Futures on the Dow Jones will open Sunday night, along with futures on the S&P 500 and Nasdaq. The stock market correction deepened, although small to modest weekly losses belied volatile weekend selling as Treasury yields soared. The Nasdaq undermined a rally attempt and hit its worst levels since 2020.
Eli Lily (THERE IS), Albemarle (ALB), dollar tree (LTRD), ZIM Integrated Shipping (ZIM) and new IPO excel energy (EE) are five stocks to watch, either in buy zones or near buy points or simply a relative bending force.
Relative strength is important, but in a market correction, relative winners can be “outright losers.” Apple (AAPL) is a great example. His relative force line is at record highs, but AAPL stock has fallen for six straight weeks.
LLY and ZIM shares are on the INN 50.
The video embedded in the article discusses the volatile market week in depth and also analyzes DLTR, Excelerate Energy and Apple stocks.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.
Stock market rally
The stock market rally began with solid gains that ended abruptly on Thursday, as the Nasdaq plunged 5% that day.
The Dow Jones Industrial Average fell 0.2% last week stock market trading. The S&P 500 index edged down 0.2%. The Nasdaq composite lost 1.5%. The small-cap Russell 2000 fell 1.3%.
The 10-year Treasury yield jumped 24 basis points to 3.12%, with almost all of that gain coming in a belated reaction to Wednesday’s Federal Reserve meeting. The 10-year yield is rushing to an 11-year high of 3.25% from October 2018.
U.S. crude oil futures jumped 4.9% to $109.77 a barrel last week.
From best ETFsthe Innovator IBD 50 ETF (FFTY) fell 2.4% last week, while ETF Innovator IBD Breakout Opportunities (FIGHT) jumped 3.3%. The iShares Expanded Tech-Software Sector ETF (VIG) fell 4.9% as investors criticized software. The VanEck Vectors Semiconductor ETF (SMH) increased by 1.2%.
SPDR S&P Metals & Mining ETF (XME) slipped 3.65% last week as steelmakers followed miners to break key support. The Global X US Infrastructure Development ETF (PAVE) fell 1.4%. US Global Jets ETF (JETS) fell 4.9%. ETF SPDR S&P Home Builders (XHB) increased slightly by 0.1%. The SPDR Energy Select ETF (XLE) jumped 10.3%. The SPDR Financial Select ETF (XLF) increased by 0.6%. SPDR Healthcare Sector Fund (XLV) fell 0.4%.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) fell 3.25% last week and ARK Genomics ETF (ARKG) 3.8%, both at 25-month lows. Notably ARKK saw record inflows as recently as Tuesday, despite the ETF’s huge decline since early 2021.
Eli Lilly Stock
Eli Lilly stock continued to trade around its 21-day line last week, finding support at its 10-week line. The shares rose 1.6% to 296.90 last week. LLY’s stock is in the range of a buy 284 point from a cup basis. Shares also broke above a short trendline, using Wednesday’s high at 296.28 as a trigger. Or, you could wait to see if LLY stock forges a new base, providing a buy point in hopefully better market conditions.
The RS line continues to hit new highs even with LLY stock off its early April highs.
ALB stock jumped 26% to 242.41 last week, fueled by strong earnings and guidance from Livent (LTHM) and then Albemarle himself. The lithium giant broke through its 50 and 200 day lines and crossed a trendline. This would have offered quick entry into a better market. Currently, the ALB stock is working on a deep cup bottom with a buy point of 291.58. But maybe Albemarle could form a handle just around the key resistance at 248.
Dollar tree stock
Dollar Tree stock returned to its 50-day/10-week lines for the first time since its breakout in early March. DLTR stock tried to rebound on Friday, but in light volume. A slightly louder movement, ideally in higher volume, would provide an early entry. Dollar Tree’s stock seems to be the leader among discount retailers right now.
The RS line for DLTR stock is at a high.
ZIM stock jumped 19% to 66.16 last week, surging to reclaim its 50-day line. This is after hitting a low of 48.21 the previous week, testing its 40-week line. The high dividend shipping play now has a cup basis with a buy point of 79.05. Ideally, ZIM stock would move a bit higher, than to forge a handle before generating profits on May 18th.
ZIM is an ocean-going container ship, but it has also recently chartered three LNG vessels.
Excelerate Energy is a rare 2022 IPO. Shares priced at $24 per share in the first half of April, fell from a high of 29.10 on April 18 to a low of 22.65 April 22. The EE action now has a IPO basis with a buy point of 29.20, according to MarketSmith Analysis. Shares attempted to break a descending trendline on Friday before paring gains to close at 26.90. A move above Friday’s high of 27.38 would offer early entry.
The RS line, the blue line in the charts provided, is already at a new high.
Excelerate Energy operates floating liquefied natural gas terminals. It is already profitable, with profits expected to soar 726% in 2022 as foreign demand for LNG soars.
Finally, the Apple stock sold hard on Thursday after briefly flashing an early entry on Wednesday. Shares extended a weekly losing streak, although the 0.2% decline to 157.28 was not significant. The RS line for AAPL shares is at an all-time high on a weekly chart. This reflects the weakness of the S&P 500 since the end of March. But it’s also a reminder of how relative winners can be absolute losers in a market correction.
Still, Apple stock is worth watching as one of the only tech or growth names to show any resilience. If he can hold his own in the Nasdaq bear market, he could be a leader in the next sustained uptrend.
Market rally analysis
The stock market has had a mind-blowing roller coaster ride over the past week. After starting a rally on Monday and surging on Wednesday, the major indices plunged on Thursday, then lost further intraday ground on Friday.
The Nasdaq plunged to its lowest levels since 2020, wiping out its attempted rally on Thursday and briefly undercutting 12,000 on Friday. On Friday, the Russell 2000 also fell to late 2020 levels.
The S&P 500 nearly broke Monday’s lows on Friday.
The attempted market rally is still relevant on the S&P 500 and the Dow Jones. Thus, they could stage a follow-up day at any time.
Arguably, the stock market could use another big shake-up to trigger a sell-off. Fear gauges are near recent highs, but haven’t topped 2022 highs. Continued flows to ARKK and other growth funds also signal that “buy the dip” is still in effect.
New lows continue to dominate new highs, especially on the Nasdaq. The scope of the market is grim. It’s been a problem for a year. But in 2022, Apple stocks and other megacaps no longer mask this underlying weakness.
Commodities games are always a beacon of hope, especially oil and gas names. Fertilizer names are trying to maintain their 50-day moving averages. Lithium games are returning to the forefront, while wood products and building materials look interesting. Meanwhile, health insurers continue to look strong as well as some drugmakers such as LLY stock, but medical leadership has shrunk.
Meanwhile, steelmakers are breaking support, looking to join gold and base metal miners. Heavy construction companies have also fallen in recent weeks. And while oil and gas plays are strong, uranium and solar stocks have fallen sharply in recent weeks.
What to do now
Investors should be in cash or near cash. Exceptions would be small exposure to leading sectors or long-term holdings with large gains.
As Thursday’s stunning selloff showed, the market can sell off much faster and deeper than it rallies. So if you are exposed, be quick to take partial profits and be prepared to cut losses quickly.
Do not try to guess the bottom of the market. You will eventually be right, but how many possible dips have there been over the past few months?
For now, keep your powder dry and your mind fresh – and work on your watch lists.
Lily The big picture every day to stay in tune with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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