What to do in the new stock market correction before the Fed meeting

What to do in the new stock market correction before the Fed meeting

Dow Jones futures were little changed after Monday’s stock market rally ahead of the Federal Reserve’s two-day policy meeting. Despite Monday’s gains, the stock market trend is still in a correction after last week’s big market losses.


stock market today

On Monday, the Dow Jones Industrial Average advanced 0.6%, while the S&P 500 rose 0.7%. The tech-heavy Nasdaq Composite rallied 0.8%. And the small-cap Russell 2000 also gained 0.8%.

Among exchange-traded funds, Nasdaq 100 tracker Invesco QQQ Trust (QQQ) was up 0.6% and SPDR S&P 500 (SPY) was up 0.8%.

Current summary of the US stock market

Index Symbol Price gain loss % Change
dow jones (0USD) 31019.82 +197.40 +0.64
S&P 500 (0S&P5) 3900.00 +26.67 +0.69
nasdaq (0NDQC) 11535.02 +86.62 +0.76
Russell 2000 (IWM) 180.52 +1.53 +0.85
IBD 50 (FFTY) 27.06 +0.10 +0.37
Last updated: 4:28 pm ET 09/19/2022

This week’s key earnings reports come from Costco (COST), Darden Restaurants (DRI), general mills (NEXT), KB Home (KBH) and Lennar (LEN).

giant EV Tesla (TSLA) rose 1.9% on Monday. Among the Dow Jones leaders, Apple (AAPL) traded 2.5% higher, while Microsoft (MSFT) lost 0.1% in the stock market today.

In the current weak market, continental resources (CL), double check (DV) and Vertex Pharmaceuticals (VRTX), as well as Dow Jones stocks Chevron (CLC) and Merck (MRK) — are among the top stocks to watch. Note that the new stock market correction is a good reason for investors to be mostly, if not entirely, on the sidelines.

DoubleVerify is an IBD Leaderboard stock, but its position size was reduced during last week’s losses. Tesla was featured in this week’s Stocks Near A Buy Zone column.

Dow Jones Futures Today: Treasury Yields, Oil Prices

Before Tuesday’s open, Dow Jones, S&P 500 and Nasdaq 100 futures were little changed against fair value. Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

The 10-year Treasury yield rose to 3.49% on Monday, surpassing the 11-year high of 3.48% set on June 14. Meanwhile, US oil prices a barrel.

Fed meeting to start

The Federal Reserve’s two-day meeting will begin on Tuesday, with an interest rate decision on Wednesday. Markets show an 82% chance that the central bank will raise rates by 75 basis points and an 18% chance that it will raise rates by 100 basis points.

Investors will be looking for clues about the pace of future rate hikes and how far the central bank will go.

What to do in the stock market correction

After last week’s big losses, IBD downgraded its market trend from “uptrend under pressure” to “market correcting”. That means investors should be mostly, if not entirely, in cash.

To prepare for another stock market rally, investors should expect a follow-up day. When the market is in a correction, look for at least one major index to try to bottom out. The first day the index closes higher counts as Day 1 of its rally attempt. (Monday is Day 1 of the rally attempt). Action on Day 2 and Day 3 is irrelevant as long as the index does not break below its latest low. If that low is lowered, the rally attempt is made and the market must try again.

On day 4 and beyond, you’re expecting the Nasdaq or S&P 500 to spike higher on volume than the previous session. That’s a follow-up day. It gives investors the green light to start buying leading stocks that are above the correct buy points. You should get your portfolio and mindset in sync with the stock market action by gradually committing capital to the leading stocks.

While you wait for a new uptrend, create a watch list of potential market leaders using the relative strength line. The RS line measures a stock’s price performance against the S&P 500. If the stock is outperforming the broader market, the RS line slopes up. If a stock is lagging the broader market, the line will point down.

The Big Picture column on Friday commented: “Since being rejected near its 200-day moving average, the Nasdaq has sunk below all of its major moving averages. It is now down nearly 28% so far in 2022.” “.

If you are new to IBD, consider taking a look at their stock trading system and the basics of CAN SLIM. Recognizing chart patterns is a key to investment guidelines. IBD offers a wide range of growth stock listings such as Leaderboard and SwingTrader.

Investors can also create watchlists, find companies nearing a point of purchase, or build custom displays on IBD MarketSmith.

Five Dow Jones Stocks to Watch Now

Dow Stocks to Watch: Chevron, Merck

Dow Jones stock Chevron is building a mug with a handle that has a buy point of 166.93, according to chart analysis from IBD MarketSmith, amid a strong performance by energy stocks so far this year. . The stock was up 0.3% on Monday, finding much-needed support at its 50-day line.

CVX stock shows a strong 97 out of a perfect IBD Composite Rating of 99, according to IBD Stock Check. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

Pharmaceutical giant Merck is also battling the downtrend in the stock market. Stocks are building a flat base that has a buy point of 95.82. But MRK shares are stuck below their 50-day line. Merck shares lost 1.2% on Monday.

4 top growth stocks to watch in the CurrCurrent Stock Market Correction

Top stocks to watch: Continental, DoubleVerify, Vertex

Oil explorer and producer Continental Resources is building a handle cup with a buy point of 72.80, according to IBD MarketSmith chart analysis. The relative strength line made a recent high last week, but remains a bit off its 52-week high. CLR shares rose 0.6% on Monday.

IBD leaderboard shares DoubleVerify are still below their buy point of 28.07 on a bottoming basis despite Monday’s 0.55% gain. While the stock’s breakout attempt falters, it found support around its 50-day line.

Vertex Pharmaceuticals is back below its 50-day line after Monday’s 1.6% loss. The stock has held up well during the current market weakness as indicated by an RS line approaching new highs. There is no new base yet, but the stock’s resiliency makes it a good idea to watch.

Join IBD experts as they discuss the top stocks in the current stock market correction on IBD Live

Tesla Stock

Tesla shares rose 1.9% on Monday, recovering from Friday’s slight loss. The shares are nearing the buy point of 314.74 from the short base. In the meantime, keep an eye out for additional buy points if the stock is able to rally higher on the right side of its major consolidation, which dates back to January.

Bullishly, the stock’s RS line is at its highest level since early April. Shares are 25% below their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among Dow stocks, Apple shares rose 2.5% on Monday, ending a two-day losing streak and recouping some of last week’s losses. Last week, the stock closed at its lowest level since July 18.

Microsoft lost 0.1% on Monday, paring losses after hitting a new 52-week low. The software giant is down 30% from its 52-week high.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the Dow Jones Industrial Average.


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