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Dow Jones futures will open on Sunday night, along with S&P 500 and Nasdaq futures. Major indices and major stocks suffered heavy losses over the past week, causing the market to shift direction towards the ‘correction’.
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Investors are always on You’re here (TSLA) watches over deliveries. The electric vehicle maker could release third-quarter production and sales figures this weekend or early next week.
The S&P 500 and Nasdaq dipped below their 50-day lines and broke their September 20 lows. Growth stocks have had their worst week since the coronavirus crash. As stocks rebounded on Friday, the marks on the first day of an attempted market rally. For now, the market remains in a downtrend.
In such an environment, investors would have to have limited exposure to the market or be entirely in cash. Look for stocks with strong lines of relative strength.
Netflix (NFLX), datadog (DOG), Mosaic (MOS), American Express (AXP), Bill.com (INVOICE), Quanta Services (REP) and Paychex (PAYX) all have RS lines at or near highs, reflecting their outperformance against the S&P 500 Index.
Netflix stock is now in a buy zone. In a healthy stock rally, investors could buy NFLX or see the first entries in Datadog, Mosaic, Paychex and AXP stocks.
Also keep an eye on Microsoft (MSFT) and Google (GOOGLE). The RS lines of these tech megacaps aren’t far from the tops. If MSFT Stock and Google can recover their 50-day lines, that’s a good sign for the Nasdaq.
As for the TSLA share, it remains in a buy zone. The RS lineup for Tesla hasn’t hit a new high, but is at its best in nearly six months.
Tesla, Microsoft and Google stock are listed on the IBD rankings. Microsoft and Google stocks are also among the long-term IBD leaders. American Express and PWR shares are on SwingTrader. Google stock is on the IBD 50.
The video embedded in this article analyzed the overall stock market action and reviewed Netflix, Mosaic, and DDOG stocks.
Why this IBD tool makes it easy to find the best stocks
The infrastructure bill still pending
Meanwhile, the fate of the $ 1.2 trillion infrastructure bill remains uncertain. Progressives at home are demanding significant progress, at a minimum, on a multibillion-dollar reconciliation tax and spending package before they vote for the bipartisan infrastructure bill. But Democratic leaders now appear to be trying to get centrist Democrats to agree to a $ 2 trillion reconciliation plan against the much-vaunted $ 3.5 billion plan. President Biden met with Democratic lawmakers on Friday, telling them the infrastructure bill would not pass until there was “agreement” on the reconciliation bill.
Additionally, as Congress extended government funding through early December last week, lawmakers have yet to approve an increase in the debt ceiling. Treasury Janet Yellen has set October 18 as the likely government default date. Raising the debt limit without Republican votes could complicate the reconciliation plan, which in turn could keep the infrastructure bill on hold.
Dow Jones Futures Today
Dow Jones futures will begin trading at 6 p.m. ET on Sunday. The same will be true for the S&P 500 and Nasdaq 100 futures contracts.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades during the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Coronavirus news
Coronavirus cases around the world have reached 235 million. Deaths from Covid-19 have exceeded 4.80 million.
Coronavirus cases in the United States have reached 44.41 million, with deaths exceeding 717,000.
New cases of Covid are down sharply in the United States and around the world, but still remain quite high.
Beginning of the stock market rally attempt
The stock market ended the week with heavy losses, despite Friday’s rebound.
The Dow Jones Industrial Average fell 1.35% during stock trading last week. The S&P 500 index lost 2.2%. The Nasdaq composite lost 3.2%. Small cap Russell 2000 plunged 0.3%.
The 10-year Treasury yield, which jumped to nearly 1.57% on Tuesday morning, ended the week at 1.465%, up less than a basis point. Friday’s 10-year rate pullback helped support stocks over the weekend.
Growth stocks were hit hard. Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 8.7% last week, while the Innovator IBD Breakout Opportunities (BOUT) ETF fell 4.1%. The iShares Expanded Tech-Software Sector (IGV) ETF lost 4.2%, with Microsoft stock being one of the main components. The VanEck Vectors Semiconductor (SMH) ETF slipped 5.8%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 5.1% and ARK Genomics ETF (ARKG) fell 4.9%. Tesla stock remains the top position among ARK Invest ETFs, although Cathie Wood has sold a large portion of ARK’s stake in recent weeks.
The other sectors were mixed.
The SPDR S&P Metals & Mining ETF (XME) rose 2.6% and the Global X US Infrastructure Development ETF (PAVE) fell 0.9%. The US Global Jets ETF (JETS) rose 2.5%. The SPDR S&P Homebuilders ETF (XHB) lost 4%. The Energy Select SPDR ETF (XLE) climbed 5.8%. The ETF Financial Select SPDR (XLF) fell 0.3%. The AXP share is a significant holding of XLF.
Five best Chinese stocks to watch right now
Tesla deliveries
The electric vehicle giant will soon release third-quarter deliveries and production figures, possibly over the weekend or until next Tuesday.
Tesla’s shipments will hit around 232,000, according to the latest upward revised analyst consensus. Tesla sold the Model Y in Europe for the first time, likely increasing sales in that region. Tesla exported most of its production from Shanghai in July and August, mostly to Europe, but September appears to be a big figure for local sales in China.
Chip shortages may restrict Tesla’s production, but if so, it only slows production growth so far. Meanwhile, global auto production has plunged, boosting Tesla’s demand and prices.
Even outside of Tesla deliveries, next week will be important for the electric vehicle maker.
On October 8, Tesla will begin rolling out the FSD beta to fully autonomous driving owners and subscribers who wish to opt for the still unfinished driver assistance software. Elon Musk recently said Tesla will roll out the beta to 1,000 drivers per day, starting with those who have performed best in a driving safety test. Keep in mind that despite the name, Full Self-Driving is a practical level 2 system.
Meanwhile, on October 7, Tesla will hold its annual meeting of shareholders at its Austin plant, followed by an event at its Berlin plant on October 9. It is possible that Musk is giving indications of the start of production at the Austin and Berlin factories.
Tesla shares
Tesla stock edged up 35 cents to 774.74 for the week, holding above a 764.55-year buy point, released on September 24. The RS line is still below historical levels, but has returned to its short-term April highs.
Market analysis
The major indices suffered big losses last week. Worse yet, the S&P 500 and the Nasdaq fell below the 50-day line and recent lows. It was good to see the major indices bounce back on Friday, but it was only one day. The anemic volume, especially on the Nasdaq, was not inspiring.
After rising Treasury yields were a headwind for much of the week, Friday’s sharp drop in the 10-year yield helped boost stocks.
If the major indices avoid breaking above Friday’s lows, we may have a follow-up day later in the coming week or beyond. But for now, the market remains in a correction. The major indices are below their 50 and 21 day moving averages. On the bright side, the Russell 2000 managed to regain their 10, 21, 50 and 200 day lines in one fell swoop on Friday.
Growth stocks have had a horrible week. The weekly drop in the FFTY was the worst since the coronavirus crash. This follows strong growth in growth stocks.
Growth stocks, or many of them, could take a back seat in the coming weeks.
Energy, financial and tourism stocks performed relatively well last week. Energy and banking stocks generally have the most convincing charts, but these sectors are subject to fluctuations in energy prices and Treasury yields, respectively. Travel stocks can have a longer term tailwind. With the Covid Delta wave appearing to be fading in the United States and around the world, more and more people will be ready to travel, especially with the lifting or easing of restrictions on cross-border travel.
Time the market with IBD’s ETF market strategy
What to do now
Investors should keep their exposure to minimal levels, perhaps maintaining core positions in long-standing or recent big winners. There is nothing wrong with being all in cash right now. Being in cash during market corrections preserves your capital, but also your psychological capital. Trying to make money in a fix can be mentally draining and skew your perspective. Just investing heavily during a correction means you are not listening to the market. When the market returns to a sustained uptrend, will you be ready to profit?
If you feel pressured into making new purchases, keep them small and cut your losses quickly. Be prepared to take at least partial profits quickly to help you make gains in a weak to choppy market environment.
For the most part, investors should build their watchlists with relative strength in mind. Stocks like Netflix, Mosaic, Datadog, Paychex, and American Express all have solid RS lines. Don’t rule out sectors just because you have a bias towards high-valued growth stocks. Let the market and your screens guide you to possible leaders in the next confirmed uptrend.
Read The Big Picture every day to stay in tune with the market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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