Futures on the Dow Jones will open on Sunday evening, along with futures on the S&P 500 and Nasdaq. The bear market intensified last week amid growing fears that the Federal Reserve could be forced to plunge the economy into a recession in order to bring inflation under control.
As major indexes dip to their pre-Covid highs, investors should be on the sidelines. Don’t get excited about one-day bounces, like Friday’s tech advance. Instead, get ready to take advantage of the next sustained uptrend.
Few stocks hold up, but here are five that do a reasonable job: You’re here (TSLA)rival BYD (BYDDF), Vertex Pharmaceuticals (VRTX), fertilizer and lithium set M² (m²), Eli Lily (LLY) and Enphase Energy (ENPH).
All have relative ley lines at or near the vertices. The RS line, the blue line in the charts provided, tracks a stock’s performance against the S&P 500 Index.
BYD stock is close to a traditional buy point. SQM stock is finding support at its 50-day line after making big round-trip gains. ENPH stock recovered to that key level on Friday. Vertex and Eli Lilly stocks are not far below their 50-day lines.
LLY stock is on the IBD ranking. Eli Lilly and SQM shares are on the IBD 50. BYD was Friday’s IBD stock of the day.
The video embedded in this article discusses weekly market action and analyzes stocks from BYD, SQM and Enphase.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.
US markets will be closed on Monday for the June 16 holiday, but other exchanges around the world will be open. Dow futures will trade normally on Monday.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
The stock market again posted big weekly losses, with major indexes falling to their worst levels in more than a year.
The Dow Jones Industrial Average fell 4.8% in stock trading last week. The S&P 500 index fell 5.8%. The Nasdaq composite fell 4.8%. The small-cap Russell 2000 plunged 7.5%.
The 10-year Treasury yield rose 8 basis points to 3.24%. On Tuesday, the 10-year yield climbed to 3.48%, an 11-year high.
U.S. crude oil futures plunged more than 9% to $109.56 a barrel last week, ending a seven-week losing streak. Gasoline futures also fell sharply. Natural gas prices have fallen.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) plunged just over 12% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) slipped 9.1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 5.1%. ETF VanEck Vectors Semiconductor (SMH) lost 8.1%.
The SPDR S&P Metals & Mining ETF (XME) sold 10.4% last week. The Global X US Infrastructure Development ETF (PAVE) fell 8.6%. The US Global Jets ETF (JETS) fell 8.9%. SPDR S&P Homebuilders ETF (XHB) resigned 11.4%. ETF Energy Select SPDR (XLE) fell 17.2% and ETF Financial Select SPDR (XLF) fell 4.8%. The SPDR healthcare sector fund (XLV) lost 4.5% as Lilly and VRTX shares were both held.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 3.3%, rebounding well from lows and still not breaking its late May lows. ETF ARK Genomics (ARKG) fell just under 1% after hitting a new two-year low. Tesla remains a major holding in Ark Invest ETFs. Ark has a small position in BYD stocks.
Five best Chinese stocks to watch now
BYD stock rose 4% on Friday but fell 4.1% to 37.45 for the week, ending a five-week winning streak. The stock has forged a handle on a weekly chart, giving it a buy point of 39.81. With such a deep base – 48% – the chances of a failed breakout are higher. A long handle, especially one that’s long enough to be its own tight base, would be constructive.
But with Chinese electric vehicle stocks — and U.S.-listed Chinese stocks in general — rebounding, BYD shares may not stay in the park for long. Nio (NIO), Xpeng (XPEV) and Li-Auto (LI) rose, with Li Auto approaching highs.
BYD’s in-house battery and chip operations, along with massive capital expenditures over the past 18 months, have fueled huge sales growth and helped the company avoid supply chain issues and the China Covid lockdown. Its sales of electric vehicles and plug-in hybrids will overtake Tesla’s electric-only sales in the second quarter and could maintain that lead.
Tesla stock fell 6.7% last week to 650.28, nearly topping its lows in late May.
Tesla vs. BYD: Which electric giant is the best buy?
Enphase shares fell 5.8% to 184.90 last week. Friday’s 8.9% gain took ENPH stock back above its 50- and 200-day line. A break from a double bottom base in early June quickly failed as the 193 buy point was no longer valid. But a handful has now formed, with a buy point of 217.33 just above the June 8 high. Keep in mind that Enphase stock has big daily moves. While solar stocks held off the selloff in oil and gas names on Friday, that may not last.
ENPH and SolarEdge Technologies (SEDG) stocks were still among the best performers in the S&P 500 on Friday. The SEDG stock got its 50-day line back, working on a mug base with handle.
Vertex stock rose 3.2% to 253.09 last week, almost retaking its 50-day line with a pop of 4.8% on Friday. A buy point of 276.10 cup with handle is no longer valid, so the official entry is 292.85. But investors could use 279.23 as an early entry.
Eli Lilly Stock
Eli Lilly stock fell from 2.15 to 390.90 last week, hitting resistance at the 50-day line on Friday. A strong move above the 50-day line could offer an early entry for LLY shares. An earlier fixed base buy point of 314.10 is no longer valuable, but Lilly stock is forging another consolidation alongside.
Stock of m²
SQM stock fell 6% last week to 90.29, but rose on Friday after finding support at its 50-day line. The stock has erased a 27% gain from a buy point of 90.97 in the past few weeks. But a strong rebound from the 50-day line could offer an entry for SQM shares.
Both SQM and BYD stocks are key components of Global X Lithium & Battery Tech ETF (LIT), along with Tesla.
The severe market correction – a bear market for the S&P 500 and the Nasdaq – continued to worsen last week.
Friday’s mixed action was hardly inspiring. Yes, the Nasdaq and S&P 500 rose on Friday, so it’s technically the first day of an attempted market rally for those two indexes. But they only reduced the strong weekly losses.
The S&P 500, Dow Jones and S&P 500 all hit their worst levels since late 2020.
Even if the market climbs and holds a tracking day in the near future, there would still be plenty of reason to be skeptical and few stocks to buy.
The oil and gas sector, the only enduring area of market strength, plunged last week, with many big winners sending sell signals. The sector may not be complete, but it was a character change, with damaged maps.
While some stocks such as BYD and SQM are close to buy points, and other names such as Vertex, Lilly or Enphase could be attractive with a few strong sessions, many potential leaders may take weeks to repair. And that’s in a scenario where a new market rally is firmly taking hold.
At present, it is much more likely that the stock market will continue to decline. An economy teetering into recession while the Federal Reserve is at the start of an aggressive tightening cycle is not an ideal environment for stocks.
The major indices are all close to their pre-Covid peaks. It might offer a potential level of support, but it doesn’t have to hold. The Russell 2000 already exceeds this key level.
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What to do now
Investors have no reason to be invested, even energy stocks showing sell signals. The only possible exception would be modest exposure among long-term winners.
Still, it’s important to stay engaged, watch the market action, and prepare for the next uptrend.
It’s time to get your pencils, not your pens, to update your watchlists. Look for stocks with strong relative strength, especially if they hold key support levels. But a lot of stocks with strong RS lines will have ugly charts right now.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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