Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures. The stock market rally rebounded strongly on Wednesday, with the Nasdaq ending a seven-day decline as energy prices fell and Treasury yields fell. The major indices are moving back towards their 50-day moving averages, but face this big test.
Apple (AAPL) unveiled its new iPhone 14 and several other products. Solar values continued to lead the way. Enphase Energy (ENPH), Network technologies (ARRY), Shoal Technologies (SHLS), sunrun (RUN) and Invesco Solar ETF (TAN) all issued buy signals on Wednesday.
Meanwhile, Twitter (TWTR) bounced back as the social media company won some, but not all, preliminary issues decided in a Delaware court on Wednesday regarding You’re here (TSLA) Takeover bid from CEO Elon Musk.
Apple unveiled the iPhone 14 and iPhone 14 Plus at a “Far Out” product event on Wednesday, along with new Apple Watch and Air Pod options. Apple’s iPhone 14 and other products were long overdue and largely offer incremental improvements. The new iPhone will have emergency satellite communication capabilities. The big surprise? Apple iPhone prices are not increasing.
Apple stock rose 0.9% to 155.96, still below the 50-day line. Above that, AAPL should clear the 200-day average before moving to a buy point of 176.25.
TWTR stock jumped on Wednesday after the Delaware Chancery court rejected Elon Musk’s bid to delay the Twitter takeover trial, which is expected to begin in October. But it will allow him to add the allegations of a recent whistleblower to his countersuit. Twitter is suing Musk to force him to complete the takeover. Musk balked at paying $44 billion, or $54.20 per share, and is trying to pull out of the deal. Legal experts continue to view Twitter as having a strong case, with the Delaware judge’s comments and rulings underscoring that argument.
Twitter stock jumped 6.6% to 41.21 on Wednesday, returning above its 50- and 200-day lines. TSLA stock rebounded 3.4% to 283.70, bouncing off the 50-day line but still below some other key levels. A decisive move above the 200-day line and near-term highs would offer an aggressive entry.
TAN, the Invesco Solar ETF, was added to SwingTrader and was Wednesday’s IBD stock of the day. The RUN stock was Tuesday’s stock of the day. Enphase and Tesla shares are on the IBD 50. ENPH shares are also on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.1% while Nasdaq futures were just below breakeven.
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 that started on Wednesday changed little but accelerated throughout the day.
The Dow Jones Industrial Average rose 1.4% in trading on Wednesday. The S&P 500 index jumped 1.8%. The Nasdaq composite jumped 2.1%. The small cap Russell 2000 gained 2.2%.
U.S. crude oil prices fell 5.7% to $81.94 a barrel, the lowest close since Jan. 11. Natural gas futures continued to decline, down 3.7%. While these declines reflect economic weakness, among other factors, they signal further significant declines in headline inflation through at least September.
The 10-year Treasury yield fell 7.5 basis points to 3.265% after climbing 15 basis points on Tuesday.
Markets lock in on a third consecutive Fed rate hike of 75 basis points on September 21, although August’s consumer price index is due next week. Markets are currently expecting quarter-point rate hikes from the Fed in November and December.
Among the top ETFs, the Innovator IBD 50 (FFTY) ETF edged up 0.3% as energy names took a hit. The Innovator IBD Breakout Opportunities (BOUT) ETF rose 1%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.1%. The VanEck Vectors Semiconductor (SMH) ETF rose 1.6%.
The SPDR S&P Metals & Mining ETF (XME) climbed 0.9% and the Global X US Infrastructure Development ETF (PAVE) 2%. The US Global Jets ETF (JETS) rose 3.5%. The SPDR S&P Homebuilders ETF (XHB) rebounded 2.8%. The Energy Select SPDR ETF (XLE) fell 1.2% and the Financial Select SPDR ETF (XLF) rebounded 2%. SPDR healthcare sector fund (XLV) rose 1.6%
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 3.4% and ARK Genomics ETF (ARKG) jumped 4.7%.
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Enphase stock jumped 8% to 316.31 on Wednesday, hitting a new high as it continued its rebound from the 21-day line. Stocks had consolidated strongly in recent weeks and were poised to forge a flat base ahead of Wednesday’s move. ENPH stock has now jumped x% in this short week. Investors could still buy Enphase, although it is closing in on the 21-day extension. It is well extended from 50 days.
The relative strength line reached new highs, reflecting the strong outperformance of Enphase stock against the S&P 500 index.
ARRY stock rose 6.1% to 22.03, rebounding from its 21-day mark. Investors could use this as an early entry for the ground mount solar system maker, or wait to see if Array can break the downtrend in a handful in a very deep cup base. The official point of purchase is 24.10.
SHLS stock jumped 7.6% to 27.76 on Wednesday, continuing a rebound from the 21-day line and hitting a 2022 high, offering an aggressive entry.
RUN stock jumped 10.5% to 36.58, bouncing off its 21-day moving average and breaking the downtrend of a short consolidation. This offered an early entry into the solar installation specialist. On Tuesday, Sunrun stock found support just above the 10-week moving average.
The Invesco Solar ETF TAN jumped 6.2% to 87.46, crossing above the 21-day line and breaking the downtrend of a short consolidation in heavy volume. This continues Tuesday’s bounce off the 50-day line. The main holding of the TAN ETF is ENPH stock, along with Sunrun, Shoals and ARRY stocks.
The TAN ETF has big moves, but it is less risky and volatile than buying an individual solar stock.
Market rally analysis
The stock market’s not-quite-dead rally showed signs of life, with the Nasdaq posting a seven-game losing streak as major indexes rebounded. However, volume declined from the previous session on the Nasdaq and NYSE.
It can be said that the market was overdue for a rebound after losing so much ground in a short time. But that doesn’t mean the downward pressure is over. If the stock market continues to rebound, the major indices will soon reach the 50-day and 21-day moving averages. Moving decisively above these levels would be a good first step. But the 50-day line has recently served as a cap.
Above all, it is the 200-day moving average.
One of the reasons for Wednesday’s stock market rebound was a modest pullback in Treasury yields, after surging on Tuesday. But the upward trend in Treasury yields remains well intact.
Solar stocks are hot, while pollution control names are cleaning up. Health insurers, some distribution names look solid. Still, the leadership is relatively narrow at the moment.
Oil and gas names struggled with big losses in crude oil and natural gas.
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What to do now
Investors who chose to do nothing on Wednesday had good reasons. A one-day bounce in a downtrend below key support is not a clear signal.
On the other hand, several buying opportunities presented themselves on Wednesday. But investors who have entered some of these names might be looking to take partial profits early, perhaps with an initial sell-off at a 5% gain or if the major indices hit their 50-day lines. This could help mitigate the very real risk that major indexes will soon resume their declines, as well as possible sector rotation or stock-specific news.
If new trades start hurting you, act quickly. If you’re going to be aggressive in entering a dubious global market, you need to be just as fast, if not faster.
Whether or not you added exposure on Wednesday, buying risks could be higher in the very near future. The market rally has rebounded, while the 50-day line is now much closer.
Keep working on watchlists. Look for stocks with high relative strength. If the market gains momentum and clears some initial hurdles, such as the 50-day line, a number of stocks with strong RS lines will give buy signals.
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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