Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures. The stock market’s attempted rally continued on Tuesday, as Treasury yields and the dollar retreated, amid hopes that the Federal Reserve could hold off on rate hikes. TWTR shares soar as Tesla CEO Elon Musk agrees to go ahead with $44 billion Twitter (TWTR) takeover.
The major indices are moving higher, but have not yet recovered key levels or confirmed the new rally attempt.
megacaps apple (AAPL), Microsoft (MSFT), parent of Google alphabet (GOOGL) and amazon.com ( AMZN ) all posted big gains. But only Microsoft stock closed above its 21-day moving average.
Major stocks are showing positive action. Arista Networks (A NETWORK), Enphase Energy (ENPH), City of payment (PCTY), About Semiconductor (WHERE) i Devon Energy (DVN) are all at or close to pre-order. If the market rally continues to gain momentum, these stocks should be actionable. All have lines of relative strength at or near maxima.
Paylocity’s stock is on the IBD Leaderboard watch list and was Tuesday’s IBD Stock of the Day. Microsoft and Google stocks are on IBD’s long-term leader list. Enphase, On Semiconductor and DVN stocks are on the IBD 50 list. ENPH, Onsemi and Arista Networks stocks are on the IBD Big Cap 20.
The video embedded in this article highlighted Tuesday’s market action and looked at shares of PCTY, On Semiconductor and Neurocrine Biosciences (NBIX).
Elon Musk says he will go ahead with Twitter deal
Musk agreed to continue with Twitter’s $44 billion, $54.20 per share deal. Lawyers for Musk and Twitter were due to meet in an emergency Delaware Court of Chancery hearing Tuesday night to discuss how to ensure a deal can be closed.
The Musk-Twitter saga is not over. Twitter has not agreed to Musk’s latest terms, which offer no real assurances about his stated intention to move forward with the mandate. Still, Musk may officially own the social networking site within days.
The Musk-Twitter trial was set to begin on October 17, and it was widely believed that the Tesla CEO could lose.
Twitter shares, which were halted for much of the session, soared 22% to 52 as Musk blinked. Although TWTR’s stock had traded well below the acquisition price of $54.20, it had significantly outperformed parent Facebook. Metaplatforms (GOAL) i snap (SNAP) in recent months.
Twitter shares fell 1% in active after-hours trading.
Tesla ( TSLA ) rose 2.9% to 249.44, pulling back from intraday highs of 256.89 after the latest Musk-Twitter news. Investors may wonder if Musk will sell TSLA stock to pay for the Twitter deal, even though he has already sold stock with the Twitter deal as a 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 can be happy to put the Musk-Twitter acquisition saga in the past.
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Dow Jones futures today
Dow Jones futures fell 0.15% to fair value. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
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Stock Exchange meeting
The stock market’s rally followed Monday’s advance with strong gains on Tuesday, although the major indexes gave back intraday highs.
Australia’s central bank raised rates for the sixth consecutive month, but unexpectedly only by 25 basis points. That followed the Bank of England resuming bond purchases last week as the new British government’s budget sent the pound and UK debt crashing.
The rally attempt gained momentum at 10 a.m. ET after the JOLTS report showed job postings fell sharply in August, well below views. Fed chief Jerome Powell has specifically cited job vacancies as too high. While openings and the number of workers leaving are still high, the trend is favorable for the Fed. On Friday, the Labor Department will release the employment report for September.
The Dow Jones Industrial Average rose 2.8% in Tuesday’s trading. The S&P 500 rose 3.1%. The Nasdaq composite rose 3.3%. The small-cap Russell 2000 soared nearly 4%.
Apple shares rose 2.6%, while Microsoft rose 3.4%. Both are members of the Dow Jones, S&P 500 and Nasdaq. Google shares rose 3% and Amazon rose 4.5%. All of that added up to solid gains on Monday, but they need a lot of repair work.
The price of US crude rose 3.5% to $86.52 a barrel. OPEC+ meets on Wednesday, with reports that the cartel could cut production by 1 to 2 million barrels per day.
Gasoline futures rose 6.8%, indicating a further increase 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 rising line.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 3.4%. The iShares Expanded Technology Software Sector ETF ( IGV ) rose 3.8%, with MSFT shares one of IGV’s top holdings. The VanEck Vectors 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 Select Health Sector SPDR Fund (XLV) rose 2.3%.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) and the ARK Genomics ETF ( ARKG ) rose 7.6%. Tesla stock is a key holding in Ark Invest’s ETFs.
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Actions near the points of purchase
ANET shares rose 4.3% to 120.81, retracing their 200-day and 50-day lines, though volume was light. A decisive move above the 50-day line would likely break a short-term downtrend. Arista shares are working on a 132.97 buy point from a consolidation within a much longer base.
ENPH shares rose 0.6% to 288.55, but were down from 297.67 intraday. At its highs, Enphase stock retook its 50- and 21-day lines and broke a short downtrend.
Shares of PCTY rose 3.55% to 252.33, recovering from its 50-day line on strong volume. Shares of Paylocity are in a trendline, with a move above the September 28 high of 253.26 as a possible specific trigger point. The HR software maker is in consolidation with a buy point of 276.98, according to MarketSmith analysis.
ON shares jumped 6.4% to 68.92, retracing their 50-day line, although the price was slightly below the average. A bit more strength could see Onsemi clear a trend line within a new consolidation alongside an earlier, deeper base.
Shares of DVN gained 5.7% to 69.07, recovering from its 50-day, as it works on a cup-with-handle base and 75.37 buy points. Devon stock is reaching a trend line within the handle.
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Analysis of market concentration
The stock market’s attempted rally continued to rise, with a second strong rally for the major averages. The Dow Jones, S&P 500 and Nasdaq composite broke above their 10-day moving averages and approached their 21-day lines. The small-cap Russell 2000 continued to lead, recovering to 21 on the day.
All indices still have some distance to reach their 50- and 200-day falling moving averages, with the mid-August peaks another key area of resistance.
Megacaps like Apple stock are doing their part this week, but they have a long way to go.
However, major stocks are outperforming major indexes, with several stocks emerging, flashing early entries or moving into position for potential entries.
The stock market was certainly due for a bounce. Falling Treasury yields and the dollar have clearly helped drive this week’s equity gains. But if yields and the greenback resume their uptrends, the market rally could fade quickly.
Although stocks are rising on hopes that the Fed will slow the pace of rate hikes, markets continue to trade for a fourth hike of 75 basis points in November and a half-point move in December.
Tuesday was the second day of a rally for the Dow, the S&P 500 and the Nasdaq. A follow-up day could come later this week to confirm the new uptrend.
Some might argue that the Russell 2000 and S&P MidCap 400 staged “track days” on Tuesday. It’s a positive sign, but it won’t cause a change in market direction. Because? 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 mark the beginning of a tradable bearish market rally against a long-term bullish trend. The 50-day 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 attempted rally is gaining momentum, with a number of leaders showing buy signals. Investors could take some pilot positions in certain stocks or broad market ETFs. But anyone who gets in early must be prepared to exit just as quickly if the market rebound fails.
Still nothing wrong with being almost or all cash.
But it’s definitely a time to work on your watch lists and pay close attention to the market. Look for quality stocks that are actionable or nearly so.
Read The Big Picture every day to stay in sync 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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