Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded strongly Wednesday, with the Nasdaq ending a seven-day slide while energy prices tumbled and Treasury yields pulled back. The major indexes are moving back toward their 50-day moving averages, but face this big test.
Apple (AAPL) unveiled its new iPhone 14 and several other products. Solar stocks continued to lead the way. Enphase Energy (ENPH), Array Technologies (ARRY), Shoals Technologies (SHLS), Sunrun (RUN) and Invesco Solar ETF (TAN) all flashed buy signals on Wednesday.
Apple unveiled the iPhone 14 and iPhone 14 Plus on Wednesday at a “Far Out” product event, along with new Apple Watch and Air Pod options. The Apple iPhone 14 and other products had long been expected and largely offer incremental improvements. The new iPhone will have emergency satellite communication capabilities. The big surprise? Apple iPhone prices are not going up.
Apple stock rose 0.9% to 155.96, still below 50-day line. Above that, AAPL would need to clear the 200-day average before moving toward a 176.25 buy point.
TWTR stock jumped Wednesday after the Delaware Chancery Court rejected Elon Musk’s bid to delay the Twitter takeover trial, set to start in October. But it will let him add a recent whistle-blower’s claims to his countersuit. Twitter is suing Musk to force him to close the takeover. Musk has balked at paying $44 billion, or $54.20 a share and is trying to get out of the deal. Legal experts continue to see Twitter as having a strong case, with the Delaware judge’s comments and rulings underscoring that argument.
Twitter stock jumped 6.6% to 41.21 on Wednesday, back above its 50-day and 200-day lines. TSLA stock rallied 3.4% to 283.70, rebounding from the 50-day line but still below some other key levels. A decisive move above the 200-day line and short-term highs would offer an aggressive entry.
TAN, the Invesco Solar ETF, was added to SwingTrader and was Wednesday’s IBD Stock Of The Day. RUN stock was Tuesday’s Stock Of The Day. Enphase and Tesla stock are on the IBD 50. ENPH stock also is on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures were flat vs. fair value. S&P 500 futures and Nasdaq futures tilted higher.
Crude oil and natural gas futures rose a fraction.
The 10-year Treasury yield edged down to 3.25%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally started Wednesday little changed but gained momentum throughout the day.
The Dow Jones Industrial Average rose 1.4% in Wednesday’s stock market trading. The S&P 500 index popped 1.8%. The Nasdaq composite jumped 2.1%. The small-cap Russell 2000 gained 2.2%.
U.S. crude oil prices dived 5.7% to $81.94 a barrel, the lowest close since Jan. 11. Natural gas futures continued to decline, off 3.7%. While these declines reflect economic weakness, among other factors, they signal further big declines in headline inflation into at least September.
The 10-year Treasury yield fell 7.5 basis points to 3.265% after soaring 15 basis points on Tuesday.
Markets are locking in on a third-straight Fed rate hike of 75 basis points on Sept. 21, though the August consumer price index is due out next week. Markets currently expect a half-point Fed rate hike in November and a quarter-point in December.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) edged up 0.3%, as energy names took a toll. The Innovator IBD Breakout Opportunities ETF (BOUT) rose 1%. The iShares Expanded Tech-Software Sector ETF (IGV) popped 2.1%. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.6%.
SPDR S&P Metals & Mining ETF (XME) climbed 0.9% and the Global X U.S. Infrastructure Development ETF (PAVE) 2%. U.S. Global Jets ETF (JETS) rallied 3.5%. SPDR S&P Homebuilders ETF (XHB) bounced 2.8%. The Energy Select SPDR ETF (XLE) sank 1.2% and the Financial Select SPDR ETF (XLF) rebounded 2%. The Health Care Select Sector SPDR Fund (XLV) rose 1.6%
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Enphase stock jumped 8% to 316.31 on Wednesday, breaking out to a new high as it continued a rebound from the 21-day line. Shares had been consolidating tightly in recent weeks and were close to forging a flat base before Wednesday’s move. ENPH stock has now jumped x% so far in this short week. Investors could still buy Enphase, though it’s getting close to extended from the 21-day. It’s well extended from the 50-day.
The relative strength line has been hitting new highs, reflecting Enphase stock’s strong outperformance vs. the S&P 500 index.
ARRY stock rose 6.1% to 22.03, bouncing from its 21-day. Investors could use that as an early entry for the solar ground-mounting system maker, or wait to see if Array can break the downtrend in a handle in a very deep cup base. The official buy point is 24.10.
SHLS stock jumped 7.6% to 27.76 on Wednesday, continuing a rebound from the 21-day line and hitting a 2022 high, offering an aggressive entry.
RUN stock surged 10.5% to 36.58, rebounding from its 21-day moving average and breaking the downtrend of a short consolidation. That offered an early entry in the solar installation specialist. On Tuesday, Sunrun stock found support just above the 10-week moving average.
The Invesco Solar ETF TAN leapt 6.2% to 87.46, moving above the 21-day line and breaking above the downtrend of a short consolidation in heavy volume. That continues Tuesday’s bounce off the 50-day line. The TAN ETF’s top holding is ENPH stock, with Sunrun, Shoals and ARRY stock also components.
The TAN ETF has big moves, but is less risky and volatile than buying an individual solar stock.
Market Rally Analysis
The not-quite-dead stock market rally showed some signs of life, with the Nasdaq snapping a seven-session losing streak as the major indexes rebounded. Volume declined vs. the prior session on both the Nasdaq and NYSE, however.
Arguably the market was overdue for a bounce after losing so much ground in a short span. But that doesn’t mean the downward pressure is over. If the stock market continues to bounce, the major indexes will soon run into the 50-day and 21-day moving averages. Moving decisively above those levels would be a good first step. But the 50-day line has acted as a ceiling recently.
Above all that is the 200-day moving average.
One reason for Wednesday’s stock market bounce was a modest pullback in Treasury yields, after surging Tuesday. But the rising trend in Treasury yields remains well intact.
Solar stocks are hot, while pollution control names are cleaning up. Health insurers, some retail names are looking solid. Still, leadership is relatively narrow for now.
Oil and gas names struggled with big losses in crude oil and natural gas.
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What To Do Now
Investors who chose to take no action Wednesday had good reasons. A one-day bounce in a downtrend below key support is hardly an all-clear signal.
On the other hand, there were several buying opportunities on Wednesday. But investors who stepped into some of these names may want to consider taking partial profits quickly, perhaps with an initial sale at a 5% gain or if the major indexes hit their 50-day lines. That could help mitigate the very-real risk that the major indexes soon resume heading lower, along with possible sector rotation or stock-specific news.
If new trades do start to go against you, be quick to act. If you’re going to be aggressive getting into a dubious overall market, you have to be just as quick getting out, if not quicker.
Whether or not you added exposure on Wednesday, the risks of buying may be higher in the very near future. The market rally has gotten a bounce, while the 50-day line is now a lot closer.
Keep working on watchlists. Look for stocks with strong relative strength. If the market builds momentum and clears some initial hurdles, such as the 50-day line, a number of stocks with strong RS lines will flash buy signals.
Read The Big Picture every day to stay in sync with the 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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