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Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures.
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Nasdaq reverses higher after sharp decline; ONON, APP, DASH in focus
The stock market rally delivered a dramatic bullish reversal on Wednesday. The major indexes recovered from sharp early losses, with the Nasdaq jumping and the S&P 500 reaching key levels again.
Nvidia (NVDA) gathered for a third session in a row, with high volume. Tesla (TSLA) posted a small gain after recovering from solid morning losses.
In the meantime, AppLovin (APP), ServiceNow (NOW), Spotify (PLACE), Eli Lilly (LLY), Freshpet (FRPT) And When holding (ONON) all buy signals flashed on Wednesday.
Nvidia and Freshpet shares are active IBD rankings. Eli Lilly and On Holding shares are on SwingTrader. Nvidia, On Holding, Eli Lilly and ServiceNow stocks are on the list IBD50. Eli Lilly stock is on the ropes IBD Bigcap 20. On Holding was the IBD share of the day on Wednesday.
The video embedded in the article analyzes Wednesday’s bullish action and rates shares of AppLovin, On Holding and Doordash (DASH).
Dow Jones futures today
Dow Jones futures lost a fraction compared to fair value. Futures on the S&P 500 were flat and futures on the Nasdaq 100 rose slightly.
The yield on ten-year government bonds rose to 3.67%.
At 8:30 a.m. ET on Thursday, the Department of Labor will release the August Producer Price Index and weekly unemployment claims.
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
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Stock market rally
The stock market rally sold off in the open, in the wake of Tuesday’s presidential debate, Wednesday’s CPI inflation report and continued concerns about lenders and consumer spending. But the major indexes, all down more than 1% on the day, recovered from mid-morning lows. Nvidia led the Nasdaq higher.
The Dow Jones Industrial Average rose 0.3% in stock trading on Wednesday after falling to settle below its 50-day line intraday. The S&P 500 index rose 1.1% to reclaim the 50- and 21-day lines after what appeared to be a severe rejection near those levels. The Nasdaq composite rose 2.2%, returning above the 21-day mark after a 1.4% intraday decline. The small-cap Russell 2000 rose 0.3% after falling to the 200-day line intraday.
The Invesco S&P 500 Equal Weight ETF (RSP) rose a fraction and held the 21-day line after briefly undercutting the 50-day line in morning trading.
Wednesday’s whiplash action underlines how important the market as a whole is for individual stocks. Some leading stocks fell sharply on Wednesday morning and then recovered.
The Nasdaq, which is up 4.2% so far this week, is still an inside week. The tech-heavy composite still has a shelf life of less than 50 days, but it’s certainly closing the gap.
US crude oil prices rose 2.37% to $67.31 per barrel
Ten-year government bond yields rose one basis point to 3.65%, after hitting a new 52-week low of 3.61% intraday.
ETFs
Among the growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) gained 1.1%. ServiceNow stock is a large IGV holding, while AppLovin is also in the ETF. The VanEck Vectors Semiconductor ETF (SMH) rose by 5.2%. Nvidia stock is number one in SMH.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) rose 2.2% and ARK Genomics ETF (ARKG) 1.8%. Tesla shares are a major stock in Ark Invest’s ETFs. Cathie Wood has also taken a large position in NVDA stock in recent months.
SPDR S&P Metals & Mining ETF (XME) jumped 1.95%. The SPDR S&P Homebuilders ETF (XHB) rose by 0.2%. The Energy Select SPDR ETF (XLE) fell 0.9% and the Health Care Select Sector SPDR Fund (XLV) fell 0.3% amid some big up and down moves after the debate for many medical stocks. The Eli Lilly share is a large XLV interest.
The Industrial Select Sector SPDR fund (XLI) rose by 0.2%. The Financial Select SPDR ETF (XLF) retreated 0.5%.
Time the market with IBD’s ETF market strategy
Stocks near buy points
AppLovin shot up 13.15% to 97.57, jumping off the 21-day line to a buy point of 91.91. It has now extended slightly from the official entry, but is still within reach of an alternative buy point with a high range of 93.70.
The relative strength line, which tracks a stock’s performance against the S&P 500 index, is at a 52-week high. Early Tuesday, Bank of America raised its price target for APP shares to 120.
Shares of ServiceNow rose 1.75% to 875.17, moving higher after undercutting the flat-base buy point of 850.33 intraday.
Shares of Spotify rose 2.9% to 336.60, recovering from the 50-day line to recapture a previous buy point of 331.08 on a flat basis and crossing the 21-day line. After this week, SPOT stock will have a new base with an entry of 359.38.
Shares of Eli Lilly rose 2% to 919.54, bouncing above the 50-day mark and closing just shy of the 21-day mark. That offers an early entry. Investors could view the August 2 high of 972.53 as a high starting point for a V-shaped consolidation.
Freshpet shares rose 1.8% to 137.62, back above a 136.35 buy point, after undercutting Tuesday’s 21-day intraday line.
Shares of On Holding fell 2.6% to 46.43, after falling to 43.38 intraday. Shares closed above a 21-day line and a consolidation buy point of 44.30.
Tesla shares rose 0.9% to 228.21, maintaining the 50-day mark. The EV giant fell intraday to 216.80, but found support at the 21-day moving average. Shares rose 4.6% on Tuesday.
TSLA stock has a consolidation buy point of 271, although investors could use the September 5 high of 235 as an aggressive entry.
Tesla has a busy October ahead of it, with third quarter deliveries (likely October 2), the robotaxi event on October 10, and third quarter results on October 16.
Nvidia stock
Nvidia shares rose 8.1% to 116.86, back above its 21-day moving average. The AI chip leader is on the cusp of its 50-day line, closing fractionally above its 10-week range.
Santa Clara, California-based Nvidia posted its first major volume gain in more than a month.
NVDA stock is now up 13.6% this week. But after diving that is 13.9% in the week before, and 7.7% in the week before that.
Nvidia stock has a buy point of 131.26 on a lumpy deal.
The US government is about to let Nvidia export its AI chips to Saudi Arabia, Semafor reported, citing sources at the Saudi AI summit Gain.
As the most important company and stock of the past two years, it’s hard to overstate Nvidia’s importance to the market.
Meanwhile, Nvidia chipmaker Taiwanese semiconductor (TSM) And Broadcom (AVGO) regained their 50-day lines.
What to do now
Wednesday’s action was encouraging, especially considering the negative starting action. A number of stocks showed buy signals on Wednesday and many more stocks are on the rise.
The S&P 500 is clearly above the 50-day line, but not decisively so. The Nasdaq has yet to reach that key level.
You may choose to take some pilot positions, but keep overall exposure low and be ready to leave quickly.
There is nothing wrong with waiting for real confirmation that the market’s uptrend is back on track. But don’t get stuck in a bearish – or bullish – mentality. As the market changes, you must adapt.
Whether aggressive or patient, investors should keep a close eye on stock price movements.
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