Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market’s attempted rally continued on Tuesday as Treasury yields and the dollar retreated, amid hopes the Federal Reserve could rein in rate hikes. TWTR shares soared as Tesla CEO Elon Musk agreed to go ahead with the $44 billion Twitter (TWTR) take the control.
The main indices are moving higher, but have not yet returned to key levels or confirmed the new recovery attempt.
megacapsules Apple (AAPL), Microsoft (MSFT), main Google Alphabet (GOOGLE) Y amazon.com (AMZN) all made strong gains. But only Microsoft shares closed above their 21-day moving average.
Still, the major stocks offer reasons to tiptoe into the market, or at least prepare.
Arista Networks (sides), phase energy (ENPH), paylocity (PCTY), in semiconductors (IN) Y devon energy (DVN) are all in or coming up early buy points. If the market rally continues to gather momentum, these actions should be actionable. Everybody has lines of relative force at or near the maxima.
Paylocity shares are in the IBD classification table watch list and it was Tuesday’s IBD day action. Microsoft and Google stocks are in the IBD long-term leaders ready. Shares of Enphase, On Semiconductor and DVN are in the IBD List 50. The shares of ENPH, Onsemi and Arista Networks are in the IBD large cap 20.
The video included in this article highlighted Tuesday’s market action and analyzed the shares of PCTY, On Semiconductor and Neurocrine Biosciences (NBIX).
Elon Musk Says He Will Go Forth With Twitter Deal
Musk agreed to continue with the $44 billion Twitter deal, $54.20 per share. Lawyers for Musk and Twitter will meet in an emergency hearing in Delaware Chancery Court on Tuesday night to discuss how to ensure a deal can be closed.
The Musk-Twitter saga is not quite over. Twitter has not agreed to Musk’s latest terms, which provide no real guarantee about his stated intention to go through with the term. Still, Musk may officially own the social networking site within days.
The Musk-Twitter trial was scheduled to begin on October 17, and the Tesla CEO was seen as having a very good chance of losing.
Shares of Twitter, ground to a halt for much of the session, soared 22% to 52 as Musk blinked. While TWTR shares were trading well below the $54.20 acquisition price, they significantly outperformed Facebook’s parent company. Metaplatforms (GOAL) Y Nap (NAP) in recent months.
Tesla (TSLA) rose 2.9% to 249.44, retreating from intraday highs of 256.89 after the latest Musk-Twitter news. Investors may wonder if Musk will sell shares of TSLA to pay for the Twitter deal, even though he already sold shares with the Twitter deal as the reason. Longer term, investors in Tesla stock may fear that Musk’s attention will be further divided from the electric vehicle giant as he adds Twitter to his portfolio of companies. Still, TSLA investors may be happy to get the Musk-Twitter takeover saga behind them.
Twitter shares were little changed in active after-hours trading. TSLA shares edged lower.
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Dow Jones Futures Today
Dow Jones futures fell 0.2% against fair value. S&P 500 futures fell 0.25%. Nasdaq 100 futures fell 0.2%.
Remember that the overnight action in dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock Exchange session.
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The stock market rally followed Monday’s advance with strong gains on Tuesday, although major indices fell back to intraday highs.
Australia’s central bank raised rates for the sixth month in a row, but unexpectedly by only 25 basis points. That followed the Bank of England resuming bond purchases last week as the British government’s new budget roiled the pound and UK debt.
The rally attempt gained momentum at 10 am ET after the JOLTS report showed job openings fell sharply in August, well below views. Fed chief Jerome Powell has specifically mentioned that job offers are too high. While job openings and the number of workers quitting remain high, the trend is in favor of the Fed. On Friday, the Labor Department will release the September employment report.
The Dow Jones Industrial Average rose 2.8% in trading on Tuesday stock trading. The S&P 500 index rose 3.1%. The Nasdaq Composite jumped 3.3%. The small-cap Russell 2000 soared almost 4%.
Apple shares rose 2.6%, while Microsoft shares rose 3.4%. Both are members of the Dow Jones, S&P 500 and Nasdaq. Google shares rose 3% and Amazon shares rose 4.5%. All added up to solid earnings on Monday, but needs a lot of repair work.
US crude prices rose 3.5% to $86.52 a barrel. OPEC+ meets on Wednesday, with reports that the cartel could cut output by 1-2 million barrels per day.
Gasoline futures rose 6.8%, signaling a further surge at the pump. Natural gas futures rose 5.7%.
The 10-year Treasury yield fell 3 basis points to 3.62%, after falling 15 basis points on Monday. For the second day in a row, the 10-year yield found support at its 21-day upline.
Between best ETFsthe Innovator IBD 50 ETF (FFTY) gained 3.4%. The iShares Extended Technology Software Sector ETF (VAT) rallied 3.8%, with MSFT shares a major IGV holding. The VanEck Vector Semiconductor ETF (SMH) rose 4.3%.
SPDR S&P Metals & Mining ETF (XME) rose 3.8%. US Global Jets ETF (JETS) rose 7.1%. The Energy Select SPDR ETF (XLE) added 4.3%. The SPDR Fund of the Select Sector of Health Care (XLV) collected 2.3%.
Mirroring more speculative historical stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both soared 7.6%. Tesla shares are a key holding in Ark Invest ETFs.
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Stocks near buy points
ANET shares were up 4.3% at 120.81, retaking their 200 and 50-day lines, though volume was light. A decisive move above the 50-day line would likely break a brief downtrend. Arista shares are working at a buy point of 132.97 from a consolidation within a much longer base.
Shares of ENPH rose 0.6% to 288.55, but fell from 297.67 intraday. At their highs, shares of Enphase retraced their 50 and 21-day lines and broke a brief downtrend.
Shares of PCTY rose 3.55% to 252.33, rebounding from its 50-day line on strong volume. Paylocity shares are right at a trend line entry, with a move above the 28 Sep high of 253.26 as a possible specific trigger point. The HR software maker is in a consolidation with a buy point of 276.98, according to MarketSmith Analysis.
ON shares rose 6.4% to 68.92, retaking its 50-day line, although trading was modestly below average. A little more strength could see Onsemi clear a trend line within a new consolidation alongside a deeper previous base.
Shares of DVN gained 5.7% to 69.07, rebounding from its 50-day run while working on a cup base with handle and 75.37 purchase point. Devon shares are reaching a trend line at the handle.
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Market recovery analysis
The stock market rally attempt continued to rise, with a second strong gain for the major averages. The Dow Jones, S&P 500 and Nasdaq Composite broke above its 10-day moving average and approached its 21-day lines. The small-cap Russell 2000, which was still leading, returned to the 21-day.
All indices still have some distance to reach their lower 50 and 200 day moving averages, with the mid-August peaks another key resistance area.
Megacaps like Apple stock are doing their part this week, but they have a long way to go.
However, the leading stocks are outperforming the major indices, with several stocks breaking out, showing early entries, or moving into position for potential entries.
Arguably, the stock market was about to bounce. The drop in Treasury yields and the dollar has clearly helped fuel this week’s gain in equities. But if yields and the dollar resume their bullish trends, the market’s rally could fizzle out quickly.
While stocks are rallying on hopes that the Fed will slow the pace of rate hikes, markets continue to price in a fourth 75 basis point hike in November and a half point move in December.
Tuesday was the second day of a stock market rally for the Dow, S&P 500 and Nasdaq. A follow-up day could arrive later this week to confirm the new uptrend.
Some might argue that the Russell 2000 and S&P MidCap 400 staged “follow-up days” on Tuesday. It is a positive sign, but it will not cause a change in the direction of the market. Why? There is a low success rate for FTDs that do not include the Dow Jones, S&P 500, and Nasdaq.
A confirmed market rally could only usher in a tradable bear market rally versus a long-term uptrend. The 50 and 200 day lines would be key levels to watch after an FTD.
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What to do now
The stock market’s rally attempt is gathering steam, with several leaders showing buying signals. Investors could take some pilot positions in certain stocks or broad market ETFs. But anyone who jumps in early has to be ready to jump in just as quickly if the market bounce falters.
There is still nothing wrong with being almost or completely in cash.
But it’s definitely a time to work on your watchlists and pay close attention to the market. Look for quality actions that are actionable or close to it.
Read The panorama every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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