Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. The stock market rally had a strong session after inflation fell more than expected last month. The uptrend is now in a “power trend”, a bullish turn.
The Global X Lithium & Battery Tech ETF (BED) surpassed its 200-day moving average. The ALB share is the main LIT holding, together with the SQM share, You’re here (TSLA), China EV and battery giant BYD (BYDDF) and many Asian battery manufacturers.
Lithium stocks and LIT ETFs are ways to meet the growing demand for electric vehicles, without having to choose a specific electric vehicle manufacturer.
As for Tesla, shares of the electric vehicle giant rose 3.9% to 883.07 on Wednesday. After declaring Tesla stock a “buying opportunity” on August 4, CEO Elon Musk revealed that he sold $6.9 billion worth of stock on August 5, 8 and 9. Musk cited the possible Twitter (TWTR) recovery for fresh sales. He said he was done with TSLA stock sales for now.
TWTR stock jumped 3.7% to 44.43, continuing a strong uptrend over the past month. Legal experts see Twitter having a strong case for forcing Musk to close the deal at $54.20 per share.
Musk also tweeted on Wednesday that the Tesla Semi will be released later this year with a range of 500 miles. The Semi was delayed for several years. Also, a report said BYD (BYDDF) would supply batteries to Tesla’s Berlin factory, with Blade-powered Model Ys potentially rolling off the line this month.
BYD stock edged down 0.5% after hitting a two-month intraday low. Shares of the Chinese electric vehicle and battery giant are slightly below a 50-day rising line.
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To finish, waltz disney (SAY) reported better-than-expected earnings after the close, with Disney+ subscribers also well above views. The entertainment giant plans to raise Disney+ subscription fees to $10.99 per month, while introducing an ad-supported low-cost tier. DIS stock rose 7% overnight. Shares of Disney rose 4% to 112.43 on Wednesday, a three-month high.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. The DIS stock is a component of Dow. S&P 500 and Nasdaq 100 futures were roughly flat.
At 8:30 a.m. ET, the Department of Labor will release weekly unemployment claims. Initial claims have risen sharply in recent months, but remain historically low. In addition, continuing claims have increased much less, suggesting that laid-off workers are quickly finding new jobs.
Remember that overnight action on futures on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Stock market rally
The stock market rally surged on Wednesday as the July inflation report was much fresher than expected and closed near session highs.
The consumer price index remained stable compared to June and rose only 0.3% excluding food and energy, both below expectations. Headline inflation fell to 8.5% from June’s 40-year high of 9.1%. Core inflation held steady at 5.9% against views for a slight increase.
The market is now in a “power trend”, a positive sign of a longer-lasting upward trend.
The Dow Jones Industrial Average rose 1.6% in trading on Wednesday. The S&P 500 index jumped 2.1%. The Nasdaq composite jumped 2.9%. The small-cap Russell 2000 also rose 2.9%.
U.S. crude oil prices rose 1.6% to $91.93 a barrel, reversing higher on data signaling a rebound in U.S. gasoline demand. Gasoline futures jumped 3.7%. Natural gas futures jumped 4.7%.
The 10-year Treasury yield edged down 1 basis point to 2.79%, well off intraday lows of 2.71%. The two-yield Treasury fell 6 basis points to 3.23%. The yield curve is always inverted from the 1-year rate to the 10-year rate.
Markets are now pricing in a 57.5% chance of a 50 basis point Fed rate hike on Sept. 21. On Tuesday, markets saw a 68% chance of a third consecutive 75 basis point move.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 3%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) gained 1.5%. The iShares Expanded Tech-Software Sector ETF (VIG) jumped 3.8%. The VanEck Vectors Semiconductor ETF (SMH) jumped just over 4%.
SPDR S&P Metals & Mining ETF (XME) climbed 3.55% and the Global X US Infrastructure Development ETF (PAVE) 2.5%. US Global Jets ETF (JETS) increased by 2.4%. ETF SPDR S&P Home Builders (XHB) increased by 3.5%. The SPDR Energy Select ETF (XLE) edged up 0.7% and the Financial Select SPDR ETF (XLF) rose 2.25%. SPDR Healthcare Sector Fund (XLV) added 1.1%.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) jumped 7.4% and ARK Genomics ETF (ARKG) 7.05%. Tesla stock is a major holding in Ark Invest’s ETFs. Cathie Wood’s Ark also owns BYD stock.
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Albemarle shares jumped 6% to 259.30. ALB stock has a buy point of 273.78 from a deep base with a handle, according to MarketSmith analysis. However, if you consider the 31% deep handle as its consolidation, the ALB stock clears a handle entry of 250.25. Albemarle has also had a lot of trades around the 248-253 zone since September.
Albemarle’s revenue easily topped views last week, with EPS up 288% and revenue up 91%. The lithium giant also doubled its EPS forecast for the full year, the third big increase expected in about three months. Lithium prices are high and expected to remain so, with Albemarle converting more contracts to spot prices.
SQM stock rose 3.8% to 101.12, clearing an early entry of 99.84. The grip is slightly too low in the base to be a good buy point, which officially remains 115.86. SQM earnings are due August 17th.
Livent stock jumped 6.7% to 28.20, clearing an early entry at 27, slightly above the 200-day line. LTHM stock has an official buy point of 34.71. Livent’s earnings also topped last week, with EPS growth of 825%. Revenues rose 114%, the seventh straight quarter of accelerating earnings.
The Global X Lithium & Battery Tech ETF climbed 2.35% to 78.79, crossing above the 200-day line for the first time since late January. Investors could use this as an opportunity to buy the LIT ETF, which offers a wide avenue to play the EV trend.
Market rally analysis
The market rally bounced higher on the inflation report, which silenced – for now – that the uptrend was due to a pause or prolonged pullback.
The Nasdaq composite returned to Monday’s intraday highs, testing a trendline dating back to January. The S&P 500 and Dow Jones hit their early June highs.
The next major resistance level for the major indices is the 200-day moving average.
Chip stocks rebounded after the one-two punch of Nvidia (NVDA) and Micron (MU) warnings. Onsemi (ON) now has a handful in its consolidation, with several other hot token plays trying to carve out handles.
This is one of the reasons why a sideways market action would be positive for the market rally. More dominant stocks could forge bases and handles as the moving averages catch up.
In addition to Albemarle, lithium stocks and some chip names, steel and metal games loom, along with some medical device makers and heavy construction companies. Some energy stocks are sending buy signals, including natural gas-focused names such as Energy Cheniere (LNG).
Solar stocks and health insurers continue to do well, but are generally extended.
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What to do now
The rally in the market moving towards a power trend is definitely a positive signal. The major indices, after initially hitting resistance this week at some key levels, are moving back to or above those levels.
Investors should seek to increase their exposure. You don’t need to be fully invested and you shouldn’t try to increase your purchases quickly.
Work on those watchlists. Many interesting actions are emerging.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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