Wednesday morning, Target (TGT) made the headlines, as well as Lowe’s (LOW), Children’s place (PLCE), TJX Cos. (TJX) and Analog devices (NAME).
A weak retail sales report, Home Depot earnings, geopolitical concerns over Afghanistan and increased pressure from China on tech companies weighed on stocks on Tuesday.
The Nasdaq fell to its 10-week moving average. But it wasn’t just a question of technology.
July’s retail sales report weighed heavily on many consumer names on Tuesday, but several sectors were hit hard.
One exception is the large medical sector. Dexcom (DXCM), UnitedHealth (UNH), HCA Health (HCA), In Mode (INMD), Intuitive surgery (ISRG), Idexx Laboratories (IDXX) and Zoetis (ZTS) resist well or advance. Many of them are usable, or almost.
The video embedded in this article analyzes CRWD, Idexx Labs, and Copart stocks, as well as market action.
Dow Jones Futures Today
Futures contracts on Dow Jones fell 0.1% from fair value. S&P 500 futures fell 0.1%. Futures on the Nasdaq 100 fell 0.2%.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades during the next regular trading session.
The 200-day average: the last line of support?
Tesla, success in the automotive sector
Auto sales have fallen sharply, the latest proof that potential buyers are put off by soaring prices. It is a bad sign for automakers to Tesla (TSLA) at General Motors (GM). It also hit car dealerships such as AutoNation (A).
Tesla stock fell 3% to 665.71 on Tuesday, but rebounded from lows to close just above its 50 and 200 day lines. On Monday, TSLA stock fell 4.3%, topping an early entry of 700.10, as NHTSA announced a new autopilot probe with new language suggesting the agency is stepping up its scrutiny. Tesla is hosting an AI Day event on Thursday.
GM stock fell 4.7% on Tuesday, below its 200-day line and the worst levels since February. AutoNation fell x%, erasing Monday’s bullish rebound.
Auto price shock should be good news for the rescue operator Copart (CPRT) and retailers such as Advanced auto parts (AAP), but they also fell back on Tuesday. CPRT stock has found support on its 50-day line, creating a possible buying opportunity.
Home Depot, Retail Hammer Housing
The retail sales report showed spending on home improvement and furnishings weakened. A separate index of optimism for home builders has fallen. Finally, Home Depot’s US comparable store sales missed out as the number of customers declined.
Home Depot shares fell 4.3% to 320.75, falling below a handle-grip cup buy point of 333.55 and a fraction below its 50-day line.
Meanwhile, a high-end home furnishings retailer HR (RH) fell 3.8% to 688.03, below its 50-day line and 5% below a buy point of 724.11. Floor and Decoration (FND), which erupted on July 20, is close to a 17% round-trip gain, falling 4.35% to 112.58. That’s just above the 109.95 buy point and the 50 day line. Lennar (LEN) fell 3.85%, falling back below its buy point, according to MarketSmith analysis.
CrowdStrike, software collapse
CRWD’s stock fell 0.8% to 232.80. That’s well below the official buy point of 251.38, with the 50 day line just below that entry. At an intraday low of 227.25, shares gained 20% from the early entry of 227.30. Meanwhile, DocuSign (DOCU) et Shopify (SHOP) are fighting for help on their 50 day line.
But steelmakers have sold off again after soaring last week. Commodities and mining stocks struggled. Industrials, which rebounded bullish on Monday, struggled on Tuesday. Financials also fell, although they generally fell in an orderly fashion.
Walmart (WMT) was essentially unchanged after its results on Tuesday, but several other discounters retreated. TGT stock fell 3.2%, testing its 10-week line for the first time in nearly three months.
Chip shares, which have been under pressure for several days, continued to struggle with Nvidia earnings expected Wednesday night and Applied materials (AMAT) Thursday.
Tesla and InMode shares are listed on the IBD rankings. Copart and IDXX shares are on the long term leaders IBD. The INMD stock is on the IBD 50. The CPRT stock was the IBD stock for Tuesday.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Stock market rally Tuesday.
The stock rally had a tough session, with higher volume falling, although the major indices closed significantly from lows.
The Dow Jones Industrial Average fell 0.8% in stock trading on Tuesday. The S&P 500 index lost 0.7%. The Nasdaq composite fell 0.9%. Russell 2000 small cap sank 1.2%
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) lost 1%, while the Innovator IBD Breakout Opportunities (BOUT) ETF fell 2%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 0.7%. The VanEck Vectors Semiconductor (SMH) ETF slipped 1.9%.
The SPDR S&P Metals & Mining ETF (XME) fell 2.8% as miners continued to pull out and steel stocks gave up some of their recent gains. The ETF Global X US Infrastructure Development (PAVE) fell 1.6%. The US Global Jets ETF (JETS) fell 2.25%. The S&P Homebuilders (XHB) SPDR ETF fell 3.2%, with RH, Lennar and Home Depot stocking all key components. The Energy Select SPDR ETF (XLE) slipped 1% and the Financial Select SPDR ETF (XLF) fell 0.7%.
ETF Health Care Select Sector SPDR (XLV) xxx% rose 1.2% to a new high. UNH stock is a major component, but XLV also owns Dexcom, Idexx Labs, Zoetis, and Intuitive Surgical.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 0.9% and ARK Genomics ETF (ARKG) fell 0.6%, which isn’t too bad but prolonged a recent decline. Tesla remains the No. 1 position among ARK Invest ETFs.
Five best Chinese stocks to watch
Market rally analysis
The stock rally didn’t offer many places to hide on Tuesday. Retail, housing, autos, commodities and industrials were hit on Tuesday, as growth continues to come under pressure.
The size of the market is deplorable. The forward / down line broke through mid-July lows, at its worst level since early January. The Russell 2000, which bounced off its 200-day line in mid-July but then hit the resistance of its 50-day line, is testing its 200-day line again.
What is holding up? Many medical names sound healthy. Dow Jones UnitedHealth giant is just below a buy point, but UNH stock has struggled to outperform the S&P 500 in recent years. HCA stock has been consolidating in recent weeks after deviating from an earnings base last month. InMode, Idexx Labs and Zoetis find support on their 50 day / 10 week lines.
Meanwhile, shipping stocks look attractive again, while Apple (AAPL) and Microsoft (MSFT) are at record levels.
The main indexes always look OK. The Dow Jones and S&P 500 have found support at their 21-day exponential moving averages and are just below the record highs. The Nasdaq composite has found support at its 50-day line, but is not far from historical levels. This modest pullback – as opposed to the choppy side action at the highs of the previous weeks – has the potential to form proper grips and bases.
Time the market with IBD’s ETF market strategy
What to do now
Thus, within a few weeks, a number of new buying opportunities could develop. But right now, investors are probably seeing a lot of red in their portfolios.
Definitely get rid of stocks that make double-digit round-trip or follow significantly below your purchase price.
It is possible that say, Tesla stock, RH or Shopify (SHOP) will find support at these levels and we will look back and see this moment as a great buying opportunity for the daring. But more could drop yet, the way the CRWD title crossed its 50 day line.
There is also an opportunity cost of holding a stock in the hope that it will bounce back. You could hold onto a loser or a laggard rather than selling now and buying a top stock for the near future.
Consider your strategy for winning stocks in the current rallying market environment. Are you taking quick profits on the winners or trying to hold onto larger gains, knowing that a stock could give up large gains before ramping up – or wipe them out. It is not necessarily all or nothing. You can decide to take a 10% or 15% partial profit and try to keep the rest.
Read The Big Picture every day to stay in tune with the market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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