Dow Jones futures rose slightly on Thursday night, as did S&P 500 and Nasdaq futures. The stock market rally hit highs on Thursday morning as major indexes approached new resistance levels, while energy prices and Treasury yields rallied.
Shares of Rivian (RIVN) fell more than 2% overnight after the EV startup reported mixed second-quarter results after the close. RIVN stock rose 4.1% in Thursday’s session. Illuminated (ILMN) plunged 17% after missing analysts’ second-quarter targets and offering weak guidance.
As the end of the earnings season nears, the bulk of the June quarter results so far have met or exceeded expectations. But the market continues to treat missteps mercilessly. It’s a healthy reminder that investors need to remain nimble, ready to react to market strength or weakness.
Onsemi (ON), EQT Corp. (EQT), Penske Automotive Group (PAG), FirstSource Builders (BLDR) and You’re here (TSLA) work on handle or handle-like models. EQT and BLDR stocks are exploitable, while ON stocks quickly pulled back from an early entry on Thursday.
Builders FirstSource is on SwingTrader and was Thursday’s IBD stock of the day. The ON stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures climbed 0.15%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally started strong, then faded, with indices turning mixed.
The Dow Jones Industrial Average came in at less than 0.1% in trading on Thursday. The S&P 500 index posted a fractional loss. The Nasdaq composite closed down 0.6% with software names Working day (WDAY) and Okta (OKTA) at the bottom of the index. Small cap Russell 2000 ended with a 0.3% gain.
U.S. crude oil prices rose 2.6% to $94.34 a barrel. Natural gas prices jumped 8.2%.
Rising oil and gas prices are good news for energy stocks, which helped support Thursday’s stock action. But if the rebound in energy prices continues, it could stagnate or negate some relief at the pump and inflation in general.
The 10-year Treasury yield opened lower but rebounded to gain 10 basis points to 2.88%, the highest yield in three weeks. This is despite another report on tame inflation.
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Stocks close to buy points
Onsemi stock profited this week Nvidia (NVDA) and Micron (MU) warns to pause his big run and carve out a handful. It now has a buy point of 69.36 in a seven-month consolidation. On Thursday, ON stock broke the downtrend of the handle, hitting 68.74 intraday, but the stock closed 0.2% lower at 66.36.
EQT stock is working on a buy point of 46.81 cups with handle. The Natural Gas play found support around the 21 and 50 day lines. On Thursday, EQT stock rose 5.3% to 45.80, extending a rebound from the 21-day line. But the volume was below average.
BLDR stock has a buy point of 74.58 cups with handle. Shares rose 2.8% to 70.26 on Thursday in above-average trading. The bounce off the 200-day line and the breakout of the downtrend of the handle offered an aggressive entry.
PAG stock rose 0.8% to 118.28, moving towards a buy point of 121.55 cup with handle, according to MarketSmith analysis.
Tesla stock fell 2.6% to 859.89. Unlike the other stocks mentioned here, the electric vehicle giant lacks a proper grip and is trading below the 200-day line. A move up above the 200-day line, perhaps clearing last week’s high at 940.82, could offer an aggressive entry.
Market rally analysis
The stock market rally started Thursday with solid gains, building on Wednesday’s big advance. But key indexes retreated, with the Nasdaq closing lower. Trading was higher, with Nasdaq volume increasing significantly.
The Russell 2000 peaked intraday just below its 200-day line. Large-cap indices are a little further from this long-term average, but the Nasdaq hit resistance at the 13,000 level.
While the market rally just entered a power trend after Wednesday, the last power trend collapsed almost immediately in early April. The direction of the market seems uncertain in the very short term.
Perhaps the market is rising quickly, as the major indices did on Wednesday after the reversal on Monday morning. Or maybe this is the start of a setback.
A pullback would let more stocks form handles and allow the moving averages to catch up. But the setback could turn out to be something more serious.
Market leadership has expanded.
The energy sector is reviving, especially natural gas fields such as EQT stock. Oil and natural gas prices rebound. If this continues, fossil fuel stocks could lead again.
But where energy stocks are thriving, other sectors have struggled in 2022, due to broader economic concerns. If inflation fears drive treasury yields sharply higher, growth stocks in particular could be affected.
For now, chip stocks like Onsemi have recently taken a breather, but could easily rise, especially if the market rally continues to climb.
Lithium plays are strong, while some metal stocks look attractive. Medical care continues to be an area of strength, even as different segments of healthcare will change leadership.
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What to do now
This is not necessarily the right time to add very short-term exposure, except perhaps in the energy sector. Consider taking partial profits.
Work on your watchlists, long and short. With major indices and many stocks hitting key levels, often in low volume, there could be a number of short selling opportunities if the market pulls back.
If nothing else, just considering short setups can help temper an overly bullish mindset. Keeping an open mind is key to successful long-term investing.
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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