It’s X.
The major indexes fell below key levels last week. The low of the May 26 follow-through day was a very bearish signal for the stock market. The current uptrend was under pressure after Thursday’s sell-off.
NetEase and Onsemi are showing strength near buy points.
These are worthy for your watchlists, but investors should be cautious of any new buys and reduce their exposure.
ON stock is on the Leaderboard with other stock. Eli Lilly and NTES are both on the IBD 50. The market action was discussed in detail in the video embedded in this article.
Megacap growth stocks are not showing any leadership. Apple, Microsoft, MSFT, GOOGL, Meta Platforms and Amazon.com all suffered serious losses, with GOOGL stock and Amazon.com reversing lower from their 10-week lines. There was a 1% weekly decline for the company. TSLA stock closed near weekly lows after hitting resistance multiple times.
At the annual meeting in August, shareholders will be able to approve the split of TSLA stock. There were plans for another stock split by the EV giant in March. The company’s stock rose 1.8%.
Larry Ellison won’t be running for reelection to the board of directors.
Adobe is due late Thursday. Some insight into corporate IT spending will be provided by the software giants. The stock of Adobe is in a deep downturn.
The EV crown is being snatched by a new Frenemy.
The futures of the Jones
The fair value was lower than the futures fell. The S&P 500 futures were down 1% and the 100 futures were down 1.4%.
The yield on the 10-year Treasury increased.
The price of crude oil in the U.S. dropped more than 1%.
The price of the digital currency fell to the lowest level in more than a year.
There are a limited number of new Covid cases.
It’s important to remember that overnight action in the stock market doesn’t translate into actual trading in the next day’s session.
The meeting of the Fed.
On Tuesday and Wednesday, the Federal Reserve meets. The rate hike will be announced by the Fed. The Fed chief will hold a news conference at 2:30 p.m. on Wednesday. 4:30.
The risk of a U.S. recession was raised to 45% by Yardeni Research. The odds were raised from 30% to 40% on May 24.
The stock market sell-off is triggered by investor fear that the Fed will have to be more aggressive in reining in price pressures, raising the risks of a recession.
Markets are expecting 50-basis-point moves at the next four Fed meetings after Friday’s report showed inflation rising to a fresh 40-year high.
There are calls for the Fed to raise rates by 75 basis points on Wednesday. Markets are pricing in a good chance of a rate hike.
It would be out of character to have a surprise. Powell has telegraphed monetary policy moves. The Fed has not indicated a three-quarter-point move. Powell said after the early May meeting that 75 basis points wasn’t something policymakers were actively considering.
With Fed chief Powell signaling that 75 basis points is on the table for late July, one option would be for the central bank to stick with a half-point rate hike this coming week.
As they analyze the market and discuss watchlist-worthy stocks on IBD Live, join the experts.
There is a stock market review.
The stock market started the week within a recent range, but fell below those levels on Thursday and Friday.
The stock market dropped last week. The S&P 500 fell by 5.1%. The index plunged by 5.6%. The small-cap Russell 2000 lost 4.5%.
The 10-year Treasury yield rose to its highest level in more than a year. The 2-year Treasury yield jumped to 3.07% on Friday, up 25 basis points from the previous day. Stagflation fears are highlighted by the flattening yield curve.
U.S. crude oil futures have gained for seven straight weeks.
The Innovator IBD 50 Exchange Traded Fund (FFTY) fell 5.3% last week, while the Innovator IBD Breakout Opportunities Exchange Traded Fund (BOUT) retreated 4%. Microsoft, Adobe and ORCL stock were all notable holdings in the IGV. The VanEck Vectors Semiconductor Exchange-Traded Fund (SMH) was down 7.4%.
The S&P metals and mining exchange traded fund lost 4.45% last week. The Global X U.S. Infrastructure Development is down. The U.S. Global Jets Exchange Traded Fund fell 7.2%. The S&P Homebuilders exchange traded fund dropped 5.8%. The XLE and theXLF were down by 6.8% and 0.8% respectively. The Health Care Select Sector SPDR Fund dropped 3.3%. LLY is a big holding.
Reflecting more-speculative story stocks, ARK Innovation Exchange Traded Fund (ARKK) and ARK Genomics Exchange Traded Fund (ARKG) fell last week. There is still a top holding of the Ark Invest Exchange Traded Funds.
There are five best Chinese stocks that you should watch.
There are stocks that are to watch.
NetEase stock, along with EV makers BYD and Li Auto, are among the best looking Chinese firms in the U.S., as those names have rallied over the past few weeks on optimism. On Friday, the stock price rose 1.8% to 105.65. There was a brief break above a 107.25 handle buy point as well as key resistance levels just above 108. The mobile gaming giant is in a consolidation going back to November or February of 2021. The stock’s relative strength line is at a high.
China stocks are up on easing internet restrictions. It’s not a good market if you’re using Chinese stocks as a safe haven.
The stock fell 3% last week, but found support at its 50-day line. On June 3, shares of the defense giant cleared a 477.36 cup-with-handle buy point, but fell back below that entry on June 8. The line for the stock is still high.
LLY stock closed below its 50-day line for the first time last week. After clearing a buy point on May 27, shares fell back the following day. The Eli Lilly stock line is near highs. Eli Lilly is having to fight hard just to hold on to support.
The stock fell last week. The company’s share price is back below an early entry. According to MarketSmith analysis, Albemarle stock now has a handle to go with its cup base, which gives it an official buy point of 273.78. A new early entry might be 259.97, just above Wednesday’s high. At least on a weekly chart, ALB stock seems to be moving in the right direction. There is more time for moving averages to catch up with a longer handle.
ON stock found support at the 21-day line last week. The chipmaker now has a buy point on a weekly chart. The handle has a declining-tops trendline. Some time for moving averages to catch up would be given by a longer handle.
There was a market analysis.
The stock market started the week holding within a tight range, with the major indexes showing support at the 21-day moving average. On Tuesday, the Russell 2000 and S&P MidCap 400 both moved above their 50-day lines.
The major indexes had a quiet day, but it was a turning point. Many promising breakouts began failing in spectacular fashion. Several other sectors slumped, with oceangoing shipping stocks plunging. Both the Russell 2000 and S&P MidCap fell below their 50-day lines.
The key indexes broke below their 21-day lines, as the selling in leading stocks continued. After Thursday’s action, the major indexes and leading stocks moved “uptrend under pressure”.
The major indexes sold off hard on Friday after the report.
The low of the May 26 follow-through day was the low of the index. Eric Krull’s research shows that there is a 90 percent chance that the market will eventually undercut its lows.
The S&P 500 and the DOW closed below their May 26 lows. The follow-through days were never staged. The close of the S&P 500 was the worst in 14 months.
The action of the leading stocks is worse than what the major indexes are showing.
The one sector that has held up well is energy stocks, but the other sectors have lost money. Shippers, travel firms and chemical plays have suffered losses.
Growth stocks are looking terrible. It’s not clear if AAPL stock, Microsoft orTesla will be market leaders for a while. It’s clear that they are not market leaders.
IBD has a strategy for the market.
What can we do now?
A new chapter in the bear market story is at risk if the major indexes break below recent lows.
Reducing exposure is something that investors should do. The market action has been weak, so you can hang on to the stocks that are working. With the market shift and the sudden sell-offs in many other top stocks, investors may want to at least consider partial profits.
The watchlists of investors should be updated. If a lot of chart patterns are damaged or broken, focus on stocks with strong relative strength, such as Lilly and Albemarle. There is a lot of time for charts to shape up again.
Stay in tune with the market direction and leading stocks and sectors by reading The Big Picture every day.
You can follow Ed Carson on social media for stock market updates.
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