The S&P 500 index rose 2.45%. Tesla, Exxon and UNH stocks were among the best performers of the S&P 500, with the latter two also named Dow giants. The Nasdaq Composite gained 2.5%. The small-cap Russell 2000 advanced 1.8%.

Crude oil futures contract to expire in July rose 1% to $110.65 a barrel from an intraday high. August crude rose 1.4% to $109.52.

The 10-year Treasury yield rose 7 basis points to 3.31%.


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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2%. The iShares Extended Tech-Software Sector ETF (IGV) advanced 1.9%. The VanEck Vector Semiconductor ETF (SMH) was up 2.8%.

The SPDR S&P Metals & Mining ETF (XME) was up 1.6% and the Global X US Infrastructure Development ETF (PAVE) was up 1.1%. The US Global Jets ETF (JETS) rose 0.8%. The SPDR S&P Homebuilders ETF (XHB) gained 0.4%. The Energy Select SPDR ETF (XLE) rebounded 4%, with XOM stock being a large component, and the Financial Select SPDR ETF (XLF) was up 1.5%. Health Care Select Sector SPDR Fund (XLV) rose 2.3%, with UNH stock being the top gainer and Eli Lilly also a notable constituent.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 4.4% and the ARK Genomics ETF (ARKG) 3%. Tesla stock remains a major holding in the Arc Invest ETF.


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LNG Stock

Cheniere Energy stock rose 5.5% to 132.95 at the close of the 50-day moving average. On Friday, LNG stocks cut trading for several months, but then rose by huge amounts. LNG Play is working on consolidation with a 150.10 buy point, although there may be early entries. Several other LNG plays also reverted towards their 50-day line.

XOM Stock

Exxon’s stock rose 6.3% to 91.51, reclaiming its 50-day moving average and arguably still valid 89.90 cup-with-handle buy point. XOM stock rallied 105.57 on June 8 but soon gave up on recent gains, falling 14% last week.

Ideally, Exxon Mobil would move sideways and begin forming a new consolidation before making a major advance.

On Tuesday, Exxon Mobil joined a $29 billion Qatari natural gas project. Other partners include ConocoPhillips (COP), anise (e) and total energy (TTE). Meanwhile, Credit Suisse upgraded its rating on Exxon stock to outperform with a price target of $125.

LLY Stock

Eli Lilly stock climbed 2.2% to 297.35, closing a hair below the 50-day line. 314.10 The pre-flat basis/basis-on-premises structure 314.10 Point of Purchase is no longer valid. LLY stock is working on a new consolidation. A break above a short downward-sloping trend line would offer an entry of around 306.

Bristol Myers Squibbo (BMY), Vertex Pharmaceuticals (VRTX) and Sadbhav Biosciences (HRMY) showing affirmative action.

Lee Auto Stock

LI stock rose from 7.85 to 35.75 on Wednesday, the highest level since January 2021. Lee Auto stock broke out of a nearly 55%-deep consolidation above a 37.55 buy point. Ideally, the LI stock will form a handle, as long as it digests its recent gains.

China’s Li Auto on Tuesday unveiled the new hybrid SUV L9. It is more expensive than the Li One, which is already in the premium segment.

NIO (NIO) grew 9.2% and Xpeng (XPEV) 6.8%, as both continue to rebound above their 50-day lines but below their 200-day averages. EV and Battery Giants BYD (BYDDF) rose 3.2% to 38.60 on the weekly chart, working at a 39.81 cup-with-handle buy point.

Tesla’s stock jumped 9.35% to 711.11, just reclaiming its 21-day moving average by huge amounts. But the 50-day and 200-day lines are the major hurdles. TSLA stock came close to hitting its late May low last week, but it didn’t.


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northrop stock

NOC stock rose 4.5% to 463.77, retracing its 21-day and 50-day lines. Northrop stock fell solidly over the past two weeks, failing a cup-with-handle breakout. A new consolidation may begin to form. A decisive move on the 50-day line could offer early entry.

UnitedHealth Stock

UNH stock jumped 6.25% to 480.32, having bounced back above the 200-day moving average. The shares closed right around the downside trend. Any strength from this point may offer an early entry into UnitedHealth stock. However, investors can view 507.35 as a double-bottom buy point, which will push UNH stock above the 50-day line.

dollar general stock

According to MarketSmith analysis, DG stock rose 3.5% to 238.97, trading above the 50-day line and nearing the 240.07 cups-with-handles buy point. Dollar General stock was arguably already actionable after clearing a downward trend Tuesday. 240 price level tops DG stock in August and January.

market rally analysis

Major indices rebounded strongly on Tuesday, although volumes were much lighter than Friday.

After falling to their lowest levels since late 2020 last week, the Dow Jones, S&P 500 and Nasdaq Composite were arguably due for a bounce. All the major indices are still trading below their 10-day moving averages. The 50-day line is a huge hurdle, with the 200-day average and the highest level in the distance so far.

The index’s best percentage gains in history have been in bear markets or corrections, so Tuesday’s action was not meaningful in itself.

The S&P 500 and Nasdaq Composite are on the second day of the stock market rally, while the Dow Jones is just on the first day.

If the rally attempt continues, investors may look for a follow-up day later this week to confirm the new uptrend. But this bear market has seen several confirmed market rallies that fade away immediately or within a few weeks.

Not many stocks are in a position to sell off so fast in 2022.

Energy stocks bounced back after heavy losses last week. Some names like Exxon Mobil and LNG Stock look interesting.

China EV names have been leading the way in recent weeks, but Li Auto could probably use an extended pause.

Ultimately, the stock market could struggle with the Fed aggressively raising rates and the high risk of a recession. This likely will not change until inflation shows a meaningful decline, which will likely take several months.


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What should we do now

A market is trying to continue the rally effort, but has not yet provided evidence that it has found the staying power. Even if there is a follow-through day soon, investors should be cautious about re-entering the market, adding exposure slowly and exiting quickly.

If this rally attempt turns into a sustained uptrend that lasts for weeks, months or even years, there will be plenty of opportunities to invest heavily.

Right now, build your watchlist for stocks with strong relative strength, especially those holding or reclaiming major moving averages.

Read The Big Picture every day to learn the direction of the market and keep up with key stocks and sectors.

Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.

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