Dow Jones Futures: Market Rally Turns On Its Head; Here’s what you need to do now

Dow Jones futures were little changed overnight, as were S&P 500 futures and Nasdaq futures. smartsheet (SMAR) and GameStop (GME) slumped late in earnings.




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The stock market rally was mixed. The Nasdaq fell back from its 2023 highs, while the Dow Jones edged up slightly. Meanwhile, small and mid-cap stocks continued their recent rally.

Software, e-commerce, and tech titans, among others, have struggled Microsoft (MSFT), Google parent company alphabet (GOOGL), Amazon.com (AMZN), service now (Now and Shopify (BUSINESS).

Chips fell but held up better than many technology sectors. Nvidia (NVDA) was down slightly but remained within its recent range.

Tesla (TSLA) extended its winning streak but ended at its new highs for 2023.

A large number of housing-related holdings and groups stood out.

The latest move could be a healthy corrective to what has been a weak market rally so far. Still, Wednesday saw few buying opportunities and reasons to exit or reduce positions in some hard-hit names.

floor & decor (FND) was actionable after making an uptrend above the 50-day moving average within a basis. Mobileye (MBLY) gave a buy signal but closed in the bottom half of its range. biogenic (BIIB), which is already technically in a buying zone, rallied bullishly from the 50-day moving average on a hopeful sign of FDA approval for its latest Alzheimer's drug.

NVDA stocks, Shopify and Tesla are on the IBD leaderboard. FND stock is on SwingTrader. MSFT stock is among the IBD Long-Term Leaders. NOW the stock is at IBD 50 and IBD Big Cap 20.

Dow Jones futures today

Dow Jones futures saw a slight decline from fair value. S&P 500 futures and Nasdaq 100 futures trended higher.

Keep in mind that nightly action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular trading session.


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Important income

SMAR stock plummeted 19% overnight. Smartsheet earnings beat Q1 EPS and revenue guidance. But the accounts remained insufficient. The workplace management software maker also provided full-year earnings per share, revenue and cash flow forecasts that point to some underperformance for the remainder of the year. Shares fell 5.15% to 49 in Wednesday's regular session, falling back to a buy point around 48.99. Smartsheet shares gained 4.8% on Wednesday.

GME stock fell 19% in after-hours trading, signaling a move below the key moving averages. GameStop reported an unexpectedly large drop in losses and revenue. The mall-based video game retailer and meme-stock pioneer also fired CEO Matt Furlong and appointed major investor Ryan Cohen as chairman of the board. GameStop shares rose 5.75% to 26.11 on Wednesday. GME stock has made a buy point of 27 from a bottom.

Biogenic Alzheimer's drug

FDA staff documents for the Advisory Panel on Biogen's Alzheimer's drug Leqembi on Friday contained no surprises, analysts said Wednesday. That raised hopes that the committee will recommend approval. Biogen shares turned higher around the 50-day moving average and rose 1.7% to 304.90.

BIIB stock remains in the area of ​​a double bottom buy point of 296.90 originally set on April 28th. Wednesday's renewed strength provided a fresh buying opportunity near the 50-day level and broke a month-long downtrend.

stock market rally

The stock market rally caused the Nasdaq to fall as many large technology companies fell significantly, but other sectors held up well or made progress.

The Dow Jones Industrial Average rose 0.3% in trading on Wednesday. The S&P 500 index slipped 0.4%. The Nasdaq Composite fell 1.3%, its worst loss since April 25. Small-cap Russell 2000 was up 1.8%, while the S&P MidCap 400 was up 1.5%.

US crude prices rose 1.10% to $72.53 a barrel.

The 10-year government bond yield rose 8 basis points to 3.78%. However, T-bill rates generally fell. The 1-month T-bill slipped below 5% after hitting 6% in late May, just ahead of the debt ceiling deal.

Markets are still betting on the Federal Reserve going on hiatus next week. However, the Bank of Canada unexpectedly hiked interest rates on Wednesday, a day after Australia's central bank also beat expectations.

ETFs

Among growth ETFs, Innovator IBD 50 ETF (FFTY) slipped 2%, while Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 3.1%, with shares of Microsoft and ServiceNow being the top stocks and shares of SMAR also included in the IGV. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.6%. Nvidia stock is an important holding.

Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 1% and the ARK Genomics ETF (ARKG) lost just over 1%. Tesla stock is Ark Invest's #1 ETF. SHOP stock is also a big stock.

SPDR S&P Metals & Mining ETF (XME) added 1.3% and Global X US Infrastructure Development ETF (PAVE) added 2.1%. The US Global Jets ETF (JETS) rose 0.6%. The SPDR S&P Homebuilders ETF (XHB) was up 1.5%, with FND stock a notable position. The Energy Select SPDR ETF (XLE) rallied 2.7%. The Health Care Select Sector SPDR Fund (XLV) lost 0.4%. The BIIB share is in the XLV.

The Financial Select SPDR ETF (XLF) is up 0.4%. The SPDR S&P Regional Banking ETF (KRE) gained 3.3%.


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Analysis of the market rally

As the stock market rallied, high-quality areas declined while other segments took the reins.

The Nasdaq had a bad day after making a fresh 52-week high shortly after the open. The Composite and Nasdaq 100 stretched. The overall Nasdaq is now 6.2% above the 50-day moving average and the big cap Nasdaq 100 is 6.9%, still slightly elevated.

The S&P 500 fell slightly and is still near the highs of 2023.

The Dow Jones edged up after finding support at the 50-day moving average on Tuesday.

Meanwhile, the Russell 2000 and S&P MidCap 400 continued to make strong gains, helped by the rebound in bank stocks.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell just over 1%, but better than the Nasdaq 100's 1.7% loss.

The Invesco S&P 500 Equal Weight ETF (RSP) gained 0.7%.

The movers outperformed the movers almost 2-1 on the NYSE and significantly on the Nasdaq.

Overall, the market recovery could be positive. Yes, we all wish stocks would go up every day, but that can't happen. As such, it's healthy for some of the big winners to pause or retreat slightly. Meanwhile, the breadth of the market is getting bigger and bigger.

Of course, if the Nasdaq sell-off continues and the broader market also falters, Wednesday's potentially “constructive” action could prove to be the start of a “destructive” downtrend.

Key Sectors, Stocks

The housing sector, including homebuilders, builders' merchants and home furnishers, was solid or strong. The same applied to energy, steel and infrastructure issues. Some of these names, such as FND stock, gave buy signals while others broke above key levels. However, many require extensive repair work.

Tech titans, software companies, e-commerce and medical devices have had a rough day. For some it was a noticeable but normal retreat after a long time. MSFT stock fell 3.1%. Google stock lost 3.8% in a downward move. Amazon stock plummeted 4.25% and NOW stock plummeted 4.9%.

Others, however, suffered major technical damage. SHOP stock is down 6.4%, undercutting Tuesday's early entry. working day (WDAY) fell 5.4% and cloud flare (NET) plunged 8.5% with both buy points falling. DXCM stock plunged 4.5%, once again bouncing back towards its 50-day price from a nearby traditional buy point.

Chips were generally ok. MBLY stock climbed 2.8% but remained a long way off the early highs and closed below a downtrend break. Nvidia stock slipped 3%, breaching its 10-day moving average as it has been range bound since rising following May 25 gains.

Tesla shares rose 1.5% to 224.57, down from the session high of 280.83. But it was the ninth straight lead and the eighth straight with above-average volume. TSLA stock is extended from a buy point of 207.79. The relative strength line is at a seven-month high. As of Tuesday night, Tesla began reducing US inventory of the Model 3 Long Range by 1%. Tesla has already offered significant stock discounts on other Model 3 variants.


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What now

The market rally rotation appears orderly and constructive. However, some stocks are falling below key levels, while many rising stocks are not yet in position. Investors don't know if the rotation will continue or if it will become more volatile.

Currently, buying opportunities are relatively slim, while investors may want or need to reduce or exit some positions.

Hopefully, market action will bring a range of opportunities, from big winners re-establishing themselves and potential leaders breaking out. Look for these stocks by running screens and updating watch lists.

Read The Big Picture daily to stay up to date on market direction and the leading stocks and sectors.

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

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