Χ The main indicators sold hard at the end of last week, falling below the key levels, while the recent breakouts failed dramatically. The Nasdaq fell on Friday to close below the low of the following day, May 26, a very bearish signal. The current uptrend was already “under pressure” after Thursday’s sell-off. NetEase (NTES), Northrop Grumman (NOC), Eli Lilly (LLY), Albemarle (ALB) and Onsemi (ON) all show relative strength near market points. These are worthwhile for your watch lists, but investors should be wary of any new markets and instead reduce their current exposure. Albemarle, Northrop and LLY shares are on the IBD Leaderboard, with ON shares on the Leaderboard watch list. NTES and Eli Lilly are at IBD 50. The video in this article examines market activity in detail, while also analyzing NOC, Onsemi and Albemarle shares. Late Friday, Tesla announced its plans to split its TSLA stake 3 to 1, subject to shareholder approval at its annual general meeting on August 4. The EV giant had signaled plans for another stock split in March. Tesla shares rose 1.8% late on Friday. Also, Oracle chairman and co-founder Larry Ellison will not seek re-election to Tesla’s board of directors. Oracle (ORCL) reports Monday night, with Adobe (ADBE) expected late Thursday. The software giants will provide some insight into corporate IT costs. But shares of ORCL and Adobe are in deep decline. Tesla’s new Frenemy takes the EV crown
Fed meeting
The Federal Reserve meets on Tuesday and Wednesday. The Fed will announce its latest rate hike at 2 p.m. ET on Wednesday, followed by a press conference by Fed Chairman Jerome Powell at 2:30 p.m. ET. A major trigger for the stock market sell-off is investors’ fear that Fed policymakers will have to be much more aggressive to curb price pressures, increasing the risk of a recession. After Friday’s CPI report showed that inflation rose unexpectedly to the new 40-year high of 8.6%, markets are now expecting 50 basis points in the next four Fed meetings, by November. However, there are some calls on Wednesday for the Fed to raise interest rates by 75 basis points on Wednesday. Markets are pricing with a small but not small chance of an oversupply of Fed interest rates. A surprise would be out of character. Fed chief Powell tends to telegraph monetary policy moves much earlier. Fed officials have not said a three-quarter move is possible. In fact, Powell said after the meeting in early May that the 75 base units were not something that policymakers were “actively considering.” One option would be for the central bank to insist on raising interest rates by half a point this week, but with Fed chief Powell signaling that 75 basis points are on the table by the end of July.
Dow Jones Futures Today
Dow Jones Futures contracts open at 6 p.m. ET, along with futures contracts for the S&P 500 and Nasdaq 100. Shanghai and Beijing have re-imposed some restrictions on Covid amid a limited number of new cases. Remember that overnight action on Dow futures and elsewhere does not necessarily translate into real trading at the next regular trading session. Join IBD Experts as they analyze the market and discuss stocks that are worth watching on IBD Live
Stock Exchange Evaluation
The stock market started the week within a recent range, but broke below these levels on Thursday with even greater losses on Friday. The Dow Jones Industrial Average sank 4.6% in last week’s trading session. The S&P 500 index fell 5.1%. The Nasdaq complex plunged 5.6%. The small-cap Russell 2000 fell 4.5%. The 10-year Treasury yield jumped 20 basis points to 3.16%, reaching its highest level since the end of 2018. The 2-year Treasury yield, most closely linked to Fed interest rate movements, jumped to 3.07%, up to 25 basis points Friday only. This flattening yield curve underscores fears of stagnant inflation. US crude futures rose 1.5% to $ 120.67 a barrel, the seventh consecutive weekly gain. Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 5.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 4.4%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 5.9%, with shares of Microsoft, Adobe and ORCL all making significant gains. The VanEck Vectors Semiconductor ETF (SMH) fell 7.4%, with Nvidia inventory being a significant component. SPDR S&P Metals & Mining ETF (XME) fell 4.45% last week. The Global X US Infrastructure Development ETF (PAVE) fell 5.6%. The US Global Jets ETF (JETS) fell 7.2%. The SPDR S&P Homebuilders ETF (XHB) fell 5.8%. The Energy Select SPDR ETF (XLE) fell 0.8% and the Financial Select SPDR ETF (XLF) fell 6.8%. The Health Care Select Sector SPDR Fund (XLV) fell 3.3%. The LLY stock is a large XLV holding. Reflecting the most speculative stocks, the ARK Innovation ETF (ARKK) fell 7.1% last week and the ARK Genomics ETF (ARKG) 8.4%. Tesla’s stock continues to top all Ark Invest ETFs. Five best Chinese stocks to watch now
Shares to be monitored
Shares of NetEase, along with electric vehicle makers BYD (BYDDF) and Li Auto (LI), are among the top Chinese listed companies, as these names have risen in recent weeks due to optimism. NTES shares rose 1.8% to 105.65 points on Friday. The shares reached 108.77 during the day, briefly exceeding the buy point 107.25 as well as the key resistance levels just above 108. The giant of mobile gambling is in high consolidation at the end of November or February 2021 The relative strength line for the NTES stock is at a 52-week high. Chinese stocks are recovering from easing Covid restrictions and online repression, but that could change quickly. If you use Chinese stocks as a “safe haven”, it is not a good buy. The NOC fell 3% to 463.82 points last week, but found support on the 50-day moving average on Friday. Shares of the defense giant closed a 477.36 cup-with-handle market on June 3, but fell below that entry again on June 8. However, the RS line for the Northrop stock is high. LLY shares fell 1.5% last week to 297.01 points, but fell 3.3% on Thursday and 2.1% on Friday, closing below the 50-day line. Shares of the stock settled at 314.10 on May 27, but retreated to the next session. The RS range for Eli Lilly shares remains near the highs. But Eli Lilly has to fight hard just to have support, despite the continuing upward trend for a possible blockbuster drug for obesity. ALB shares fell 5.5% to 236.87 points last week. Shares of the lithium giant are again below an early entry around 248. Albemarle’s stock now has a grip on its base, giving it an official buy point of 273.78, according to MarketSmith analysis. Investors may use 259.97, just above Wednesday’s high, as a new early entry. At least on a weekly chart, ALB shares seem to be tightening somewhat. A larger grip would provide more time to cover moving averages. The ON share fell 4.45% to 60.14 points last week, finding support on Friday at the 21-day line. On a weekly chart, the chip maker now has a handle with a buying point of 67.29. The top of the handle aligns roughly with a downward trend line from the top of January 5th. A larger grip would give some time to cover the moving averages.
Market Analysis
The stock market started the week holding in a narrow range of prices, with the main indices continuing to find support in the 21-day moving average. The Russell 2000 and S&P MidCap 400 moved above the 50-day line on Tuesday. On Wednesday, the main indicators had a similarly calm day, but it was a turning point. A series of promising outbursts began to fail, often in spectacular ways. Shipping stocks declined, with several other sectors declining. Russell 2000 and S&P MidCap fell below their 50-day high. Sales in the top stocks continued on Thursday, while key indices broke below their 21-day high. The movement in the main indices and the top shares triggered a movement in “upward pressure” after the action on Thursday. On Friday, after the shock report on CPI inflation, the main indicators sold out again. The Nasdaq composite closed below the low of the following day, May 26. This is important because Eric Krull’s research shows that when indices do this, there is a 90% chance the market will eventually fall below its lows. The S&P 500 and the Dow closed well below their May 26 lows. However, these indicators never showed consecutive days. The S&P 500 closed the worst in 14 months. As bad as the key indicators look at the moment, the action of the top stocks is even worse. Energy stocks are the only industry that held well in 2022, but LNG games were big losers last week. Other leading candidates, including metals, shipping companies, travel companies and chemical companies, have suffered significant losses. Growth stocks, with Onsemi a rare exception, look formidable right now. It is unclear whether AAPL, Microsoft or Tesla will be the market leaders for some time. It is clear that they are not the market leaders at the moment. Market time with IBD ETF market strategy
What should we do now
There is a high risk that the main indicators will break below the recent lows, triggering a new chapter in the history of the bear market. Investors should reduce their exposure. Market activity, especially in leading stocks, was weak. If you have shares that work, you can choose to keep them. However, given the market shift and strong, sudden sales in many other top stocks, investors may at least want to consider some gains. Investors will need to review their watch lists again. With a lot…
