Dow Jones Futures: Why this market rally is so dangerous; Tesla is about to cut prices on this move

Dow Jones futures were up slightly early Thursday, along with S&P 500 futures and Nasdaq futures. The stock market rally took a flat-to-lower session on Wednesday.

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Nasdaq leads the decline as Apple (AAPL), parent company of Google Alphabet (GOOGLE) and Tesla stock extends its big weekly loss. Apple and Google shares broke below some support levels while Tesla (TSLA) is closing at its bear market low.

Tesla continued to slide on Thursday on various news.

The sideways action over the past few weeks has made buying difficult. The precarious market caused investors to cut their heads. This is not a good time to add exposure.

Late on Wednesday, the Pentagon said that amazon.com (AMZN), Google, Microsoft (MSFT) and prophesy (ORCL) won cloud computing contracts that could amount to $9 billion combined through 2028. In 2019, the Department of Defense awarded a $10 billion cloud computing contract, but canceled that deal in 2021 due to Amazon objections.

The four tech giants were little changed in after-hours trading.

Dow Jones Futures Today

Dow Jones futures are up 0.2% above fair value. S&P 500 futures were up 0.3 percent and Nasdaq 100 futures were up 0.3 percent.

The yield on the 10-year Treasury note rose 4 basis points to 3.45%.

Crude oil futures rose slightly.

The Hang Seng Index rallied 3.4%, continuing its recent uptrend as local media reported that Hong Kong was considering ending the outdoor mask-wearing rule. Chinese stocks listed in the United States are moving higher.

Remember that action overnight in future index and other places that don’t necessarily translate into actual transactions the next time stock market meeting.

Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live

Stock market recovers

The stock market rally traded slightly lower for most of Wednesday, closing in the red overall.

The Dow Jones Industrial Average is up less than two points on Wednesday stock market trading. The S&P 500 index fell 0.2%. The Nasdaq composite fell 0.5%. The Russell 2000 small-cap index fell 0.3%.

U.S. crude oil prices fell 3% to $72.01 a barrel, further falling on worries about global demand. Gasoline futures fell 3.4% to a one-year low. Natural gas prices increased by 4.6% after 5 sessions of sharp declines.

The yield on the 10-year Treasury note fell 10 basis points to 3.41%, hitting its lowest level in nearly three months.

The inverse relationship between stocks and bond yields is fading as Treasury yields are now falling more as recession fears ease inflationary pressures. A moderated November CPI report on December 13 would still be welcome. While the possibility of a half-point rate hike looks very high on December 14, progress on inflation should raise hopes of smaller rate hikes in early 2023 and an earlier end to the tightening. . That should reduce the risk of a slump or at least a hard landing.

ETFs

Among the growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) decreased by 0.5%. VanEck Vectors Semiconductor ETF (SMH) closes just below breakeven. Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 0.8% and the ARK Genomics ETF (ARKG) increased by 0.3%. TSLA stock is the primary holding in Ark Invest ETFs.

SPDR S&P Metals & Mining ETF (XME) fell 0.3% and the Global X US Infrastructure Development ETF (PAY THE ROAD RED) lost a fraction. US Global Jets ETF (jet plane) decreased by 3.3%. SPDR S&P Homebuilders ETF (XHB) increased by 1.8%. Energy Select SPDR ETF (XLE) fell 0.2% and the Financial Select SPDR ETF (XLF) decreased by 0.4%. Health care SPDR Foundation (XLV) increased by 0.8%.

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Apple Stock And Google Stock

Apple stock fell 1.4% on Wednesday to 140.94, hitting its lowest level since Nov. 10. So far this week, AAPL stock has fallen 4.65%, well below the median line. 50 days average. The Dow Jones tech giant is approaching an October 13 low of 134.37 but is still a gap from the bear market low of 129.04 set on October 16. June.

Google stock fell 2.1% to 94.94, below its 50-day moving average. GOOGL stock is down 5.4% so far this week, wiping out gains from three weeks earlier. Shares remain above the November 3 bear market low of 83.34.

Tesla shares

Tesla shares slid 3.2% to 174.04 on Wednesday, closing at the bear market low of 166.19 set on Nov. 22. Shares were down 10.7% for the week. so far this week. TSLA stock drops more than 50% in 2022.

On Wednesday, Tesla cut prices in China by 6,000 yuan for cars in stock. Along with insurance subsidies, free charging and other gifts, Tesla is offering incentives worth more than 21,000 yuan for the cars in the shipment. That follows a massive late-October price drop in China. And it comes ahead of government EV subsidies ending December 31, which should drive demand up. This also comes amid widespread reports – denied by Tesla – about production cuts in Shanghai.

Tesla’s Shanghai factory will shorten production shifts and delay the introduction of some new employees due to weak Chinese demand, sources told Bloomberg. That follows widespread reports recently, denied by Tesla, that the EV giant will cut production in Shanghai by 20%.

Meanwhile, Tesla China chief Tom Zhu has been tapped to run the Austin plant and ramp up production there, Bloomberg reported on Thursday.

Elon Musk’s bankers could offer him new margin loans backed by Tesla stock to replace some of Twitter’s high-interest debt, Bloomberg reported Wednesday night. Banks have struggled to reduce Twitter debt. Musk has put a lot of his Tesla stock as collateral.

TSLA stock fell slightly early Thursday.

Tesla vs. BYD: Which EV giant to buy?

Analysis of market recovery

The stock market’s rally continued to pull back, although the technical picture did not change significantly.

Nasdaq tested the 50-day line, one day after falling below the 21-day moving average. Apple, Google and Tesla stocks affect the large-cap indexes, but the underlying trend is also slightly lower.

The major indexes have generally trended higher from their October 13 lows, particularly the Dow Jones and S&P 500. The market rally appeared to be picking up momentum late last week, with the S&P 500 above the 200-day moving average and the Dow Jones hit a seven-month high.

But with the recent drop, the major indexes and the Russell 2000 are essentially where they were in early November or late October.

The sideways market is one of the most dangerous markets for investors, especially when there is volatility up and down. There is only enough strength to attract buyers, but then the market will drop for a while. That forces investors to cut their losses when they are small — with a good chance the stock will recover — or risk a much larger drop.

The current volatile market rally has one more hurdle. Most of the uptrend comes in a few trading sessions a day, so it is difficult to have even small uptrends to generate profits in new positions.

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What to do now

The stock market rally has hit resistance and is testing some key levels, but has yet to be severely damaged. If you have modest exposure to active positions, you don’t need to get out. Of course, taking partial profits is never a bad idea in this market.

But there’s a high chance that anyone who bought stocks in the past few weeks when they broke out or had an early buy signal dropped in value on those stocks. In a volatile, sideways market, when stocks start to look interesting, they may be about to peak.

Investors should be cautious about adding more exposure until the market can break out of its recent trading range, with the S&P 500 firmly above its 200-day line. That may not happen until after next week’s CPI inflation report and the Fed meeting.

Even then, investors should increase their positions slowly, in case the major indexes once again turn back after hitting near-term highs.

But keep working on those watchlists. The industrial and infrastructure plays are looking good, along with the medical variety. Some brokers are hovering around buy points. The chip device name is showing relative power, with some semiconductors just fine.

Read Big picture every day to stay in sync with market trends and top stocks and sectors.

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

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