Dow Jones futures will open on Sunday night, along with the S&P 500 and Nasdaq futures. The bear market has intensified over the past week amid growing fears that the Federal Reserve will be forced into a recession to curb inflation.
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As major indexes plunge to their peaks before Covid, investors need to stay away. Don’t worry about one-day rebounds, such as Friday’s technological advances. Instead, prepare to take advantage of the next steady uptrend.
Not many stocks are holding back, but here are five that do a sensible job: Tesla’s rival (TSLA) BYD (BYDDF), Vertex Pharmaceuticals (VRTX), SQM (SQM), Eli Lilly (LLY) and Enphase Energy (ENPH).
All have relative lines of force at or near high. The RS line, the blue line in the graphs provided, tracks stock performance against the S&P 500 index.
BYD shares are close to a traditional buying point. SQM shares found support in their 50-day line after two-way big gains. Shares of ENPH regained this key level on Friday. Shares of Vertex and Eli Lilly are not much below their 50-day lines.
LLY is available in the IBD rankings. The shares of Eli Lilly and SQM are on IBD 50. BYD was Friday’s IBD Stock of the Day.
The video embedded in this article discusses the weekly operation of the market and analyzes the shares of BYD, SQM and Enphase.
Dow Jones futures today
Dow Jones futures open at 18:00 ET on Sunday, along with S&P 500 and Nasdaq 100 futures.
Markets in the United States will be closed on Monday in honor of June 16, but other exchanges around the world will be open. Dow futures will trade normally on Monday.
Remember that the action at night in Dow futures and elsewhere does not necessarily turn into actual trading in the next regular session of the stock market.
Join the IBD experts as they analyze the actions that can be taken in the stock market rally on IBD Live
Stock Exchange
The stock market again had large weekly losses, with major indices falling to their worst levels in more than a year.
The Dow Jones industrial average sank 4.8 percent in stock trading last week. The S&P 500 fell 5.8%. The Nasdaq index fell 4.8%. Russell 2000 with a small capitalization fell 7.5%.
The yield on 10-year government bonds rose by 8 basis points to 3.24%. On Tuesday, the 10-year yield rose to 3.48%, an 11-year high.
US crude futures fell more than 9 percent to $ 109.56 a barrel last week, breaking a seven-week losing streak. Gasoline futures also fell sharply. Natural gas prices have fallen.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell just over 12% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 9.1%. The iShares Expanded Tech-Software Sector ETF (IGV) ETF fell 5.1%. VanEck Vectors Semiconductor ETF (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) was down 8.6%. The US Global Jets ETF (JETS) was down 8.9%. The SPDR S&P Homebuilders ETF (XHB) withdrew 11.4%. The Energy Select SPDR ETF (XLE) fell 17.2% and the Financial Select SPDR ETF (XLF) dropped 4.8%. The Health Care Select Sector SPDR Fund (XLV) lost 4.5%, with Lilly and VRTX holding both shares.
Reflecting the more speculative history of the stock, the ARK Innovation ETF (ARKK) fell 3.3%, rebounded to its lowest level and has not bottomed out since late May. The ARK Genomics ETF (ARKG) fell just under 1% after establishing a new two-year low. Tesla remains a major holding company in Ark Invest ETFs. Ark has a small position in BYD shares.
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BYD shares
Shares of BYD rose 4% on Friday, but fell 4.1% to 37.45 for the week, breaking a five-week winning streak. Shares forged a handle on the weekly chart, giving it 39.81 points to buy. With such a deep base – 48% – the risks of failure are higher. A long handle, especially one that is long enough to be its own narrow base, would be constructive.
But with the recovery of shares of Chinese electric cars – and Chinese shares registered in the US in general – BYD shares may not stay in the park long. Nio (NIO), Xpeng (XPEV) and Li Auto (LI) are boosting as Li Auto approaches high levels.
BYD’s internal operations with batteries and chips, along with huge capital expenditures over the past 18 months, have led to huge sales growth and allowed the company to avoid problems with the supply chain and the blocking of Covid in China. Sales of electric cars and hybrids with added modules will surpass Tesla’s sales for electric cars only in the second quarter and may retain this advantage.
Shares of Tesla fell 6.7% last week to 650.28, almost hitting a low since late May.
Tesla vs. BYD: Which EV giant is better to buy?
Enphase Stock
Shares of Enphase fell 5.8% to 184.90 last week. The 8.9% rise on Friday pushed ENPH shares above their 50-day and 200-day lines. A break from the double-bottom base in early June quickly failed as the 193 buyout point was no longer valid. But now a handle is forming with a buying point of 217.33 just above the highest level of June 8. Keep in mind that Enphase shares have big daily movements. While solar stocks opposed the sale of oil and gas names on Friday, this may not continue.
However, shares of ENPH and SolarEdge Technologies (SEDG) were among the best performers on Friday’s S&P 500. Shares of SEDG regained their 50-day line by working on a base with a cup with a handle.
Vertex Stock
Shares of Vertex rose 3.2% to 253.09 last week, almost recovering its 50-day line with a 4.8% jump on Friday. The point of buying a cup with a handle of 276.10 is no longer valid, so the official entrance is 292.85. But investors could use 279.23 as an early entry.
Eli Lilly Stock
Shares of Eli Lilly fell 2.15 to 390.90 last week, hitting resistance on the 50-day line on Friday. Strong movement over the 50-day line may offer early entry for LLY shares. A previous buying point on a flat basis of 314.10 is no longer worth it, but Lilly shares are in the process of forging another consolidation next to them.
SQM stock
Shares of SQM fell 6% last week to 90.29, but rose on Friday after finding support on its 50-day line. Shares have cleared 27% of their 90.97 buy point earnings in the past few weeks. But a strong recovery from the 50-day line may offer entry for SQM shares.
Shares of SQM and BYD are key components in the Global X Lithium & Battery Tech ETF (LIT), along with Tesla.
Market Analysis
The major market correction – the bear market for the S&P 500 and Nasdaq – continued to deteriorate last week.
Friday’s mixed action was hardly inspiring. Yes, the Nasdaq and S&P 500 rose on Friday, so technically this is the first day of stock market rally experience for these two indexes. But they only reduced large weekly losses.
The S&P 500, Dow Jones and S&P 500 reached their worst levels since the end of 2020.
Even if the market rises and starts the next day in the near future, there will still be many reasons to be skeptical and few stocks to buy.
The oil and gas sector, the only enduring area of market power, collapsed last week, with many big winners signaling sales. The sector may not be complete, but it was a change of character, with damaged graphics.
While some stocks like BYD and SQM are close to buying points, while other names like Vertex, Lilly or Enphase may be interesting with a few solid sessions, many potential leaders may need weeks of repairs. And this is in a scenario where a new market rally is taking a firm stand.
Currently, the stock market is much more likely to continue lower. An economy that is faltering in recession while the Federal Reserve is at the beginning of an aggressive tightening cycle is not a great environment for stocks.
All major indexes are close to their peaks before Covid. This may offer a potential level of support, but is not required. Russell 2000 is already undermining this key level.
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What should we do now
Investors have no reason to invest, and even energy stocks are flashing sell signals. The only possible exception would be modest exposure to long-term winners.
However, it is important to stay engaged, monitor market action and prepare for the next uptrend.
It’s time to get your pencils, not your pens, to update your watch lists. Look for stocks with strong relative strength, especially if they hold key levels of support. But many stocks with strong RS lines will have ugly charts right now.
Read the Big Picture every day to stay in line with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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