Dow Jones Futures: Apple Masks Weak Market Rally Trends As Upwork, Figs, AMC Plunge; Netflix Pops Late

Dow Jones futures were little changed Wednesday night, along with S&P 500 futures and Nasdaq futures, amid Chinese economic data and Netflix news. X On the surface, the stock market rally had a quiet Wednesday, helped by bullish Apple iPhone news and dovish comments from Federal Reserve chief Jerome Powell. But more leading stocks ran


Dow Jones futures were little changed Wednesday night, along with S&P 500 futures and Nasdaq futures, amid Chinese economic data and Netflix news.




X



On the surface, the stock market rally had a quiet Wednesday, helped by bullish Apple iPhone news and dovish comments from Federal Reserve chief Jerome Powell. But more leading stocks ran into trouble, including Upwork (UPWK) and new IPO Figs (FIGS).

Meme stocks such as AMC Entertainment (AMC) and GameStop (GME) continued to sell off.

Netflix (NFLX) late Wednesday said that it has hired Facebook gaming executive Mike Verdu, signaling a much-bigger push into gaming. Verdu previously worked at Electronic Arts (EA). NFLX stock rose nearly 3% in overnight trade. That signals a possible move to a 563.66 buy point that could be viewed as an early entry or an official entry from a double-bottom base. Netflix stock climbed 1.3% to 547.95 on Wednesday.

Taiwan Semiconductor (TSM), Dow Jones giant UnitedHealth (UNH) and Morgan Stanley (MS) report earnings early Thursday. All three are working on consolidations.

Apple Stock Rallies, iPhone Chipmakers Fizzle

On Wednesday, Apple stock rose 2.4%, hitting yet another all-time high on a report that Apple (AAPL) is telling suppliers that it wants to boost iPhone production by 20% in 2021. AAPL stock is extended from a recent breakout.

That should be good news for Apple chipmakers such as Qorvo (QRVO), Skyworks Solutions (SWKS) and Taiwan Semiconductor stock. Both Qorvo stock and Skyworks briefly cleared cup-with-handle buy points. But the advances fizzled, with QRVO closing down 0.2% while SWKS stock climbed just over 1%.


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Leading Stocks Reverse Hard

Meanwhile, Upwork stock plunged 17% to 50.15, a day after it broke out of a cup-with-handle base. UPWK stock not only is a failed breakout, it’s wiped out all the gains from an early entry just below 52. Cimarex Energy (XEC) sank 6.2% to below its 50-day, after trying to break out on Monday.

New IPOs FIGS stock and Olo (OLO) plunged nearly 12% and 11%, respectively. Figs decisively broke through its 21-day exponential moving average while OLO stock knifed through its 50-day line, after both had found support multiple times at those levels.

Snowflake (SNOW) retreated 4.6% to 252.54. SNOW stock had recently cleared what could be seen as a short bottoming base buy point of 256.09, bucking the tide as other former leaders’ rebounds ran out of steam this month.

Several other leading stocks showed more modest reversals.

Meme Stocks Selling Off

AMC stock fell 15% on Wednesday, closing below its 50-day line for the first time in two months. GameStop stock slid 6.9%. So far in July, AMC stock is down 41% and GME stock 22%, though both are up sharply in 2021. AMC and GME stock fell solidly overnight.

Newegg Commerce (NEGG) and Carver Bancorp (CARV), two more recent “meme stocks” touted by Reddit users, also fell sharply, extending their sell-offs after briefly skyrocketing.


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TSM stock gained 0.4% to 124.39. Shares have rebounded from their 50-day line and cleared some very short-term resistance. That offered an early entry but Taiwan Semi’s looming earnings report made that riskier. The world’s largest chip foundry makes chips on behalf of Apple, Skyworks, AMD (AMD), Nvidia (NVDA) and many others.

UNH stock dipped 0.9% to 414.74 on Wednesday. UnitedHealth stock is working on a 426.08 buy point from a flat base, according to MarketSmith analysis.

Morgan Stanley stock slipped 0.8% to 92.46, just below a 94.37 buy point. Its short flat base is part of a base-on-base formation. MS and fellow investment bank Goldman Sachs (GS) are holding above their 50-day lines, but most other banks have lost significant ground.

Fed Chief Powell

Fed chief Powell told the House Financial Services Committee on Wednesday that inflation has picked up considerably and will likely remain “elevated” for several months before easing. But he said it’s too soon to begin tapering bond buys.

Powell’s prepared remarks, released before Wednesday’s market open, didn’t offer much in the way of news. The real question is whether the Fed will officially start discussing tapering at the July meeting or at the September meeting. Powell, who appears to be among the more dovish policymakers, again noted Wednesday that the Fed will signal the bond taper well in advance.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures rose 0.1%, with NFLX stock offering a slight boost.

China reported Q2 GDP rose 7.9% vs. a year earlier, slightly below views for 8.1%. June industrial production popped 8.3%, topping estimates for 7.8%. June retail sales swelled 12.1%, above forecasts for 11%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Stock Market Rally

The stock market rally was narrowly mixed on the major indexes, but small caps and growth stocks sold off while key sector ETFs all retreated.

The Dow Jones Industrial Average rose 0.1% in Wednesday’s stock market trading. The S&P 500 index also added 0.1%. The Nasdaq composite dipped 0.2%. The Nasdaq 100 rose 0.2%, fueled by Apple stock as well as Microsoft (MSFT), Amazon.com (AMZN) and Google parent Alphabet (GOOGL). The small-cap Russell 2000 retreated 1.7% after dropping below its 50-day line on Tuesday.

10-year Treasury yield fell 6 basis points to 1.36% as investors focused on dovish Fed chief Powell and shrugged off yet another strong inflation report.

Crude oil prices fell 2.8% to $73.13 a barrel amid conflicting reports on whether Saudi Arabia and the United Arab Emirates have reached a compromise, with the UAE getting a higher quota. That could pave the way for an OPEC+ production deal that would let members increase output modestly. But now Iraq wants a higher production baseline as well.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) skidded 2.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave up 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) slumped 0.7%. The VanEck Vectors Semiconductor ETF (SMH) edged down 0.2%, reversing from intraday gains.

SPDR S&P Metals & Mining ETF (XME) slipped 0.5% and Global X U.S. Infrastructure Development ETF (PAVE) 0.4%. U.S. Global Jets ETF (JETS) tilted down 0.3%. The SPDR S&P Homebuilders ETF (XHB) shed 0.4%. The Energy Select SPDR ETF (XLE) retreated 2.9% as oil prices fell. The Financial Select SPDR ETF (XLF) fell 0.5%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 3.35% and ARK Genomics ETF (ARKG) 3.7%. ARKK fell through its 200-day line and is closing in on its 50-day line. ARKG undercut its 50-day after tumbling through its 200-day line on Tuesday. ARK Invest’s Cathie Wood went on CNBC after Wednesday’s close to tout key holding Tesla (TSLA), Bitcoin and other ARK stocks and strategies.


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Market Rally Analysis

It’s not the “Apple stock market rally” — but it’s starting to feel that way. The market rally looks fine just looking at the major indexes, all of which are right by all-time highs. The Nasdaq is 4.8% above its 50-day line, which is slightly below the 6% level that starts to raise concerns. Sideways action would be positive for the Nasdaq, giving a chance for the 50-day line to close the gap.

But the way in which the Nasdaq is pausing is less than ideal. It’s like trying to lose weight by cutting out fruits and vegetables. The Nasdaq 100 is 6.7% above its 50-day, fueled by Apple stock and a few other megacaps like Microsoft, Google and Amazon.

Meanwhile, many other breakouts or bullish reversals are struggling or failing, while the Nasdaq advance/decline line is deteriorating.

Bottom line: The Nasdaq is showing signs of being extended while buying opportunities generally aren’t working and fewer stocks overall are rising. Those are not healthy signs. A “hard penny” market is shifting toward a market that nickels and dimes investors.


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What To Do Now

This is not a good time to make new buys or add to exposure.

Investors may want to sell into strength, locking in at least partial profits. Cut your losses quickly. How defensive you get may depends on how your stocks are doing. If you own Apple, Microsoft, Lululemon (LULU) and a few other stocks holding up, then a little pruning may be all you need. But, as UPWK stock and FIGS stock show, that can change quickly. If your stocks are erasing gains or turning into losers, you should be reducing exposure more substantially, especially if you’ve been on margin.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

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

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