Futures: what to do before inflation data, Powell's speech

Rally Awaits Powell Speech, Key Data; What to do now

Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures, with Fed Chief Jerome Powell and the start of key economic data at hand.




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The stock market rally ended mixed on Tuesday with Apple (AAPL) once again a drag on major indices, as well as Amazon.co.uk (AMZN) and You’re here (TSLA). Meanwhile, the other Dow Apple giants Boeing (BA), Chevron (CLC) and Goldman Sachs (GS) are close to the buying points.

Hewlett Packard Enterprise (HPE) and NetApp (NTAP) headlined earnings reports Tuesday night, with CrowdStrike (CRWD) and Working day (WDAY) launches big software reports this week.

HPE stock edged higher in overnight trade after HPE earnings topped views. HP Enterprise stock, above its 200-day line, is operating on a long cup basis. NTAP stock plunged in prolonged action on weak earnings and NetApp guidance. WDAY stock jumped overnight on a third-quarter pace and a $500 million buyback. CRWD stock plunged despite battered views in the third quarter as subscriptions surfaced and the cybersecurity firm implicated a fourth-quarter revenue loss.

On Wednesday morning, ADP will release its November employment estimate of the private payroll. The Department of Labor will publish job openings in the October JOLTS report. The job openings are being watched closely by Fed Chief Jerome Powell, who will speak on Wednesday afternoon.

All of this foreshadows the Fed’s favorite inflation gauge, the PCE price index, on Thursday morning, as well as the November jobs report on Friday, along with several other notable economic releases.

Investors should be cautious before opening new positions until there is more clarity on the economy and the outlook for a Fed rate hike. On the contrary, they may want to reduce their positions in the very short term.

The CVX stock is on the IBD ranking. BA stock is on SwingTrader.

Speech by Fed Chief Powell

Fed Chief Jerome Powell will speak at the Brookings Institution at 1:30 p.m. ET on Wednesday. It should bolster expectations that the central bank will move to a 50 basis point rate hike on Dec. 14. Markets see a 67.5% chance of a half-point move, but still a decent chance of a fifth straight Fed rate hike. of 75 basis points. But it will also likely indicate that rate hikes will continue into 2023.

Whatever Powell says, he will quickly be overtaken by economic data. If inflation begins to show a significant slowdown and labor markets ease, even the most hawkish Fed policymakers will favor a slower pace of rate hikes and an earlier end than markets expected. Hot prices and employment data will strengthen the resolve of many Fed doves. Of course, the economic data for the next few days could show mixed results or marginal improvement.

Dow Jones Futures Today

Dow Jones futures fell slightly relative to fair value, along with S&P 500 futures. Nasdaq 100 futures fell 0.2%.

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


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Stock market rally

After Monday’s strong sell-off, the stock market rally closed mixed on Tuesday.

The Dow Jones Industrial Average closed just above breakeven in trading on Tuesday. The S&P 500 index fell about 0.2%. The Nasdaq composite fell 0.6%. The small-cap Russell 2000 rose 0.3%.

Apple stock fell 2.1%, its third significant decline in a row, as China Covid cases, lockdowns and protests weigh on the tech giant. On Tuesday, shares fell 2.6%, below their 50-day moving average. Above the 50-day line looms a 200-day resistance for AAPL shares. Apple has seen unrest at a massive Foxconn iPhone assembly plant in China.

Amazon stock was down 1.6% and Tesla stock fell 1.1%, both falling close to their 21-day lines. Both are relatively close to bear market lows.

U.S. crude oil prices climbed 2.4% to $79.62 a barrel. On Monday intraday, crude oil futures hit their lowest levels of the year.

The 10-year Treasury yield rose 5 basis points to 3.75%.

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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.8%. ETF VanEck Vectors Semiconductor (SMH) fell 0.3%.

The SPDR S&P Metals & Mining ETF (XME) gained 2.3% and the Global X US Infrastructure Development ETF (PAVE) 0.1%. The US Global Jets ETF (JETS) climbed 1.8%. The Financial Select SPDR ETF (XLF) climbed 0.6%. The SPDR healthcare sector fund (XLV) fell 0.25%.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) edged down 0.5% and ARK Genomics ETF (ARKG) fell 0.4%. Tesla stock is a major holding in Ark Invest’s ETFs.


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Dow stocks near buy points

Boeing stock rose 2% to 175.32 on Tuesday, returning above a base buy point of 173.95 cups, according to MarketSmith analysis. Shares are trading tightly in light volume near the buy point after a big surge in optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent break in BA shares has caught up to the 21-day line.

Chevron shares climbed 1.45% to 180.94, slightly below the 182.50 buy point and just above the 21-day line. CVX stock has been trading around this official buy point all month. An early entry near 167 on October 19 was probably the safest bet initially. But with Chevron stock at 21 days and no longer extended from 50 days, it looks more interesting.

GS stock edged up 0.35% on Tuesday to 383.71. The investment bank has a buy point of 389.68 from a cup base with a 35%-deep handle dating back to November 2021. Investors could also view the recent break as a shelf just above of the buy range from a bottom base that Goldman stock cleared in early November. The 21-day moving average is about to catch up, while the 50-day line is starting to gain ground. The relative strength line is at a multi-year high, reflecting the outperformance of GS stock versus the S&P 500.

Market rally analysis

The stock market rally pulls back with key technical tests and economic data at hand, as well as uncertainty over China’s Covid policies.

The S&P 500 index extends a pullback to just below the 200-day moving average, but still above its 21-day line. The Russell 2000, which fell back below the 200-day and 21-day lines on Monday, moved back above the 21-day.

The lagging Nasdaq fell below the 21-day line and is approaching its 50-day line.

Shares of Apple, Tesla and other megacaps weighed on the Nasdaq and the S&P 500 index.

The Invesco S&P 500 Equal Weight (RSP) ETF is still above its 200-day moving average.

But don’t overstate Apple’s impact. Many top stocks are testing or falling below buy points or decent round-trip gains.

The silver lining is that the stock market is not rallying to Fed speeches and major economic data. This could mean markets could rebound if there are no negative surprises, with the possibility of bigger gains if the headlines ahead are positive.

But the market rally will do what it will do.


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What to do now

With the pullback in the markets, there aren’t many stocks that are giving buy signals. Investors should probably wait for Powell’s speech and economic data to arrive before making any major new purchases. Investors may want to take at least some partial profits on the winners, especially if the winning stocks pull back to buy points.

If the market rally increases soon, a large number of stocks will look exploitable. But a lot of interesting stocks today will start to look damaged if the major indices drop significantly from here.

Investors must therefore remain committed and flexible. Keep your watchlists up to date, but also have exit strategies for your holdings.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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