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Dow Jones futures will open Sunday night, along with S&P 500 and Nasdaq futures. The stock market suffered a decisive break last week, with the surge in coronavirus cases, the impending presidential election and major reports on Apple stock earnings Shopify (SHOP), Microsoft (MSFT) and Amazon.com (AMZN) failed to satisfy Wall Street.
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The Dow Jones, S&P 500 Index and Nasdaq Composite suffered their worst weekly losses since March. Major indices and many top stocks broke decisively below key support, including Apple (AAPL), Shopify, Microsoft and Amazon stock as well as Adobe (ADBE) and You’re here (TSLA) and more. All of this points to a new negative direction for the stock market.
Money is made in the stock market when the trend is up. But the stock market character has become increasingly negative in recent weeks. In this environment, investors must take a defensive approach, significantly reducing their exposure. Going 100% in cash is not a bad strategy.
But stay engaged. The direction and character of the stock market may soon change.
Keep an eye out for high relative strength stocks, standing near buy zones. Examples include JD.com (JD), ServiceNow (NOW), Monolithic power systems (MPWR) and Idexx Laboratories (IDXX). Of course, they may not continue to hold on. Many stocks that seemed resilient as we approached last week have collapsed.
Meet 5 Technicians With Strong Near-Buy Points
Microsoft, Adobe, ServiceNow, JD.com and Tesla stocks are listed on the IBD rankings. Microsoft stock, Adobe and Idexx Labs are long-term IBD leaders. Amazon stock, ServiceNow and Adobe stock are part of the IBD 50. Monolithic Power stock was on Friday’s IBD Stock Of The Day.
Dow Jones Futures today
Dow Jones futures start trading at 6 p.m. ET on Sunday, as do S&P 500 and Nasdaq 100 futures.
Spike in coronavirus cases and coronavirus lockdowns could take a toll on the global economy, especially in Europe and the United States
Meanwhile, a Chinese manufacturing index showed continued growth in October, while non-manufacturing activity picked up.
Keep in mind that an overnight action on Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks during the stock market rally on IBD Live.
Coronavirus news
Coronavirus cases around the world have reached 46.20 million. Covid-19 deaths have exceeded 1.19 million.
Coronavirus cases in the United States have reached 9.41 million, with deaths exceeding 235,000.
New coronavirus cases around the world surpassed 573,000 cases on Friday, easily a daily record.
New U.S. coronavirus cases reached 101,461 on Friday, beating previous daily records on Thursday (91834) and 81811 (Wednesday). Hospitalizations are skyrocketing in many states.
Meanwhile, Belgium will join France and Germany in partial lockdowns, as coronavirus cases skyrocket in Europe. Belgium has among the most numerous cases of Covid per capita in the world.
In the coming weeks, we should get early data on the end-stage trials of the coronavirus vaccine candidate by here Pfizer (PFE) and partner BioNTech (BNTX), with a possible filing of FDA authorization by the end of November. Until last week, Pfizer said it would have some initial data by the end of October. Modern (ARNM) could follow a few weeks later with its Covid-19 vaccine.
Stock market action last week
Snapshot of the US Stock Market Today |
||||
|---|---|---|---|---|
| Index | symbol | Price | Loss of profit | % Change |
| Dow jones | (0DJIA) | 26503.57 | -155.54 | -0.58 |
| S&P 500 | (0S and P5) | 3270.14 | -39.97 | -1.21 |
| Nasdaq | (0NDQC) | 10911.59 | -274.00 | -2.45 |
| Russell 2000 | (Etc.) | 153.11 | -2.03 | -1.31 |
| IBD 50 | (FFTY) | 35.95 | -0.98 | -2.65 |
Last Modified: 4:10 PM ET 10/30/2020 |
||||
The stock market has had a rough time, with the major indexes suffering their biggest losses since March.
The Dow Jones Industrial Average fell 6.5% during stock trading last week. The S&P 500 index plunged 5.6%. The Nasdaq composite sold 5.5%. All fell sharply thanks to their 50-day moving averages. The Dow Jones undermined its September lows and is now testing its 200-day line.
Apple shares fell 5.4% last week, Microsoft 6.4% and Amazon 5.25%. SHOP shares plunged 9.8%, Adobe 8.5% and Tesla 7.75%. The sale of Tesla came against the backdrop of large gains for Chinese VE stocks such as Nio (NIO).
Compare that to more resilient stocks. JD.com stock edged up 0.2% last week. MPWR stock fell 0.6%, Idexx Labs 1.3% and ServiceNow 3.2%, all benefiting from positive feedback to earnings reports.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 6.2% last week. The iShares Extended Tech-Software Sector (IGV) ETF slipped 7%, with Microsoft, Adobe and ServiceNow stocking all major components. The VanEck Vectors Semiconductor ETF (SMH) was down 4.9%.
Meanwhile, after nearly three weeks of decline, the past few days have caused major damage to the cards.
This is an important time to read The Big Picture.
Why this IBD tool makes it easier to find the best stocks
The stock market lacks good character
There is a lot of discussion as to whether a stock market is an “uptrend under pressure” or a “market correction”. At some level, it’s an arbitrary dividing line.
The real problem is that at some point the stock market changes its character from a general uptrend to a general downtrend. A good day or two in the middle of a downtrend doesn’t necessarily mean the character is positive again.
This is the goal of a follow-up day. It’s not bureaucratic paperwork that CAN SLIM investors have to fill out. It’s a way for the stock exchange to prove a change in character.
The goal is to enter a new market rally relatively quickly, but wait until there is evidence of a decisive character change. You want a few days of uptrend, then a big day to confirm.
So, for now, forget the labels. Consider the current stock market.
A good day wouldn’t mean a character load. Thursday was a solid day, but ultimately did not signal a positive change in market direction.
The stock market must decisively break the downtrend of the main indices. Right now, this positive direction in the stock market would likely imply that the Nasdaq clearly resumes its 50-day line. But that won’t happen overnight, unless there is some truly incredible payoff. At this point, many top stocks like Apple, Amazon and Tesla stocks are badly damaged and need time to repair their graphics.
The CBOE volatility index, commonly known as the VIX, is at its highest for four months. Excessive fear is often associated with short-term market funds. But while the market fear gauge rose slightly on Friday, it never broke Wednesday’s intraday high. It may take a larger VIX peak to signal a bottom and a possible new market direction.
The next few days will be particularly difficult to interpret. Even though Dow Jones futures signal a rebound on Sunday night, there are strong moves Monday and Tuesday, the market could take a dramatic turn after election day. So, if it is possible that JD.com, Monolithic Power or other stocks near the buy points could erupt, investors should be aware that the risks are extremely high.
Game plan for the coming week
Hopefully investors reduce their exposure as gains fade and breakouts turn into losses. But look carefully at your remaining positions. Which should be cleaned or cut entirely?
During this time, focus on creating your watchlists. There is probably a lot of turnover, with a lot of promising stocks looking broken. Keep looking for stocks that are near buy points, but look more broadly at stocks with strong lines of relative strength, even if they are not in position. Over the next few weeks, they could form new consolidations.
The profit season will remain heavy.
Horizon Therapeutics (HZNP) and Lumentum (LITE) reports income before Monday opens. Pay Pal (PYPL), Skyworks Solutions (SWKS), Cirrus logic (CRUS) and Freshpet (FRPT) report after closing.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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