The stock market saw significant bear market rally during the previous week as a hawkish Federal Reserve drove Treasury rates up once more. On Friday, the other major indices came within striking distance of the Dow Jones’ breach of the June lows. The last growth leaders began to crumble.
Investors should stay away from the markets as the slump deepens while keeping an eye out for possible leaders. Some medical equities, like Eli Lilly, are seeing relative strength (LLY). Pinduoduo (PDD), a major Chinese e-commerce company, is retracing its steps slowly. Although they are under growing pressure, Apple (AAPL), Tesla (TSLA), Enphase Energy (ENPH), and Albemarle (ALB) are still worth keeping an eye on.
The IBD 50 list includes Albemarle, Enphase Energy, and Tesla shares. On the IBD Big Cap 20, Enphase and ALB shares are listed. Friday’s IBD Stock Of The Day was Eli Lilly.
The article’s attached video covered the abrupt market decline and examined the shares of Neurocrine Biosciences (NBIX), Albemarle, and PDD.
Jones Futures Today’s Dow Jones futures, S&P 500 futures, and Nasdaq 100 futures all begin trading at 6 p.m. ET.
Keep in mind that overnight trade in Dow futures and other markets may not always reflect real trading during the next normal stock market session.
The Stock Market
Despite a brief rebound around Friday’s close, the stock market lost a significant amount of money last week, finishing near weekly lows.
In last week’s stock market trade, the Dow Jones Industrial Average decreased by 4%. S&P 500 index losses were 4.6%. 5.1% of the Nasdaq composite fell. The Russell 2000 small-cap index fell 6.6%.
An eighth consecutive weekly rise was capped by a 25 basis point increase in the 10-year Treasury yield to 3.7%.
Last week, U.S. crude oil futures fell 7.1% to $78.74 a barrel, marking their lowest prices since January.
ETFs The Innovator IBD 50 ETF (FFTY), one of the greatest ETFs, fell 10.8% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT), another top ETF, down 6.5%. A 5.4% decline was seen in the iShares Expanded Tech-Software Sector ETF (IGV).Semiconductor ETF VanEck Vectors (SMH) fell 5.7%.
Last week, the SPDR S&P Metals & Mining ETF (XME) fell 8.3%. A 5.3% loss was experienced by the Global X U.S. Infrastructure Development ETF (PAVE). U.S. Global Jets ETF (JETS) lost 9.1% of its value. SPDR S&P Homebuilders ETF (XHB) lost 4.2% of its value. The Financial Select SPDR ETF (XLF) dropped 6.1%, while the Energy Select SPDR ETF (XLE) fell 10.15%. A 3.6% loss was seen in the Health Care Select Sector SPDR Fund (XLV).
Both the ARK Innovation ETF (ARKK) and the ARK Genomics ETF (ARKG) saw declines last week due to more speculative tale stocks. One of the most popular assets in all of Ark Invest’s ETFs is still TSLA stock.
The price of Apple shares decreased by just 0.1% to settle at 150.54, close to its weekly lows. The AAPL stock encountered resistance on Wednesday and is now back close to previous lows. However, on Friday, the relative strength line reached a new high. Apple stock still has a purchase point of 176.25 handles, but regaining its 50-day and 200-day lines will be the first test.
The price of Eli Lilly’s shares increased by 0.9% last week to 311.60. Thursday saw a roughly 5% increase in shares as a result of good medication news and an analyst upgrade. The LLY stock is trading below its 50-day line and encountered resistance there on Friday. The RS line, though, is speeding up.
According to MarketSmith research, the drug giant has a 335.43 flat-base purchase point. Although there may be a trendline entry just above the 50-day line, this is not the time to purchase anything.
ENPH stock fell 12.1% last week to 279.49, just missing the current lows and its 50-day line. The ENPH stock should ideally stabilise for a while and maybe establish a new foundation.
Stock of PDD Pinduoduo stock fell 8.5% to 60.08, falling below its 21-day line and getting close to its 50-day. Since the Chinese e-commerce behemoth published astronomical numbers in late August, when it temporarily broke out, PDD stock has lost almost all of its gains.
Albemarle’s stock fell 6.1% last week to 269.69, but on Friday it found support at its 50-day line. ALB stock is round-tripping gains from a 273.78 alternative entry from a big cup-with-handle base while remaining above a 250.25 purchase point from a modest handle in early August. Currently, there is no obvious entry point for ALB stock.
With increased EV demand and limited lithium supplies, lithium prices are high and are expected to stay that way indefinitely. ALB stock and other lithium bets may, without a doubt, be extremely volatile and vulnerable to significant sell-offs.
Tesla shares lost significantly more from Wednesday’s high, falling 9.2% to 275.36. Although it fell below its 200-day and 50-day lines, the TSLA stock managed to hold above recent lows. With a 316.74 purchase price inside of a much deeper consolidation, the EV behemoth now has a bonafide consolidation. Tesla stock has a handle entry of 313.90 on a weekly chart.
Up until late last week, the RS line has been rising.
Weekly China sales figures, which should be available by Tuesday, might allay or exacerbate concerns about the country’s Tesla demand. Early October will provide figures on worldwide production and delivery for the third quarter.
Analysis of the stock market
Another week of severe losses for the stock market. Together with the NYSE Composite, the Dow Jones fell below its June lows on Friday. Although they haven’t, the Nasdaq, S&P 500, and Russell 2000 all need one more terrible day to fall lower.
A bounce can be possible. It’s true that the market is oversold by a number of metrics, and a comeback effort from the June lows makes sense. Despite the fact that the market fear measure is not at extraordinary levels, the CBOE Volatility Index increased to a three-month high on Friday.
Of fact, a bounce does not always occur immediately. And if the indices suddenly start selling again, one or two strong days won’t signify anything.
Treasury rates and the US currency would likely need to slow down or retreat in order for the stock market to rebound.
Market rallies, even intraday ones, have been mediocre, low-volume events in recent weeks, followed by a lot of selling.
There is a good likelihood that the Bear Market rally will have one more substantial leg downward. Even if the market does bottom out, it could take a while for prices to rise sharply.
What may alter the situation? The August PCE index, the Federal Reserve’s preferred inflation indicator, will be available on September 30. A week later, the September jobs report will be released. Positive numbers would be welcome, but the Fed prefers to see persistent drops in core inflation and job market deterioration.
Over the following few weeks, significant warnings are anticipated. Earnings disappointment is a result of high labour costs, problematic supply chains, rising interest rates, a rising dollar, and a stagnant economy.
Although the emphasis is relative, certain industries are functioning rather well.
This covers well-known pharmaceutical companies like LLY stock in addition to other medical firms like specific biotechs and medical brands. The fight against pollution is still going well. But even many companies with rising or new highs on their RS lines are tumbling and trading on the incorrect side of the 50-day and 200-day lines.
A stock may have been holding up, but that doesn’t guarantee it will continue to do so during a market drop. This past week, a huge number of strong stocks had abruptly steep declines. This includes growth stalwarts that are now sharply depreciating, including Enphase and TSLA shares.
These stocks may require more time to restore if they sustain substantial additional damage. However, the same might be said of the market as a whole.
Steps to Take
Investors ought to stay out of the market. Few equities are holding up, and even relative winners are struggling as a result of the market drop.
Continue to create your watchlists with a focus on relative strength. With a few exceptions, such as the LLY stock, almost all of the charts will appear bad.
It’s usually better to wait for a rebound, when equities or the major indices surge back up to important levels and strike resistance, if you’re seeking for shorts. But you should also work on such possible lists.
Bear Market rally are notorious for making it difficult to gain money. The next significant market surge will be the window for significant gains. The idea is to remain involved and get ready for that rise.
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