Dow Jones futures rose modestly overnight, along with S&P 500 and Nasdaq futures, with President Joe Biden and Federal Reserve Chief Jerome Powell. The attempted stock market rally suffered heavy losses on Tuesday as crude oil prices skyrocketed and government bond yields fell amid signs that Russia’s invasion of Ukraine could become much bloodier for civilians in Kiev.
Major indexes hit resistance only after the rapidly falling 21-day exponential moving average, one of several potential areas of resistance to an attempted market rally. Tesla shares turned lower after briefly surpassing their 21-day high on Tuesday. Apple (AAPL) and Nvidia shares were denied near their 21-day lines. Microsoft (MSFT), which just closed above its 21-day and 200-day lines on Monday, fell on Tuesday.
Russia’s progress toward Kiev has stalled, according to U.S. military officials amid stiff Ukrainian resistance and logistical challenges. But the Russian Defense Ministry warned on Tuesday that it planned to strike Ukrainian intelligence and communications facilities in central Kiev, warning residents in the area to leave. Western officials say this is a sign that Russia’s massive strikes on Kiev’s residential areas are inevitable.
President Biden will deliver his State of the Union address to Congress and the country on Tuesday night. Biden will discuss the invasion of Ukraine, saying Russian President Vladimir Putin has underestimated the resolve of the United States and Europe. He is expected to announce that the US will ban Russian aircraft from their airspace, following the European Union, the UK and Canada.
He will also push for the revival of at least parts of the legislation to build better, proposing green energy plans as ways to reduce dependence on Russian energy. Republicans say Biden should push for more domestic production of crude oil and natural gas.
IBD Digital: Unlock ibd’s premium stock, tools and analysis lists today
Fed boss Powell
Fed Chief Powell will testify before Congress at 10 a.m. ET on Wednesday. Powell is likely to signal that the Fed’s interest rate hike will begin at the March 15-16 policy meeting, but will emphasize flexibility. Russia’s invasion of Ukraine and subsequent sanctions have pushed up crude oil prices, as well as big gains for base metals and cereals. All this threatens to further boost inflation, while exacerbating supply chain problems and slowing economic growth. Meanwhile, labour force participation may increase with Covid’s cases and restrictions rapidly decreasing, easing supply chain concerns and wage inflation.
Given all these big, uncertain cross-currents, Fed boss Powell will want to be nimble and ready to change course – and make sure financial markets know that.
Markets, whose prices were almost fully calculated when the Fed raised interest rates by half a point a few weeks ago, still expect a quarter-point increase at the March meeting. But now there is little to modest chance of a Fed change at the March meeting.
Ahead of the Fed’s next meeting, policymakers and investors will receive the February employment report on Friday and the February consumer price index on March 10.
Key gains
The Dow Jones Salesforce.com (CRM) reported better-than-expected gains late on Tuesday. CRM shares rose modestly overnight, signaling a return over the 21-day line, but fell below their rapidly falling 50-day average. Salesforce shares fell 0.8 percent to 208.89 on Tuesday.
Dollar Tree (DLTR) earnings were reported early on Wednesday, with DLTR shares flirting with buying signals over the past few weeks. The line of relative strength is now at a new peak, while Dollar Tree shares are based, a bullish signal. Investors may want to use 144.56 as an entry point, just above the highest since January 6. DLTR’s official share purchase point was 149.47.
Tesla (TSLA), Microsoft and Nvidia (NVDA) are in the IBD Leaderboard. MSFT shares are on IBD’s long-term leaders list.
The video, embedded in this article, discusses market action on Tuesday and analyzes Northern Oil and Gas (NOG), Louisiana-Pacific (LPX) and DLTR shares.
Dow Jones futures today
Dow Jones futures were up 0.45 percent against fair value. S&P 500 futures rose 0.4 percent and Nasdaq 100 futures rose 0.3 percent. CRM shares listed on the NYSE offer a boost to Dow and S&P 500 futures.
U.S. crude was trading at $106 a barrel late on Tuesday after the American Petroleum Institute reported a sharp drop in domestic crude oil supplies, with gasoline inventories also declining. The Energy Information Administration will release official U.S. oil inventories, production and demand wednesday morning.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.
Join IBD experts as they analyze the shares that can be taken in the stock market rally in IBD Live
Stock market rally
The stock market rally opened lower, briefly improved, but then sold out. The Dow Jones industrial average fell 1.8 percent in stock market trading on Tuesday. The S&P 500 index sank 1.55 percent. The Nasdaq composite index retreated 1.6 percent. The Russell 2000 with a small capitalization fell 2%.
The yield on 10-year government bonds fell 13 basis points to 1.71%, now erasing almost all of its gains for 2022.
Crude oil prices exploded 8 percent to $103.41 per barrel, even as the U.S. and other countries announced a significant but ultimately modest release of strategic oil reserves. An OPEC+ meeting – with Russia making most of that “plus” – takes place on Wednesday, with the group expected to continue to modestly increase production quotas, withdrawing pandemic-era cuts.
Gold futures rose 2.3 percent to a 13-month high.
Energy stocks rose as crude oil prices rose. Defense contractors continued to walk vertically, while gold, steel and mining games did relatively well. Finance and travel were big losers.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) retreated 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.9%, with the main components of Microsoft and CRM being shares. VanEck Vectors Semiconductor ETF (SMH) fell 3.15%. Nvidia’s shares are a major SMH holding.
SPDR S&P Metals & Mining ETF (XME) нарасна с 2,5%, а Global X US Infrastructure Development ETF (PAVE) отстъпи с 1,9%. US Global Jets ETF (JETS) падна с 5,1%. SPDR S&P Homebuilders ETF (XHB) се оттегли с 1,3%. Energy Select SPDR ETF (XLE) напредна с 1%, а Financial Select SPDR ETF (XLF) спадна с 3,7%. Фондът SPDR за избран сектор на здравеопазването (XLV) се понижи с 0,55%
Reflecting more speculative shares, ark innovation ETF (ARKK) retreated 3.1% and ark genomics ETF (ARKG) 1.7%. As elsewhere, these ETFs hit resistance near their 21-day lines. Tesla shares remain number one in ARK Invest’s ETFs.
Five best Chinese stocks to watch now
Shares hit 21-day high
Like the market rally, several megacapas are hitting resistance on their 21-day lines.
Apple shares didn’t quite get to their 21-day high, but turned around their 10-day average, falling just over 1% to 163.38. Over the 21-day line is the 50-day line. Clearing AAPL shares at this key level may offer early entry. But the official double-bottom purchase point is 176.75. Apple’s RS line for stocks is not far from the highs.
Microsoft shares fell 1.15% to 295.34, back below their 21-day and 200-day lines. A move over Tuesday’s top of 299.97 could offer an aggressive entry as a long-term leader. But the 50-day moving average and february’s peak of 315.12 are also key hurdles. MSFT’s official share purchase point was 349.77.
Nvidia shares fell 3.75% to 234.70, testing their 200-day line again after reaching their 21-day high on Monday. Rising above the 50-day line and february’s peak of 269.25 is probably necessary to offer an aggressive entrance. Reaching the peak of NVDA’s stock of 346.47 is a long way off.
Tesla shares climbed as much as 889.88 on Tuesday morning, exceeding their 21-day period before retreating 0.75 percent to 863.93. The electric car giant holds on much better than other car stocks or highly valued growth names. TSLA resumed its 200-day line on Monday after recovering from a 700-day low of 2022 last week. Rising above the february 9 high of 946.27 and the 50-day line can offer an aggressive entrance. The official point of purchase is 1208.10.
Market rally analysis
The attempted stock market rally faced resistance, with the Nasdaq and Russell 2000 interrupting a three-day winning streak.
They still hold most of their recent gains. A pause here is not so disturbing. The Dow Jones and S&P 500 have given up a little more than their recent bounces, but their attempts at a rally are intact.
The market remains headlined. As an investor, you don’t have to follow the headlines obsessively, but you need to be aware that news can have a big impact on the market and the sector.
That’s especially true now. Many of the assumptions embedded in the markets are changing. Inflation is at a 40-year high and Europe is aggressively changing decades of defence policies overnight.
Of course, this does not mean that the stock market will go in the seemingly obvious direction – the huge stock market rally in 2020 against the background of the pandemic and the collapse of the economy proves this.
A subsequent day can still happen at any time to confirm the new market rally. The confirmed upward trend is not guaranteed to work, as the recent market sell-off showed, but this is a positive signal.
Beyond the 21-day moving average, major indexes face resistance at their February highs, as well as their 50-day and 200-day moving averages, with their all-time highs well above that. So the next confirmed stock market rally will face many technical hurdles in addition to the main risks.
Want to get quick wins and avoid big losses? Try SwingTrader
Moving the market sideways – with or without FTD – would not be a terrible thing. More stocks are forming bases now. MarketSmith already has a large number of blue dot stocks – shares based or drilling with RS lines that are already at peaks. A few more weeks can generate a new crop of consolidations, while some hot stocks may offer new chances to buy or add shares.
Market time with IBD’s ETF market strategy
What to do now
The market remains in limbo. An attempted rally hit resistance, but it’s still intact. But there is no real reason for increasing exposure.
While there are reasons to maintain participation in hot groups and sectors such as energy, defence, fertilizer and steel, many of the leaders have already been extended. Given the extreme volatility, investors may want to take partial gains in some recent gains.
Keep building these watch lists. The number of shares incorporated in RS-line bases at new highs is increasing. So potential leadership is growing.
Read the Big Picture every day to stay in sync with the direction of the market and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE:
Best stocks for buy-to-let growth
the 200-day average: the last line of support?
Tesla vs BYD: Which thriving EV giant is better to buy?
See IBD stock lists and get sustained/unsuccessful ratings for all your IBD Digital shares
.