S&P 500, Dow, and Nasdaq futures showed small gains on Monday. After OPEC and its allies unexpectedly agreed to a modest output reduction, energy prices have risen again. In addition, Russia said that it would continue to halt natural gas exports to Europe.
Last week, the stock market rise plunged again, shattering critical support levels.
With the leading indices falling and few firms showing signs of strength, investors would be wise to hold onto cash and wait for brighter times.
This week will be about Apple (AAPL), as the Dow Jones tech titan will release the iPhone 14 on September 7. Apple Stock had been building up until it plunged with the market during the last several days.
Although Arista Networks (ANET) shares have a similar chart pattern to Apple (AAPL), ANET stock may be more appealing due to critical differences. Despite this, ANET stock is not a tradable asset.
However, after recent upswings, shares of Enphase Energy (ENPH), Lantheus (LNTH), and Neurocrine Biosciences (NBIX) are retracing in consolidations and heading down. So do they seem to be preparing to play hardball, or are they just teasing?
The stock of Lantheus has been featured on the IBD Leaderboard. In addition to Arista Networks, ENPH stock is included on the IBD Big Cap 20.
The article’s associated video analyzed the market movement in detail, including an analysis of Apple shares, Arista Networks, and Enphase Energy.
Rising Cost of Energy
Crude oil futures increased by 4%. (OPEC) and important partners like Russia agreed to reduce output limitations by 100,000 barrels/day in October. There was talk of a production reduction, but nobody anticipated it. Many cartel members weren’t fulfilling their pre-established quotas, so it’s hard to tell how much actual production will drop.
But it nevertheless signals OPEC+ worries about pricing and existing oil production and demand in the context of a faltering global economy.
The price of natural gas in the United States rose somewhat but was still below its morning high. After plummeting last week from record highs, the cost of natural gas in Europe has just surged. Russian state-owned gas giant Gazprom halted the European-bound Nord Stream 1 pipeline last week, ostensibly for three days of routine maintenance.
Even though it was Saturday, the pipeline still wasn’t working properly.
On Monday, the Kremlin stopped blaming maintenance problems and admitted that regular natgas shipments wouldn’t resume until the West removes sanctions over its invasion of Ukraine. So in preparation for the upcoming winter, Europe has been stocking up.
Dow Jones Today
The futures price of the Dow Industrial Average increased by 0.3% relative to its fair value. Nasdaq 100 and the S&P 500 increased by 0.3% and 0.4%, respectively.
While the United States financial markets will be closed on Monday, September 4, for the Labor Day vacation, most international stock exchanges will operate as usual. Dow futures trading will resume at 6 pm ET after the standard 1 pm ET close.
China has extended its Covid lockdown to the city of Chengdu, the center of the industrial Sichuan region and home to 21 million people. In addition, after this weekend’s widespread testing, the coastal technology metropolis of Shenzhen is subject to stricter regulations.
Remember that not all movements in the Dow futures or elsewhere in the Stock Market overnight will be reflected in the actual trading during the following regular stock market session.
Improvement in the Stock Market
The current stock market upswing is just symbolic. It finished the day just above its intraday high on Thursday, but its current slide continued.
Last week, the market saw a 3% drop in the Dow Industrial Average. The Standard & Poor’s 500 Index lost 3.3%. There was a 4.2 percent drop in the Nasdaq index. The small-cap Russell 2000 dropped 4.7%
Despite falling on Friday from two-month highs, the 10-year Treasury yield nevertheless managed to gain 16 basis points and end the week at 3.19%, marking the sixth consecutive weekly rise.
Futures of U.S. crude oil sank 4.9% to $86.87 a barrel last week.
On Friday alone, natural gas futures fell 5.2%.
Compare Apple Stock to ANET Stock
Last week, Apple shares dropped 4.8% to 155.81, falling below the 200-day line and then the 50-day line. The 176.25-handle purchase target for AAPL stock is still in place, but it is becoming less attractive as time progresses.
The relative strength line continues near highs. That indicates that Apple stock is following the S&P 500’s general trend.
Analysts predict Apple’s profits per share would expand by just a single digit in fiscal years 2022 and 2023, after a decline in the most recent quarter.
The shares of ANET fell 4.7% to 117.30, breaking below its 200-day line and failing to recover on Friday. This week, there was a near miss with the 50-day line, but shares tested the 10-week support level. As a result, Arista stock is forming a double-bottom foundation with a purchase target of around 132.97.
During the same period, Arista’s profits and sales growth have increased, with EPS up 59% and revenue up 49% in Q2. Analysts expect 40% EPS growth in 2022 and 13% in 2023.
Arista’s financials may be more precarious than Apple’s. Networking stocks may be impacted by companies slashing their IT budgets, while demand for the iPhone and Apple services seems steady.
Some Other Stocks to Keep an Eye On
This week, ENPH stock dropped 3.3% to $279.07, but it has been trading tightly and is finding support around the 21-day moving average. The market for the solar industry leader is quite tight, suggesting that it may have a flat base on a weekly chart after another week. To further test the rapidly ascending 50-day and 10-week lines, Enphase stock may continue to fall or trade sideways. Investors may have a purchasing opportunity if the ENPH share price can recover.
Last week, NBIX stock dropped 1.8%, ending at 103.01, close to its 21-day line of support. Neurocrine retreated as the market did the same on Friday morning after bouncing off that level and getting close to a short trendline entry. The earlier 100.10 point of purchase for NBIX stock is not far from the 50-day line.
The biotech will not be fully operational for another couple of weeks.
According to MarketSmith data, LNTH shares dropped 3.7% last week, ending the trading day at $78.48, just below the 21-day moving average. However, since Lantheus broke through an earlier base in August, a new entry may be possible on the 21-day or rapidly ascending 50-day.
Trend Analysis of the Recent Market Rally
The current stock market upswing is just symbolic. The main indexes have been falling since August 16, when the S&P 500 halted slightly below its 200-day moving average. Moreover, the Fed’s leader Jerome Powell’s address at Jackson Hole on August 26 signaled a more aggressive, pessimistic Fed, which caused a more significant sell-off.
All the major indices have dropped below their 50-day moving averages during the previous week. However, they recovered from their intraday lows on Thursday, with the Nasdaq composite barely averting a new low since late July.
The August employment data indicated strong hiring and a long-awaited increase in the labor force, which helped the indices recover early on Friday. However, the indices’ nasty reversal occurred when the S&P 500 and Russell 2000 reached their 50-day lines.
The 50-day EMA has switched roles and is now functioning as resistance. To succeed, you must first overcome this first obstacle. When the Nasdaq and S&P 500 are in deep downtrends, the 21-day line is another important indicator to watch. However, breaking above the 200-day moving average would be the test of success.
Contrarily, if the Nasdaq fell below its lows from Thursday, it would likely signal the end of the sputtering market rebound. In the previous week, several market leaders have taken heavy losses. While specific equities like ENPH and NBIX are doing well, they aren’t improving.
Oil and gas prices exist in a vacuum, and energy stocks may be volatile due to these factors or the whims of despotic regimes. Nevertheless, energy markets should see gains on Tuesday thanks to the OPEC+ output reduction and Russia’s decision to freeze natural gas supplies explicitly until sanctions are restored.
Dow Jones Today: Final Thoughts
Investors shouldn’t think about making new purchases until the leading indices return to their 50-day or 21-day moving averages. Even in the energy sector, where certain companies are more likely to see gains, investors should be cautious.
Investors are to limit their risk and wait for market conditions to improve.
There may have been shorting chances during the sharp ascent and subsequent reversal from the 50-day line. The 50-day mark may be attempted again soon.
Create both a long and short watchlist, keeping in mind that both will require substantial updating from where you were a week ago. Look for equities with great relative strength, even if their patterns aren’t perfect, to profit from an upward.
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