Dow futures drop after market rally; Here Comes Fed Chair Powell

Dow futures fell sharply early Wednesday, along with S&P 500 and Nasdaq futures, as recession fears grew as Federal Reserve Chairman Jerome Powell prepared to testify before Congress on Wednesday morning.




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The stock market’s bullish attempt had a strong session on Tuesday. But it is still a bullish attempt inside a bear market.

Cheniere Energy (liquefied natural gas) , ExxonMobil (XOM), Eli Lilly (LLY), general dollar (DG), Tesla (TSLA) Competitors Lee Otto (LI), United Health (United Nations) and Northrop Grumman (NOC) showed a strong positive action, with lines of relative strength at or near the highs.

But few high-quality stocks are in place now. This is just one of many reasons to stay on the sidelines. While the bullish attempt continues, the uptrend is yet to be confirmed.

Northrop and Eli Lilly stock are on the IBD Leaderboard. Li Auto and Eli Lilly stock is in IBD 50. LLY stock is also in IBD Big Cap 20.

Dow jones futures contracts today

Dow futures are down 1.1% against stocks. fair value. S&P 500 futures are down 1.3% and Nasdaq 100 futures are down 1.5%.

The 10-year Treasury yield fell 11 basis points to 3.2%.

US crude oil prices fell about 5%. President Joe Biden called on Congress on Wednesday to suspend the federal gasoline tax of 18.4 cents per gallon for three months to provide some temporary relief at the pump.

Copper prices fell more than 3% to a 15-month low amid a strong dollar and weak economic growth.

Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

Fed Chairman Powell testifies

Fed Chair Powell tests monetary policy before the Senate Banking Committee Wednesday morning. Powell will appear before the House Financial Services Committee on Thursday.

It’s unclear if Powell will make new headway last week. On June 15, the Fed raised rates by 75 basis points, with the Fed chair saying either 50 basis points or 75 basis points on the policy meeting table in late July. Markets almost fully priced it for a three-quarter point rate hike.

Fed Chair Powell tests at 9:30 a.m. ET, right at the opening bell, although the Fed may issue its own prepared remarks.

More and more Wall Street firms over the past couple of days are now predicting that the US or the world will fall into a recession, or put the odds at around 50-50.


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Tuesday’s stock market rally

The stock market rally has seen a strong business session. The Dow Jones Industrial Average rose 2.15% in stock trading on Tuesday. The S&P 500 rose 2.45%. Tesla, Exxon, and UN stocks were among the top performers in the S&P 500, and the last name was also a giant of the Dow. The Nasdaq Composite Index is up 2.5%. Small cap Russell 2000 rose 1.8%.

Expired July crude oil futures rose 1% to $110.65 a barrel, from intraday highs. The price of August crude rose 1.4 percent to $109.52.

The 10-year Treasury yield rose 7 basis points to 3.31%.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2%. The iShares Expanded Tech-Software Sector (IGV) ETF (IGV) is up 1.9%. The VanEck Vectors Semiconductor Index (SMH) was up 2.8%.

The SPDR S&P Metals & Mining ETF (XME) is up 1.6%, and the US ETF Global X Infrastructure Development (PAVE) is up 1.1%. The US Global Gates Index (JETS) rose 0.8%. The SPDR S&P Homebuilders ETF (XHB) is up 0.4%. The Energy Select SPDR ETF (XLE) is up 4%, XOM is a huge component, and the Financial Select SPDR ETF (XLF) is up 1.5%. Healthcare Sector Fund (XLV) SPDR Fund (XLV) was up 2.3%, with UN stock taking the highest share, and Eli Lilly also being a notable component.

Reflecting speculative stories stocks, the ARK Innovation ETF (ARKK) is up 4.4% and the ARK Genomics ETF (ARKG) is up 3%. Tesla stock remains major ownership across Ark Invest ETFs.


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LNG stocks

Cheniere Energy stock rose 5.5% to 132.95, approaching the 50-day moving average. On Friday, the LNG stock trimmed several months of trading, but then rose by significant volumes. LNG is consolidating with 150.10 buy points, although there may be early input. Several other LNG plays also bounced towards the 50-day streak.

Stock XOM

Exxon stock jumped 6.3% to 91.51, reclaiming its 50-day moving average and a 89.90-cup buy point with a handle still in effect. XOM stock surged to 105.57 on June 8, but quickly gave up recent gains, dropping by 14% last week.

Ideally, ExxonMobil would move sideways and start forming a new consolidation before making significant progress.

Stocks fell modestly on Wednesday morning as crude oil prices tumbled and futures contracts fell sharply.

ExxonMobil on Tuesday joined a $29 billion Qatari natural gas project. Other partners included ConocoPhillips (policeman), where are you (he is total energy (TTE). Meanwhile, Credit Suisse upgraded its rating on Exxon stock to Outperform with a $125 price target.

Stock LLY

Eli Lilly stock rose 2.2% to 297.35, closing hair below the 50-day line. The previous 314.10 purchase point of a flat base / base chassis on a base is no longer valid. LLY stock is working on a new consolidation. A break above a short, downward sloping trendline would provide an entry at around 306.

Bristol-Myers Squibb (BMY), Vertex Pharmaceuticals (VRTX) and Harmony in the biological sciences (HRMY) Show positive actions.

Li . auto inventory

LI stock rose 7.85 to 35.75 Wednesday, the highest close since January 2021. Li Auto stock nearly crossed a 37.55 buy point from a 55% deep merger. Ideally, the LI stock will handle, the more the better, digest its recent huge gains.

China’s Li Auto on Tuesday unveiled the L9, a new hybrid SUV. It is more expensive than Li One, which is already in the premium segment.

New (NIO) is up 9.2% and Exping (XPEV) 6.8%, both of which continue to bounce above the 50-day line but below the 200-day averages. Giant EV and battery BYD (BYDDF) rose 3.2% to 38.60, working on 39.81 handle cup buying points on the weekly chart.

Tesla stock jumped 9.35% to 711.11, just reclaiming its 21-day moving average in heavy volume. But the 50-day and 200-day lines present major obstacles. TSLA stock came close to paring its lows in late May last week, but it didn’t.


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Northrop Stock

National Oil Corporation stock rose 4.5% to 463.77, reclaiming its 21- and 50-day streak. Northrop’s stock has fallen strongly in the past two weeks, failing to break through a cup with a handle. The formation of a new consolidation can begin. A decisive move above the 50-day line could provide an early entry.

UnitedHealth shares

UN stock jumped 6.25% to 480.32, bouncing back above the 200-day moving average. The arrows closed right around a downward sloping trendline. Any force from this point could offer an early entry into UnitedHealth stocks. However, investors can look at 507.35 as a double-bottomed buying point, which could also push UN stock above the 50-day line.

dollar common stock

DG stock rose 3.5% to 238.97, back above the 50-day line and approaching 240.07 handle cup buy points, according to MarketSmith analysis. Arguably, the general dollar stocks were already doable after they got rid of the downward sloping trend line on Tuesday. The 240 price level is in line with the tops of DG stocks in August and January.

Market Rise Analysis

Major indices saw a strong recovery on Tuesday, although volume was much lower than it was on Friday.

After dropping last week to their lowest levels since late 2020, the Dow Jones, S&P 500 and Nasdaq Composite Indices were arguably about to rebound. All major indicators are still below their 10-day moving averages. The 50-day streak is a much higher hurdle, with the 200-day average and all-time highs in the distance.

Indexes’ best gains in history have been in bear markets or retracements, so Tuesday’s action in and of itself was not meaningful.

The S&P 500 and Nasdaq Composite were on the second day of trying to rally the stock market, while the Dow Jones was only on the first day.

If the bullish attempt continues, investors can look for a follow-up day later this week to confirm the new uptrend. But this bear market has seen many confirmed rallies in the market that fade immediately or in a few weeks.

Not many stocks are in a position with the market selling so hard in 2022.

Energy stocks rebounded again after heavy losses last week. Some names like Exxon Mobil and LNG stocks sound interesting.

China EV names have been leading in recent weeks, but Li Auto may be using a long hiatus.

Ultimately, the stock market may struggle with the Federal Reserve aggressively raising interest rates and with the risk of a recession rising. That likely won’t change until inflation shows meaningful dips, which will likely take several months at best.


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What are you doing now

An attempt to bullish the market is trying to move forward, but it has not provided evidence that it has staying power. Even if there is a follow-up day soon, investors should be wary about re-entering the market, gradually adding exposure and speeding back up.

If this bullish attempt turns into an ongoing uptrend that lasts for weeks, months or years, there are plenty of opportunities to invest heavily.

For now, build your own watchlists of stocks with strong relative strength, especially those that hold or retrace key moving averages.

Read the big picture every day to stay in sync with market trend, stocks and leading sectors.

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