Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. The bid for a stock market rally continued on Tuesday as Treasury yields and the dollar retreated on hopes the Federal Reserve might slow rate hikes. TWTR stock soars as Tesla CEO Elon Musk agrees to go ahead with the $44 billion Twitter (TWTR).
The major indices are moving higher, but have yet to retake key levels or confirm the new rally attempt.
Megacaps Apple (AAPL), Microsoft (MSFT), parent company of Google Alphabet (Google T Amazon.co.uk (AMZN) all made solid gains. But only Microsoft stock closed above its 21-day moving average.
Still, the major stocks offer reason to tiptoe into the market, or at least prepare.
Arista Networks (A NET), Enphase Energy (ENPH), Paylocity (PCTY), On semiconductor (On and Devon Energy (DVN) are all at or near the first buying points. If the market rally continues to gain momentum, these stocks should be exploitable. All have relative ley lines at or near the vertices.
The Paylocity stock is on the IBD Leaderboard watchlist and was Tuesday’s IBD stock of the day. Microsoft and Google stocks are on IBD’s list of long-term leaders. Enphase, On Semiconductor and DVN stocks are on the IBD 50 list. ENPH, Onsemi and Arista Networks stocks are on the IBD Big Cap 20.
The video embedded in this article highlighted Tuesday’s market action and analyzed PCTY, On Semiconductor and Neurocrine Biosciences (NBIX).
Elon Musk says he will move forward with Twitter deal
Musk agreed to complete the $44 billion, $54.20 per share Twitter deal. Lawyers for Musk and Twitter were scheduled to meet in an emergency hearing in the Delaware Court of Chancery on Tuesday evening to discuss how to secure a settlement.
The Musk-Twitter saga isn’t quite over. Twitter has not agreed to Musk’s latest terms, which provide no real guarantee of his stated intention to move forward with the term. Still, Musk could officially own the social media site within days.
The Musk-Twitter trial was due to begin on October 17, with the Tesla CEO seen as highly likely to lose.
The Twitter stock, which was halted for much of the session, soared 22% to 52 as Musk blinked. While TWTR stock traded well below the repurchase price of $54.20, it significantly outperformed Facebook’s parent company. Metaplatforms (META) and Instantaneous (SNAP) in recent months.
You’re here (TSLA) rose 2.9% to 249.44, pulling back from intraday highs of 256.89 following the latest news from Musk-Twitter. Investors may wonder if Musk will sell TSLA stock to pay for the Twitter deal, though he has already sold stock with the Twitter deal as the reason. Longer term, Tesla stock investors may worry that Musk’s attention will be further separated from the electric vehicle giant as he adds Twitter to his portfolio of companies. Still, TSLA investors might be happy to have the Musk-Twitter takeover saga in the past.
Twitter shares were little changed in active after-hours trading. TSLA stock tilted down.
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Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value. S&P 500 futures were down 0.25%. Nasdaq 100 futures fell 0.2%.
Remember that overnight action on futures contracts on Dow Jones 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
Stock market rally
The stock market rally followed Monday’s advance with solid gains on Tuesday, although major indexes retreated from intraday highs.
The Australian central bank raised rates for a sixth consecutive month, but against all odds, by just 25 basis points. This followed the resumption of bond buying by the Bank of England last week as the UK government’s new budget sent the pound and UK debt tumbling.
The attempted rally gained momentum at 10 a.m. ET after the JOLTS report showed job openings fell sharply in August, well below views. Fed Chief Jerome Powell specifically cited job offers as being too high. While openings and the number of workers leaving are still high, the trend is favorable to the Fed. On Friday, the Department of Labor will release the September jobs report.
The Dow Jones Industrial Average rose 2.8% in trading on Tuesday. The S&P 500 index jumped 3.1%. The Nasdaq composite jumped 3.3%. The small-cap Russell 2000 jumped almost 4%.
Apple stock rose 2.6%, while Microsoft jumped 3.4%. Both are members of the Dow Jones, S&P 500 and Nasdaq. Google stock rose 3% and Amazon gained 4.5%. All added to solid gains on Monday, but need a lot of repair work.
U.S. crude oil prices jumped 3.5% to $86.52 a barrel. OPEC+ meets on Wednesday, with reports that the cartel could cut production by 1-2 million barrels per day.
Gasoline futures jumped 6.8%, signaling another rise at the pump. Natural gas futures jumped 5.7%.
The 10-year Treasury yield fell 3 basis points to 3.62%, after falling 15 basis points on Monday. For a second straight day, the 10-year yield found support at its 21-day rising line.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.4%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 3.8%, with MSFT stock a major IGV holding. The VanEck Vectors Semiconductor (SMH) ETF rose 4.3%.
The SPDR S&P Metals & Mining ETF (XME) rose 3.8%. The US Global Jets ETF (JETS) climbed 7.1%. ETF Energy Select SPDR (XLE) gained 4.3%. SPDR Health Care Fund (XLV) gained 2.3%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both climbed 7.6%. Tesla stock is a key holding in Ark Invest’s ETFs.
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Stocks close to buy points
ANET stock rose 4.3% to 120.81, resuming its 200 and 50 day lines, although volume was light. A decisive move above the 50-day line would likely break a short downtrend. Arista stock is working on a buy point of 132.97 from a consolidation within a much longer base.
ENPH stock edged up 0.6% to 288.55 but fell from 297.67 intraday. At its highs, Enphase stock resumed its 50 and 21 day lines and broke a short downtrend.
PCTY stock jumped 3.55% to 252.33, rebounding from its high volume 50-day line. Paylocity stock is just an entry from the trendline, with a move above the September 28 high at 253.26 as a possible specific trigger point. The HR software maker is consolidating with a buy point of 276.98, according to MarketSmith analysis.
ON stock jumped 6.4% to 68.92, resuming its 50-day line, although trading was slightly below average. A little more strength could see Onsemi clearing a trendline within a new consolidation alongside a deeper prior base.
DVN stock gained 5.7% to 69.07, rallying from its 50-day run as it trades on a cup-with-handle basis and a buy point of 75.37. The Devon stock is coming to a trendline in the handle.
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Market rally analysis
The stock market rally attempt continued to build momentum, with a second big gain for the major averages. The Dow Jones, S&P 500 and Nasdaq composite moved above their 10-day moving averages and approached their 21-day lines. Small cap Russell 2000, still leading, took over the 21 days.
All indices still have some way to go to reach their falling 50- and 200-day moving averages, with the mid-August highs being yet another key resistance area.
Megacaps such as Apple stocks are doing their part this week, but still have a long way to go.
However, major stocks are outperforming major indices, with several stocks breaking out, posting early entries or positioning themselves for possible entries.
The stock market was no doubt due to a rebound. Falling Treasury and dollar yields clearly helped fuel the gain in equities this week. But if yields and the greenback resume their uptrend, the market rally could quickly run out of steam.
As stocks rise on hopes the Fed will slow the pace of rate hikes, markets continue to price in a fourth 75 basis point hike in November and a half-point move in December.
Tuesday was the second day of a stock market rally for the Dow, S&P 500 and Nasdaq. A follow-up day may come later this week to confirm the new uptrend.
Some might argue that the Russell 2000 and S&P MidCap 400 held “tracking days” on Tuesday. This is a positive sign, but it will not trigger a change in market direction. Why? There is a low success rate for FTDs that do not include the Dow Jones, S&P 500 and Nasdaq.
A confirmed rally in the market could only mark the beginning of a tradable bearish rally against a long-term uptrend. The 50 and 200 day lines would be key levels to watch after an FTD.
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What to do now
The stock market rally attempt is gaining momentum with a number of leaders issuing buy signals. Investors could take pilot positions in certain stocks or in broad market ETFs. But anyone jumping in early should be prepared to jump just as fast if the market rebound falters.
There’s still nothing wrong with being almost or all in cash.
But now is definitely the time to work on your watchlists and pay close attention to the market. Look for quality stocks that are exploitable or close to being exploitable.
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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