Futures for the Nasdaq 100, S&P 500 index and Dow Jones industrial averages were mixed Wednesday morning, with big techs continuing to slide. That came after a slew of top-rated techs — including Google parent Alphabet (GOOGL), Microsoft (MSFT) and Netflix (NFLX) — undercut their 50-day moving averages Tuesday, joining recent laggard Apple (AAPL).
XAutoplay: On | Off As for the major averages, the Nasdaq composite fell 1.6%, the S&P 500 index 0.8% and the Dow industrials 0.5% on Tuesday.
The heavy selling among leading stocks and major averages triggered a shift in market direction to “uptrend under pressure.” The market came under pressure earlier this month, when Apple and other big techs sold off on June 9-10. But most leading techs, Apple being a notable exception, found support above their 50-day lines. On Tuesday, Alphabet fell below that level for the first time since April. Microsoft closed below its 50-day for the first time in seven months. The big-cap Nasdaq 100 hadn’t finished below that support zone since early December.
Facebook (FB), which announced that it now has more than two billion monthly users, did manage to hold above its 50-day line. So did Amazon (AMZN), the final member of FANG (Facebook, Amazon, Netflix and Google parent Alphabet) and an IBD Leaderboard stock.
Futures for the Dow industrials rose 0.25% above fair value. S&P 500 futures climbed 0.3%. But Nasdaq 100 futures fell 0.3%, as big techs continue to lag. Apple, along with Facebook, Netflix and Alphabet, were fractionally lower. Amazon edged up.
IBD’S TAKE: Don’t try to predict where the market is going; listen to the market. Pay attention to the major averages and leading stocks and read The Big Picture every day for timely, time-tested analysis.
A brief sojourn below the 50-day line is not always fatal. But the sheer number of highly rated stocks — from Applied Optoelectronics (AAOI) to Coherent (COHR) to Lam Research (LRCX) — that have cut through that level is worrisome.
More than half of the IBD 50 fell 2% or more on Tuesday. True market leaders tend to fall about twice as much as the major averages in a correction.
Still, it isn’t all gloom. JPMorgan Chase (JPM) advanced 0.9% to 88.05, moving toward a buy point. Fed chief Janet Yellen said Tuesday that she doesn’t expect another huge financial crisis “in our lifetime.” That’s a good sign going into U.S. banks’ second round of stress tests due Wednesday evening. The Fed is expected to approve dividends and buybacks for many big banks.
Meanwhile, biotech stocks pulled back Tuesday, but have largely held on to their recent big gains. Celgene (CELG) fell 2.2% but is comfortably in buy range.
In the current environment, investors should be very cautious about making new purchases and be ready to take partial or full profits. Follow the action of the major averages and leading stocks.
Even if you ignore the broader market, the broader market won’t ignore you. If the market continues to weaken, your stocks will trip sell signals of their own.
Japan’s Nikkei fell 0.5% Wednesday. China’s Shanghai composite retreated 0.5% and Hong Kong’s Hang Seng lost 0.6%.
The U.K.’s FTSE was unchanged intraday while Germany’s Dax slid 0.5% and France’s CAC-40 lost 0.3%.