Dow Jones Futures Fall After Market Rallies; Here Comes Fed Chief Powell

Dow Jones Futures Fall After Market Rallies; Here Comes Fed Chief Powell

Dow Jones futures fell sharply early Wednesday, along with S&P 500 futures and Nasdaq futures, and fears of a recession mounted with Fed chief Jerome Powell set to testify before Congress on Wednesday. in the morning.




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The stock market’s attempted rally had a strong session on Tuesday. But it is still a recovery attempt within a bear market.

Cheniere Energy (LNG), exxonmobile (XOM), Eli Lilly (LLY), general dollar (GD), Tesla (TSLA) rival li car (LI), United Health (UNH) and Northrop Grumman (NOC) showed a strong positive action, with relative strength lines at or near the highs.

But few quality stocks are in position right now. That’s just one of many reasons to stay on the sidelines. While a recovery attempt is underway, it is not yet a confirmed uptrend.

Northrop and Eli Lilly shares are on the IBD leaderboard. Li Auto and Eli Lilly shares are at IBD 50. LLY shares are also at IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures fell 1.15% against fair value. S&P 500 futures lost 1.4% and Nasdaq 100 futures fell 1.6%.

The 10-year Treasury yield sank 8 basis points to 3.23%.

US crude prices fell 5%. President Joe Biden on Wednesday called on Congress to suspend the federal gas tax of 18.4 cents a gallon for three months to provide temporary relief at the pump.

Copper prices sank more than 3%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Fed chief Powell testifies

Fed chief Powell testifies on monetary policy before the Senate Banking Committee on Wednesday morning. Powell will appear before the House Financial Services Committee on Thursday.

It’s unclear if Powell will break new ground since last week. On June 15, the Federal Reserve raised interest rates by 75 basis points, with the Fed chief saying that 50 basis points or 75 basis points is on the table for the late July policy meeting. Markets have almost fully priced in another three-quarter percentage point rate hike.

Fed chief Powell testifies at 9:30 a.m. ET, just as the opening bell rings, though the Fed may release its prepared comments sooner.

More Wall Street firms in recent days are now forecasting that the US or the world will slip into recession, or are putting the odds at roughly 50-50.


Join IBD Experts as They Discuss Actionable Actions in the Stock Market Rally on IBD Live


stock market rally tuesday

The stock market rally attempt had a strong session. The Dow Jones Industrial Average rose 2.15% in trading on Tuesday. The S&P 500 index rose 2.45%. Tesla, Exxon and UNH stocks were among the best performers in the S&P 500, with the latter two names also Dow giants. The Nasdaq Composite rose 2.5%. The small-cap Russell 2000 advanced 1.8%.

The crude oil futures contract due in July rose 1% to $110.65 a barrel, off intraday highs. August crude gained 1.4% to $109.52.

The 10-year Treasury yield rose 7 basis points to 3.31%.


Stock market forecast for the next six months


ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2%. The iShares Expanded Technology Software Sector (IGV) ETF advanced 1.9%. The VanEck Vectors Semiconductor ETF (SMH) rose 2.8%.

SPDR S&P Metals & Mining ETF (XME) rose 1.6% and the Global X US Infrastructure Development ETF (PAVE) rose 1.1%. The US Global Jets ETF (JETS) rose 0.8%. SPDR S&P Homebuilders ETF (XHB) rose 0.4%. The Energy Select SPDR ETF (XLE) rallied 4%, with shares of XOM a big component, and the Financial Select SPDR ETF (XLF) rose 1.5%. The SPDR Healthcare Select Sector Fund (XLV) was up 2.3%, with UNH shares the largest holding and Eli Lilly also a notable component.

Mirroring historically more speculative stocks, ARK Innovation ETF (ARKK) was up 4.4% and ARK Genomics ETF (ARKG) was up 3%. Tesla shares remain a major holding in Ark Invest ETFs.


Five best Chinese stocks to watch now


LNG stocks

Cheniere Energy shares rose 5.5% to 132.95, approaching its 50-day moving average. On Friday, LNG shares undermined several months of trading but then rallied on heavy volume. The LNG game is working on a consolidation with a buy point of 150.10, although there may be early entries. Several other LNG games also rallied towards their 50-day line.

XOM Actions

Exxon shares rose 6.3% to 91.51, recovering its 50-day moving average and a possibly still valid cup-with-handle buying point of 89.90. XOM shares rose as high as 105.57 on June 8, but soon gave back recent gains, falling 14% last week.

Ideally, Exxon Mobil would move sideways and start to form a new consolidation before making a breakthrough.

On Tuesday, Exxon Mobil joined a $29 billion Qatar natural gas project. Other partners include ConocoPhillips (POLICEMAN), Eni (Hey Total Energies (ETT). Meanwhile, Credit Suisse upgraded its rating on Exxon stock to Outperform with a price target of $125.

LLY shares

Eli Lilly shares rose 2.2% to 297.35, closing a hair below the 50-day line. A previous 314.10 purchase point of a flat base/base on base structure is no longer valid. LLY shares are working on a new consolidation. A break above a short downsloping trend line would offer an entry around 306.

bristol myers squibb (BMY), Vertex Pharmaceuticals (VRTX) and Harmony Biosciences (HRMY) are showing positive action.

Li car stock

LI shares jumped 7.85 to 35.75 on Wednesday, the highest close since January 2021. Li Auto shares almost breached a buy point of 37.55 from a deep 55% consolidation. Ideally, LI shares would form a mango, the longer the better, digesting their huge recent gains.

China’s Li Auto unveiled the L9, a new hybrid SUV, on Tuesday. It is more expensive than the Li One, which is already in the premium segment.

child (NIO) soared 9.2% and Xpeng (XPEV) 6.8% as both continue to rally above their 50-day line but below their 200-day averages. Electric vehicle and battery giant BYD (BYDDF) gained 3.2% at 38.60, working at a handle cup buy point of 39.81 on a weekly chart.

Shares of Tesla rose 9.35% to 711.11, recovering from their 21-day moving average on heavy volume. But the 50 and 200 day lines are key hurdles. TSLA shares came close to undermining their late-May lows last week, but didn’t.


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Northrop Stock

NOC shares rose 4.5% to 463.77, recovering its 21-day and 50-day lines. Northrop shares have fallen solidly in the past two weeks, failing on a cup-and-handle breakout. A new consolidation could be starting to form. A decisive move above the 50-day line could offer early entry.

UnitedHealth Stock

UNH shares rose 6.25% to 480.32, recovering above the 200-day moving average. Stocks closed around a downward sloping trend line. Any strength from this point could offer an early entry into UnitedHealth stock. However, investors could look to 507.35 as a double bottom buying point, which would also push UNH shares above the 50-day line.

General Dollar Stocks

Shares of DG gained 3.5% to 238.97, again above the 50-day line and approaching a cup-with-handle buy point of 240.07, according to MarketSmith analysis. Dollar General shares were arguably already actionable after clearing a downward sloping trend line on Tuesday. The 240 price level aligns with the highs for DG shares in August and January.

Market recovery analysis

Major indices rallied sharply on Tuesday, although volume was significantly lower than Friday.

After falling last week to its lowest levels since the end of 2020, the Dow Jones, S&P 500 and Nasdaq Composite Index was arguably about to rebound. All major indices are still below their 10-day moving averages. The 50-day line is a much bigger hurdle, with the 200-day average and all-time highs a long way off.

The best index percentage gains in history are in bear markets or corrections, so Tuesday’s action itself wasn’t that significant.

The S&P 500 and the Nasdaq Composite are on day two of a stock market rally attempt, while the Dow Jones is on day one.

If the rally attempt continues, investors could look forward to a follow-up day later this week to confirm the new uptrend. But this bear market has seen several confirmed market rallies that fizzle out immediately or within a few weeks.

Not many stocks are in position with the market selling off that strongly in 2022.

Energy stocks rebounded after huge losses last week. Some names like Exxon Mobil and LNG seem interesting.

China EV names have been leading in recent weeks, but Li Auto could probably use a long hiatus.

Ultimately, the stock market may have problems with the Fed raising rates aggressively and with high risks of recession. That is not likely to change until inflation shows significant declines, which will likely take several months at best.


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What to do now

An attempted market rally is trying to get under way, but has yet to provide evidence that it has staying power. Even if there is a follow-up day soon, investors should be careful when re-entering the market, adding exposure gradually, and scaling back quickly.

If this rally attempt turns into a sustained uptrend that lasts for weeks, months or years, there will be plenty of opportunity to invest heavily.

At this time, build your watch lists for stocks with strong relative strength, especially those that hold or recapture key moving averages.

Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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