Dow Jones futures were slightly higher following Monday’s stock market sell-off ahead of this week’s Fed meeting. Tesla stock broke down through a key support level, while Apple reversed sharply after hitting record highs. And stock market leaders Advanced Micro Devices and Nvidia fell sharply.
On Monday, the Dow Jones Industrial Average dropped 0.9%. The S&P 500 also lost 0.9%, while the Nasdaq sold off 1.4%. The small-cap Russell 2000 declined 1.4%.
Among the Dow Jones leaders, Apple (AAPL) reversed 2.1% lower Monday after hitting all-time highs, while Microsoft (MSFT) declined 0.9% in today’s stock market. Home Depot (HD) and Nike (NKE) remain below new buy points.
Electric vehicle leader Tesla (TSLA) skidded 5% Monday. Its rival, Rivian (RIVN), climbed 3.7%. Lucid Group (LCID) bounced 4%. And Chinese EV leaders Li Auto (LI) and Xpeng Motors (XPEV) posted sharp losses.
Among Monday’s top stocks to watch, Arista Networks (ANET), Driven Brands (DRVN) and Louisiana-Pacific (LPX) are in or near new buy zones. Amid the recent stock market volatility, investors should still be developing watchlists, and avoid making new purchases until the market’s current rally attempt stages a follow-through day.
Microsoft and Tesla are IBD Leaderboard stocks. Arista featured in this week’s Stocks Near A Buy Zone column and was Monday’s IBD Stock Of The Day. , while Driven Brands was in last week’s IPO Leaders story.
Dow Jones Futures Today: Fed Meeting
After the stock market close Monday, Dow Jones futures, along with S&P 500 futures, rose 0.2% vs. fair value, while Nasdaq 100 futures gained 0.1%. Remember that premarket action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) dropped 1.4% Monday, while the SPDR S&P 500 ETF (SPY) descended 0.9%. The Innovator IBD 50 ETF (FFTY) slid 3.4%, nearing correction lows.
U.S. Stock Market Today Overview
Last Update: 4:28 PM ET 12/13/2021
Elsewhere, the 10-year Treasury yield traded down to about 1.42% Monday.
On Tuesday, the Federal Reserve’s two-day meeting will kick off with the Fed set to release its decision on Wednesday following the conclusion of the policy meeting. The Fed is expected to move quickly to wind down its bond-buying program and signal that it will raise interest rates next year in an effort to curb fast-rising inflation. The Federal Reserve’s new quarterly economic projections are expected to pencil in two rate hikes for 2022.
Stock Market Rally Attempt
The major stock indexes posted weak performances Monday, as the Nasdaq again tested its critical 50-day benchmark. Despite the losses, Monday marked Day 6 of new rally attempts on the Nasdaq and S&P 500, and Day 8 for the Dow Jones industrials.
Although indexes are still attempting to initiate a rally, the market correction isn’t over yet; several days don’t make a trend. Starting on Day 4, you are looking for a major index to rise sharply in higher volume than the prior day. That would indicate a follow-through day, and signal the start of a potential uptrend.
Until such a signal appears, the market outlook remains a market in correction. Investors should be avoiding new purchases and maintaining watchlists of top growth stocks. Be sure to keep a close eye on your portfolio to make sure you’re protecting your gains and cutting losses quickly.
Now, while the market is still correcting, it’s a good time to search for stocks that could become the next uptrend’s leaders. One tool helpful in such a search is the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.
After Monday’s session, The Big Picture commented: “Parsing the sector, however, software remains a trouble spot. The iShares Expanded-Tech Software ETF (IGV) is more than 9% below prior highs. Cybersecurity and enterprise software are chief culprits in the software sector. Those industry groups are off about 11% and 18%, respectively, from prior highs.”
For more daily stock market commentary, check out IBD’s The Big Picture.
Stocks Market Leaders Sell Off: AMD, Nvidia
Both stocks remain above their 50-day line, but their cushions are disappearing. If their 50-day lines are unable to offer substantial support, then further weakness would be expected.
Dow Jones Stocks To Watch: Home Depot, Nike
Home Depot stock remains just below a 416.66 buy point in a three-weeks-tight formation. Home Depot is one of the top Dow Jones performers in 2021, up 52.6% year to date through Monday’s close. Shares traded down 2.4% Monday.
Retail leader Nike is tracing a new flat base that has a buy point at 179.20, according to IBD MarketSmith chart analysis. Shares are trying to find support around their 50-day line following Monday’s 1.3% loss.
Stocks To Watch: Arista, Driven, Louisiana-Pacific
Monday’s IBD Stock Of The Day, Arista Networks, shows a flat base with a 134.24 buy point. ANET stock shows a strong 97 out of a perfect 99 IBD Composite Rating, according to the IBD Stock Checkup. Shares were up 1.2% Monday.
Positively, the stock’s RS line is just off new highs, indicating significant stock market outperformance during the recent weakness in the major stock indexes.
IPO Leader Driven Brand shares attempted a breakout Monday past a cup with handle’s 33.47 buy point, according to IBD MarketSmith chart analysis. But shares reversed lower, falling over 1% to close below the entry.
Louisiana-Pacific is in buy range past a 73.76 buy point in a cup with handle after Monday’s 2.6% loss. The 5% buy range tops out at 77.45.
EV Stocks: Li Auto, Xpeng, Lucid Motors, Rivian
Li Auto triggered the 7%-8% loss-cutting sell rule below a cup-with-handle base’s 34.93 buy point after last week’s tumble, but is trying to rebound. Shares are at their 50-day line after finding support around the long-term 200-day moving average. A new base could be forming. Shares moved down 3.4% Monday.
Xpeng Motors triggered the round-trip sell signal from a 48.08 buy point during early December’s sharp sell-off. But XPEV shares are back at their 50-day support level. Wait for the stock to form a new base, which would offer a new entry. The stock was down 3.2% Monday.
Lucid Motors shares added to Friday’s 3.1% bounce, climbing 4% Monday. LCID stock remains extended past a 28.49 buy point in a cup-with-handle base, but huge gains have dwindled. Shares are now trying to find support at their 50-day line.
Hot initial public offering Rivian rebounded from Friday’s 0.6% decline, rising 3.7% Monday after MotorTrend named the Rivian R1T its 2022 Truck of the Year, calling it “the most remarkable truck we’ve ever driven.”
RIVN shares closed Monday about 34% off their post-IPO highs. The decline is a potential positive for investors remaining disciplined and waiting for an IPO base to form before considering a purchase. The recent weakness is the start of Rivian’s first base formation, and last week’s advance is a step in the right direction.
Late Monday, U.S. securities filings showed Chief Executive Elon Musk sold another 934,091 Tesla shares worth about $906.5 million. In addition, he exercised stock options to buy 2.13 million shares of Tesla stock.
Shares traded as high as 1,243.49 on Nov. 4, but the stock ended Monday about 22% off its 52-week high.
TSLA shares remain sharply above a 764.55 buy point in a cup with handle. The EV giant is working on a new base, though that needs another week to form, with a likely 1,202.05 buy point. Drawing a trend line from the record high could offer an early entry around 1,150.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple stock reversed from record highs Monday, closing lower after trading as high as 182.13. Shares slid 2.1% Monday, closing about 15% past a 153.27 buy point out of a cup-with-handle base, according to IBD MarketSmith chart analysis. The stock is approaching the 20%-25% profit-taking zone.
Software giant Microsoft lost 0.9% Monday, giving up a part of Friday’s 2.8% gain. Shares found much-needed support at their 50-day line last week and are once again approaching new highs. On Oct. 18, Microsoft stock broke out past a flat base‘s 305.94 buy point. The 5% buy zone topped out at 321.24, so the stock is extended.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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