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Dow Jones Futures: Market Rally flashing very bearish signal; 5 stocks to watch

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The recovering stock market suffered a sharp loss on Tuesday, with the Nasdaq and S&P 500 breaking below key levels.




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Economic reports revive recession and inflation fears. A report by Intel (INTC) Chip price drop due to PC weakness has hit Intel and rival shares Advanced Microphone Device (AMD), as well as PC and Microsoft (MSFT).

Meanwhile, Exxon Mobil (XOM), Vertex Pharmaceuticals (VRTX), Enphase Energy (ENPH), Google’s parent Alphabet (GOOGLE) and Tesla (TSLA) are the five stocks to watch, but for different reasons.

XOM stock rose modestly, providing an intraday buy signal after the diversified energy giant held up better than most oil and gas stocks. VRTX stock falls back below a point of purchase. Falling ENPH stock is within reach as solar reserves dwindle. Shares of Google and Tesla have fallen consistently below recent buy points.

Google stock is on IBD Long-Term Leaders. Vertex and Enphase shares on IBD 50 and IBD Big Cap 20. Exxon is Tuesday’s IBD shares of the day.

The video embedded in this article highlights Exxon Mobil, Google, and VRTX stocks.

Dow Jones Futures Today

Dow Jones futures are up 0.1% above fair value. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.1%.

The 10-year Treasury note yield fell 4 basis points to 3.17%.

Remember that action overnight in Dow futures contract and elsewhere it doesn’t necessarily translate into actual trading the next week stock market meeting.


Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live


Rally stock market

The rallied stock market opened higher, boosted by China’s cut in quarantine periods for domestic travelers. But the major indexes soon faded, led by the Nasdaq.

The Dow Jones Industrial Average fell 1.6% on Tuesday stock market trading. The S&P 500 index fell 2%, with ENPH stock among the worst performers. Nasdaq Composite sold 3%. The Russell 2000 small-cap index fell 1.85%.

Two economic reports hit the market at 10 a.m. ET. The Consumer Confidence Index for June fell to its lowest level since February 2021, while its gauge of expectations hit a nine-year low. A gauge of inflation expectations hit a record high since 1987. Meanwhile, the Richmond Fed manufacturing index was much weaker than expected, with the latest negative regional factory report ahead of the index. US ISM manufacturing on Friday.

Intel is said to be reducing the price of Alder Lake processors with PC makers’ orders are much weaker than expected. Intel shares fell 2.2%. Shares of Arcrival AMD were sold down 6.2%, their lowest close in a year and just above its June 17 low. Dell Technology (DELL) and HP Inc. (HPQ) both decreased by 2.6%. Windows maker Microsoft fell 3.2%.

U.S. crude oil prices rose 2% to $111.76 a barrel. OPEC+ will hold its most recent meeting starting on Wednesday

The yield on the 10-year Treasury note rose 1 basis point to 3.21%.

ETF

Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) fell 2%, while the Innovators IBD Breakthrough Opportunity ETF (BOUT) spent 2.1%. iShares Expanded Software-Technology Sector ETF (IGV) fell 3.7%, with Microsoft stock being the top holding. VanEck Vectors Semiconductor ETF (SMH) down 2.5%, with key components from Intel and AMD.

SPDR S&P Metals & Mining ETF (XME) and the Global X U.S. Infrastructure Development ETF (SAVE) all decreased by 1.7%. US Global Jets ETF (JETS) gave up strong opening gains to drop 0.8%. SPDR S&P Homebuilders ETF (XHB) lost 2.1%. The Energy Select SPDR ETF (XLE) rose 2.7%, with XOM stock being a huge component. Financial Options SPDR ETF (XLF) slip 1%. SPDR Fund for the Healthcare Sector (XLV) with VRTX stock, down 1.7%.

Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) fell 5.9% and the ARK Genomics ETF (ARKG) 5%. TSLA stock remains the top holding on Ark Invest ETFs.


The five best Chinese stocks to watch right now


Stocks to watch

Exxon Mobil stock rallied as high as 93.24 on the day, moving above the 50-day and 21-day lines and breaking a strong downtrend. That provides a positive entry. XOM stock edged up slightly, closing up 2.8% to 91.50, but held above the 50-day line. Exxon stock held up better than many oil and gas stocks trying to recover from their 200-day threshold. Ideally, however, investors may want to see XOM stock move sideways for a while and form a new base before attempting to get in.

Vertex stock fell 3.9% to 276.17, below 279.23 inputs after just hitting a record 293.17 on Friday. VRTX stock could still be fine, with a pullback next Tuesday on lighter volume and after a massive rally last week. But it is observant. The relative strength line for VRTX stock is still near the high.

Enphase stock fell 7.5% to 190.65, finding support once again around its 21-day moving average. The ENPH supply remains in the deep processing range in double bottom sole. The official buy point is at 217.33, although investors could use a rise above Monday’s high of 210.10 as an early entry. But ENPH stock and other solar games are volatile, a trait that’s more difficult to deal with in the current market environment.


Chinese EV giant in buy zone as it takes Tesla’s crown


Tesla shares fell 5% to 697.99 to below the 21-day moving average. On Monday, TSLA stock reversed course slightly after hitting resistance at its 10-week line. Unlike most megacap stocks, Tesla stock held above its late-May low into June. This weekend, probably Saturday, Tesla will release second-quarter delivery figures that would represent a significant drop from Q1, reflecting factory shutdowns in Shanghai and a slower recovery.

Tesla has cut hundreds of employees from its Autopilot team as part of the process to lay off the EV giant, Bloomberg reported. CEO Elon Musk, who fears the possibility of a recession, has repeatedly promised to fully drive himself “this year” for nearly a decade. Tesla’s fully self-driving system, which costs $12,000, is a Level 2 driver assistance system, a far cry from Level 5 self-driving.

Google shares fell 3.3% to 2,240.15, falling below the 50-day moving average after clearing that key level on Friday. GOOGL stock also avoided a cut to its May low during the June market sell-off.

Market aggregation analysis

The major indexes started with decent gains on Tuesday but quickly headed lower. The Dow Jones, S&P 500 and Nasdaq composite all fell below their 21-day moving averages.

Nasdaq and S&P 500 fall below Friday lows track date. That is a very high bearish signal. Research shows that there is a 90% chance that the rally will eventually fail when this happens. The rally is not officially over until the indexes drop to their recent lows.

The Dow Jones didn’t close below its intraday low, but it’s not far off.

There were a lot of ugly reversals on Tuesday and stocks fell back to or below key levels.

Many megacaps, not just Tesla and Google stock, have hit resistance around the 50-day or 10-week limit, including MSFT stock, Apple (AAPL) and Amazon.com (AMZN). The same goes for XLV and ARKK ETFs.

The leading stocks did not have a good day, with widespread weakness. Pharmaceutical stocks, despite being a name of defense growth, have fallen again. Health insurers didn’t lose much, but gave up some early gains.

Oil and gas stocks may be reviving, but after bouncing off last weekend’s lows, many stocks may need time to correct. XOM stock looks better, but even energy names could struggle if the broader market sells off.


Market Timing with IBD’s ETF Market Strategy


What to do now

With the market’s rapid recovery facing selling pressure, investors should not increase their exposure, which is inherently mild. Instead, they may want to withdraw some new positions. Many stocks, such as VRTX stock, are likely to sink in the water with Nasdaq below the FTD low and the S&P 500 close to there.

Like driving in fog, it’s hard to know what lies ahead for the stock market, but the risks are high.

Continue working on the watch list. Get involved and get ready for action.

Read Big picture every day to stay in sync with market trends and top stocks and sectors.

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

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