Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market suffered a decisive break last week, with coronavirus cases soaring and lockdowns increasing, the presidential election looming and key earnings reports from the likes of Apple stock, Shopify (SHOP), Microsoft (MSFT) and Amazon.com (AMZN) failing to satisfy Wall Street.
XThe Dow Jones, S&P 500 index and Nasdaq composite suffered their worst weekly losses since March. The major indexes and many leading stocks broke decisively below key support, including Apple (AAPL), Shopify, Microsoft and Amazon stock as well as Adobe (ADBE), Tesla (TSLA) and more. All of this points to a new, negative stock market direction.
Money is made in the stock market when the trend is rising. But the stock market's character has turned increasingly negative over the past few weeks. In this environment, investors need to take a defensive approach, substantially reducing exposure. Going 100% cash is not a bad strategy.
But stay engaged. The stock market direction and character could change soon.
Keep an eye on stocks with strong relative strength, holding near buy zones. Examples include JD.com (JD), ServiceNow (NOW), Monolithic Power Systems (MPWR) and Idexx Laboratories (IDXX). Of course, they may not continue to hold up. Many stocks that looked resilient heading into last week broke down.
Meet 5 Techs Holding Strong Near Buy Points
Microsoft, Adobe, ServiceNow, JD.com and Tesla stock are on IBD Leaderboard. Microsoft stock, Adobe and Idexx Labs are IBD Long-Term Leaders. Amazon stock, ServiceNow and Adobe are on the IBD 50. Monolithic Power stock was Friday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures begins trading at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Soaring coronavirus cases and coronavirus lockdowns could take a toll on the global economy, especially in Europe and the U.S.
Meanwhile, a China manufacturing index showed continued growth in October, while nonmanufacturing activity picked up.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 46.74 million. Covid-19 deaths topped 1.2 million.
Coronavirus cases in the U.S. have hit 9.45 million, with deaths above 236,000.
New coronavirus cases worldwide topped 573,000 cases on Friday, easily a daily record.
New U.S. coronavirus cases hit 101,461 on Friday, blasting past the prior daily records on Thursday (91,834) and 81,811 (Wednesday). Hospitalizations are soaring in many states.
The U.K. will begin a new partial lockdown on Thursday, as coronavirus cases topped 1 million on Saturday. Spain and France recently topped that Covid-19 case load.
The U.K. and Belgium follow France and Germany in partial lockdowns, as coronavirus cases soar in Europe. Belgium has among the very highest number of per capita Covid cases in the world. France's partial coronavirus lockdown began Friday, with Germany and Belgium starting Monday and the U.K. on Thursday.
In the next few weeks, we should get early data on final-stage trials for the coronavirus vaccine candidate by Pfizer (PFE) and partner BioNTech (BNTX), with a possible FDA authorization filing by late November. Until last week, Pfizer had indicated it would have some early data by the end of October. Moderna (MRNA) could follow a few weeks later with its Covid-19 vaccine.
Stock Market Action Last Week
U.S. Stock Market Today Overview |
||||
|---|---|---|---|---|
| Index | Symbol | Price | Gain/Loss | % Change |
| Dow Jones | (0DJIA) | 26503.57 | -155.54 | -0.58 |
| S&P 500 | (0S&P5) | 3270.14 | -39.97 | -1.21 |
| Nasdaq | (0NDQC ) | 10911.59 | -274.00 | -2.45 |
| Russell 2000 | (IWM) | 153.11 | -2.03 | -1.31 |
| IBD 50 | (FFTY) | 35.95 | -0.98 | -2.65 |
Last Update: 4:10 PM ET 10/30/2020 |
||||
The stock market had a terrible stretch, with the major indexes suffering their biggest losses since March.
The Dow Jones Industrial Average tumbled 6.5% in last week's stock market trading. The S&P 500 index plunged 5.6%. The Nasdaq composite sold off 5.5%. All fell sharply through their 50-day moving averages. The Dow Jones has undercut its September lows and is now testing its 200-day line.
Apple stock fell 5.4% last week, Microsoft 6.4% and Amazon 5.25%. SHOP stock plunged 9.8%, Adobe 8.5% and Tesla 7.75%. Tesla's sell-off came amid strong gains for Chinese EV stocks such as Nio (NIO).
Contrast that to more-resilient stocks. JD.com stock edged up 0.2% last week. MPWR stock dipped 0.6%, Idexx Labs 1.3% and ServiceNow 3.2%, all benefiting from positive reactions to earnings reports.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 6.2% last week. The iShares Expanded Tech-Software Sector ETF (IGV) skidded 7%, with Microsoft, Adobe and ServiceNow stock all major components. The VanEck Vectors Semiconductor ETF (SMH) fell back 4.9%.
Meanwhile, after nearly three weeks of retreat, the last few days spurred major chart damage.
This is an important time to read The Big Picture.
Why This IBD Tool Simplifies The Search For Top Stocks
Stock Market Lacks Good Character
There's a lot of discussion about whether a stock market is an "uptrend under pressure" or "market correction." At some level, it's an arbitrary dividing line.
The real issue is that at some point the stock market changes character, from a general uptrend to a general downtrend. A good day or two in the midst of a downtrend doesn't necessarily mean that the character is back to positive.
That's the point of a follow-through day. It's not some bureaucratic paperwork that CAN SLIM investors must fill out. It's a way for the stock market to prove a character change.
The aim is to get into a new market rally relatively quickly but wait until there's evidence of a decisive character change. You want a few days of trending higher, then a big day to confirm.
So, for the moment, forget about labels. Consider the current stock market.
One good day would not signal a character change. Thursday was a solid day, but ultimately didn't signal a positive shift in the stock market direction.
The stock market needs to decisively break the downtrend in the major indexes. Right now that positive stock market direction would probably involve the Nasdaq clearly retaking its 50-day line. But that isn't going to happen in a day, barring a truly amazing gain. At this point, many leading stocks, such as Apple, Amazon and Tesla stock, have serious damage and need time to repair their charts.
The CBOE Volatility Index, commonly known as the VIX, is at four-month highs. Excessive fear is often associated with short-term market bottoms. But while the market fear gauge rose slightly on Friday, it never topped Wednesday's intraday high. It might take a bigger VIX spike to signal a bottom and possible new stock market direction.
The next couple of days will be especially hard to interpret. Even if Dow Jones futures signal a rebound Sunday night and there are strong moves Monday and Tuesday, the market could take a dramatic turn after Election Day. So while it's possible that JD.com, Monolithic Power or other stocks near buy points could break out, investors should know that the risks are extremely high.
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Game Plan For The Coming Week
Hopefully, investors have been reducing exposure as gains withered and breakouts turned into losses. But take a good hard look at your remaining positions. Which ones should be pared further or cut entirely?
Meanwhile, focus on building up your watchlists. There's probably a lot of turnover, with many promising stocks looking broken. Continue to look for stocks that are near buy points, but take a wider look for stocks with strong relative strength lines, even if they're not in position. Over the next few weeks, they may form new consolidations.
Earnings season will remain heavy.
Horizon Therapeutics (HZNP) and Lumentum (LITE) report earnings before Monday's open. PayPal (PYPL), Freshpet (FRPT) and Apple iPhone suppliers Skyworks Solutions (SWKS) and Cirrus Logic (CRUS) report after the close.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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