Dow Jones Futures: What To Do After A Lackluster Market Jump; Exxon, Tesla stock near buy points

Dow Jones futures trended higher overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally rallied on Wednesday, but it was a uneven rise that clawed back only a fraction of Tuesday’s huge sell-off.




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Investors should keep exposure low until major indices regain their 50-day moving averages.

Energy stocks took the lead on Wednesday, with crude oil prices rising and natural gas futures soaring. Devonian energy (DVN) cleared an early entry. Exxon Mobile (XOM) is about to signal a buy signal.

Tesla (TSLA) flirted with an aggressive entry on Wednesday and recaptured a key level.

Arista Networks (ANET) and Pure storage (PSTG) still have a little work to do.

DVN shares are on the IBD Leaderboard and SwingTrader. Devon Energy was also the IBD stock of the day on Wednesday. Tesla stock, Devon, Arista Networks and Pure Storage are all on the IBD 50. Arista Networks and XOM stock are on the IBD Big Cap 20.

Dow Jones futures today

Dow Jones futures rose 0.1% from fair value. S&P 500 futures were up 0.15% and Nasdaq 100 futures were up 0.2%.

Investors will get a slew of economic data ahead of Thursday’s market open. August retail sales and the Philadelphia Fed Manufacturing Index and New York Fed Empire State Index are due at 8:30 a.m. ET, in addition to weekly jobless claims data. Industrial production for August is set for 9:15 am ET.

Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.


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stock market rally

The stock market rally recovered slightly Wednesday morning, then faded and turned negative before recovering late and closing higher.

The Dow Jones Industrial Average rose 0.1% in trading on Wednesday. The S&P 500 index rose 0.3%. The Nasdaq Composite rose 0.7%. Small-cap Russell 2000 rose 0.4%.

US crude prices rose 1.3% to $88.48 a barrel, although those were off-hours highs. Natgas prices rose 9.2% to $9,114 (British Thermal Units (BTU))

The 10-year government bond yield fell 1 basis point to 3.41%. But it is just below the 11-year high of 3.48% set on June 14.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was up 2.35% at Wednesday’s close, helped by energy stocks on the list. Innovator IBD Breakout Opportunities ETF (BOUT) is up 0.65%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.1%. The VanEck Vectors Semiconductor ETF (SMH) is up 1.1%.

The SPDR S&P Metals & Mining ETF (XME) tumbled 3.1% and the Global X US Infrastructure Development ETF (PAVE) tumbled 1.7%. The Energy Select SPDR ETF (XLE), which includes XOM stocks and Devon Energy, also in the XLE ETF, was up 2.8%. The Health Care Select Sector SPDR Fund (XLV) rose less than 0.1%.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) rallied 2.75% and ARK Genomics ETF (ARKG) 1.6%. TSLA stock is a key position in Ark Invest’s ETFs.


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DVN share

DVN shares rose 4.5% to 72.17, rebounding from its 21-day moving average and hitting 73.29 on the intraday. The oil and natural gas producer broke Monday’s high of 71.57 and offered early entry into a cup and handle base. The official buy point is at 75.37.

XOM stock

XOM stock rose 2.45% to 97.67. Shares of the integrated oil giant are operating at a buy point of 101.66 cup with handle, according to MarketSmith analysis. Investors could use a move above Monday’s high of 99.19 as an early entry.

Tesla stock

Tesla shares rose 3.6% to 302.61 and rebounded above its 200-day moving average after falling below that key level in the market crisis on Tuesday. For the day, TSLA shares hit 306, just surpassing Monday’s high of 305.49. That could have offered an aggressive entry, emphasis on aggressive. Investors might want to use 306.10 as a trigger point now.

Tesla stock’s relative strength line has improved significantly over the past week, hitting its best level since late April.

ANET share

Arista Networks stock rose almost 2% to 122.26, recovering slightly from its 200-day moving average after falling 3.9% on Tuesday. ANET stock has a buy point of 132.97 from the double bottom and handle basis. But investors could use 126.80, just above Monday’s high, as an early entry.

PSTG stock

PSTG shares rose 0.1% to 29.67 on Wednesday, trading around its 21-day moving average after slipping 3.8% on Tuesday. Pure Storage shares have a buy point of 31.62 cups with handle. Investors could use 30.98, just surpassing Monday’s high, as a slightly lower entry.


Analysis of the market rally

The stock market rally picked up Wednesday, but it’s hardly a blip after the Nasdaq fell more than 5% on Tuesday.

Wednesday’s relatively flat PPI index likely gives the Federal Reserve reason to hold on to a third straight 75 basis point rate hike on Sept. 21, even though markets are pricing in a 100 basis point quarter chance. Perhaps more importantly, the CME FedWatch tool is now showing that markets are forecasting a 4.25% to 4.50% fed funds rate range by the end of the year. That’s up 50 basis points from before Tuesday’s hot CPI.

A potential strike by railway workers as early as Friday is a possible negative for a number of sectors of the “real economy”. Meanwhile Wednesday Nukor (NUE) Profit Warning is a reminder that negative advance notices are likely to start heating up.

It took just minutes for the major indices to plunge below their 50-day moving averages on Tuesday, but it could be a long time before they break back above this key level. The stock market rally could face resistance there or at the nearby 21-day moving average. Meanwhile, the S&P 500 and Nasdaq are close to last week’s lows, with the Dow already undercut those levels.

Energy stocks were gainers on Wednesday but closed well below intraday highs. While oil and gas names move with commodity prices, they are also subject to stock market trends.

ANET stock and Pure Storage aren’t that close to being actionable, but there’s an upside. They could send buy signals if the major indices climb back above their 50-day moving averages.


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What now

But until the major indexes break back above their 50-day levels, investors should be cautious about adding exposure. This is a market rally under significant pressure, not a strong uptrend.

If you enter new positions, you should take partial profits particularly quickly.

That being said, leading stocks are overall looking better than market indices. Investors should build their watch lists and look for quality names that are creating or flashing buy signals.

Read The Big Picture every day to keep up to date 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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