Dow Jones Futures: Market Rally Turns Upside Down; Here's What To Do Now

Dow Jones futures, S&P 500 and Nasdaq were all little changed over night. Smartsheet (SMAR), and GameStop(GME), both fell late after earnings.

Stock market rallies had a mixed day. The Nasdaq fell from its 2023 highs, while the Dow Jones rose. Small- and mid-cap stocks have continued to rise.

Microsoft, Amazon.com, ServiceNow, and Shopify, among others, all struggled.

Chips have retreated but are still holding up better than other tech sectors. Nvidia's (NVDA), a leading chip maker, fell modestly within its range but remained within it.

Tesla (TSLA), though it closed its new 2023 highs, extended its winning streak.

Diverse housing-related stocks, groups and companies stood out.

Recent action could be a healthy correction for what was a small market rally. There were still few opportunities to buy Wednesday, and there was no reason to reduce or exit positions in certain hard-hit stocks.

Floor & Decor's (FND) bullish move over the 50-day line in a base was actionable. Mobileye's (MBLY), which flashed a signal to buy, closed in the lower part of its range. Biogen (BIIB), which technically was already in a buying zone, rose from the 50-day level on a positive sign that its latest Alzheimer's medication would be approved by the FDA.

IBD Leaderboard features NVDA, Shopify, and Tesla. FND is listed on SwingTrader. MSFT is listed on IBD's Long-Term Leaders. The NOW stock appears on IBD Big Cap 20, IBD Big Cap 50.

Dow Jones Futures Today

Dow Jones futures remained flat in comparison to fair value. S&P futures were higher, while Nasdaq futures were stable.

Keep in mind the overnight Dow Futures session.

Earnings Key

The company also provided guidance for full-year earnings per share, revenue and cash flows that suggest some underperformance in the remainder of the year. In Wednesday's regular trading session, shares fell 5.15% to reach 49. Dropping back to around the 48.99 purchase point. Smartsheet's stock rose 4.8% on Tuesday.

GME's stock dropped 19% in after-hours trading, indicating a drop below important moving averages. GameStop announced a larger-than-expected revenue and loss decline. The mall-based retailer of video games and pioneer in meme stocks also fired CEO Matt Furlong, and appointed big investor Ryan Cohen to the position of executive chairman. GameStop's stock rose by 5.75% on Wednesday to 26.11. GME has been working towards a 27-point buy point since a bottoming out base.

Biogen Alzheimer's drug

Analysts said that the FDA documents preparing for the Friday advisory panel on Biogen's Alzheimer’s treatment Leqembi did not contain any surprises. This raised hopes that the panel will recommend approval. Biogen's stock reversed upwards around the 50-day mark, gaining 1.7% to reach 304.90.

BIIB remains within range of a double-bottom purchase point of 296.90, which was originally cleared on April 28. The renewed strength on Wednesday offered a fresh buying opportunity, near the 50-day moving average and breaking an one-month downward trend.

Stock Market Rally

Stocks rose in other sectors, while the Nasdaq fell.

In Wednesday's stock exchange trading, the Dow Jones Industrial Average increased by 0.3%. S&P 500 index fell 0.4%. The Nasdaq composite fell 1.3%, the worst drop since April 25. Russell 2000 small-caps jumped by 1.8% while S&P MidCap 400 soared 1.5%.

The U.S. crude prices rose 1.10%, to $72.53 per barrel.

The yield on the 10-year Treasury bond jumped 8 basis points, to 3.78%. T-bills rates fell in general. The 1-month Tbill fell below 5%, after having risen to 6% just before the debt ceiling deal in late May.

The markets are still betting on the Federal Reserve to pause next Monday. The Bank of Canada, however, unexpectedly increased rates on Wednesday. This was a day after Australia’s central bank defied expectations.

ETFs

Innovator IBD50 ETF (FFTY), a growth ETF, fell 2% while Innovator IBD's Breakout Opportunities ETF, BOUT, grew 0.7%. IGV, the iShares Expanded Tech Software Sector ETF, fell 3.1%. IGV's major holdings were Microsoft and ServiceNow stocks. SMAR was also included in IGV. VanEck Vectors Semiconductor ETF SMH fell 0.6%. Nvidia is a significant holding.

ARK Innovation ETFs (ARKK) and ARK Genomics ETFs (ARKG) both fell 1%, reflecting the more speculative stocks. Tesla stock is No. Ark Invest ETFs have a number one holding in Tesla stock. The SHOP stock also makes up a large part of Ark Invest's holdings.

Global Jets (JETS) rose 0.6%. SPDR S&P Homebuilders ETF XHB grew 1.5%. FND was a noteworthy holding. Energy Select SPDR ETF XLE grew by 2.7%. The Health Care Select Sector SPDR Fund, (XLV), fell 0.4%. BIIB is held in XLV.

The Financial Select SPDR ETF XLF KRE gained 3.3%.

Market Rally Analysis

Stock market rallies saw some areas fall while others took the lead.

After hitting a new 52-week high shortly after the opening, Nasdaq experienced an outside downside day. Both the Nasdaq composite and 100 were getting stretched. The Nasdaq overall is 6.2% higher than the 50-day line, and the Nasdaq big-cap 100 is 6.9% above that.

S&P 500 is still hovering around the 2023 highs.

Dow Jones dropped slightly on Tuesday after finding support near the 50-day line.

The Russell 2000 and S&P Midcap 400 continued to surge, helped by the rebounding bank stocks.

First Trust Nasdaq 100 Equal Weighted Index ETF QQEW fell by just over 1% but was still better than Nasdaq 100, which lost 1.7%.

The Invesco Equal Weight S&P 500 ETF (RSP), gained 0.7%.

On the NYSE, the advancers outnumbered the decliners nearly 2-to-1 and on the Nasdaq by a large margin.

Overall, market rallies could be positive. We'd all love to see stocks go up every single day, but it's not possible. It's healthy to see some big winners pause or pull back modestly. Market breadth is continuing to expand.

If the Nasdaq continues to fall and the wider market falters as well, then Wednesday's "constructive action" may be the beginning of a "destructive slide".

Stocks and Sectors of Key Interest

Housing sector including homebuilders and home furnishing retailers were strong or solid. Energy, steel and infrastructure stocks were also strong. Some names, like FND stock flashed buy signal, while others broke over key levels. But many need extensive repairs.

The day was tough for software companies, medical products, and tech titans. Google stock fell 3.8%, a reversal to the downside. Amazon stock fell 4.25%, and NOW stock dropped 4.9%.

Others suffered greater technical damage. SHOP shares fell 6.4% on Tuesday, reducing the value of early entries. Workday (WDAY), Cloudflare, and both dropped buy points. DXCM's stock fell 4.5%. It reversed once again from near its traditional buy point to back towards its 50-day.

MBLY rose 2.8% but was still well below its early highs and closed below a downward trend break. Nvidia's stock fell 3% and is now trading below its 10-day line. It has been in a range ever since the May 25th post-earnings spike.

Tesla shares rose 1.5%, to 224.57 dollars, from session highs at 280.83 dollars. It was also the ninth consecutive advance, and eighth consecutively in volume above average. TSLA stock has been extended from a 207.79 purchase point. The relative strength line has reached a high of seven months. Tesla started offering a 1% discount on Model 3 Long Range stock in the U.S. as of Tuesday evening. Tesla had already offered substantial discounts on other Model 3 models.

What to Do Now

The current market rally seems to be orderly and positive. Some stocks are retreating under key levels while others are still rising. Investors are unsure if rotation will continue or if volatility will increase.

Investors may need to reduce their positions or sell some of them.

The market will likely create many opportunities, with big winners returning and new leaders emerging. These stocks can be found by updating your watchlists and running screens.

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