Dow Jones futures were little changed overnight, along with S&P 500 futures 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 shift.
The Global X Lithium & Battery Tech ETF (LIT) moved above its 200-day moving average. ALB stock is the top LIT holding, along with SQM stock, Tesla (TSLA), China EV and battery giant BYD (BYDDF) and many Asian battery makers.
The lithium stocks and LIT ETFs are ways to play the rising demand for electric vehicles, without having to pick a specific EV maker.
As for Tesla, shares of the EV giant rose 3.9% to 883.07 Wednesday. After saying that Tesla stock was a “buying opportunity” on Aug. 4, CEO Elon Musk disclosed he sold $6.9 billion worth of shares on Aug. 5, 8 and 9. TSLA stock tumbled below the 200-day line in the span. Musk cited the possible Twitter (TWTR) takeover for the fresh sales. He said he’s finished with TSLA stock sales for now.
TWTR stock popped 3.7% to 44.43, continuing a strong uptrend over the past month. Legal experts see Twitter having a strong case in forcing Musk to close the deal at $54.20 a share.
Musk also tweeted Wednesday that the Tesla Semi will be released later this year with a 500-mile range. The Semi has been delayed by several years. Also, a report said BYD (BYDDF) would supply batteries to the Tesla Berlin factory, with Blade-powered Model Ys possibly rolling off the line this month.
BYD stock edged down 0.5% after hitting a two-month low intraday. Shares of the China EV and battery giant are modestly below a rising 50-day line.
Finally, Walt Disney (DIS) reported better-than-expected earnings after the close, with Disney+ subscribers also well above views. The entertainment giant plans to hike Disney+ subscription fees to $10.99 a month, while introducing an ad-supported, lower-priced tier. DIS stock ran up 7% overnight. Disney shares rose 4% to 112.43 on Wednesday, a three-month high.
Dow Jones Futures Today
Dow Jones futures tilted higher vs. fair value. DIS stock is a Dow component. S&P 500 futures and Nasdaq 100 futures edged lower.
At 8:30 a.m. ET, the Labor Department will release weekly jobless claims. Initial claims have risen sharply in the past few months, but remains historically low. Also, continuing claims have climbed far less, suggesting workers who are laid off quickly find new jobs.
Stock Market Rally
The stock market rally jumped Wednesday as the July inflation report was much cooler than expected, and closed near session highs.
The consumer price index was flat vs. June and up just 0.3% excluding food and energy, both lower than expected. Headline inflation fell to 8.5% from June’s 40-year high of 9.1%. Core inflation held at 5.9% vs. views for a slight increase.
The market is now in a “power trend,” a positive sign of a more-lasting uptrend.
The Dow Jones Industrial Average rose 1.6% in Wednesday’s stock market trading. The S&P 500 index popped 2.1%. The Nasdaq composite leapt 2.9%. The small-cap Russell 2000 also rallied 2.9%.
U.S. crude oil prices rose 1.6% to $91.93 a barrel, reversing higher on data signaling rebounding U.S. gasoline demand. Gasoline futures popped 3.7%. Natural gas futures leapt 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 sank 6 basis points to 3.23%. The yield curve is still inverted from the 1-year yield to the 10-year yield.
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-straight 75-basis-point move.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) popped 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 U.S. Infrastructure Development ETF (PAVE) 2.5%. U.S. Global Jets ETF (JETS) ascended 2.4%. SPDR S&P Homebuilders ETF (XHB) rose 3.5%. The Energy Select SPDR ETF (XLE) edged up 0.7% and the Financial Select SPDR ETF (XLF) advanced 2.25%. The Health Care Select Sector SPDR Fund (XLV) added 1.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) jumped 7.4% and ARK Genomics ETF (ARKG) 7.05%. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD stock.
Albemarle stock leapt 6% to 259.30. ALB stock has a 273.78 buy point from a deep cup-with-handle base, according to MarketSmith analysis. However, if you view the 31%-deep handle as its consolidation, then ALB stock is clearing a 250.25 handle entry. Albemarle also has had a lot of trading around the 248-253 area going back to September.
Last week, Albemarle earnings easily beat views, with EPS up 288% and revenue 91%. The lithium giant also doubled full-year EPS guidance, the third big forecast hike in about three months. Lithium prices are high and likely to stay that way, with Albemarle converting more contracts to spot prices.
SQM stock rose 3.8% to 101.12, clearing an early entry of 99.84. The handle is slightly too low in the base to be a proper buy point, which officially remains 115.86. SQM earnings are due on Aug. 17.
Livent stock jumped 6.7% to 28.20, clearing an early entry at 27, modestly above the 200-day line. LTHM stock has an official 34.71 buy point. Last week, Livent earnings also topped, with 825% EPS growth. Revenue grew 114%, the seventh straight quarter of accelerating gains.
The Global X Lithium & Battery Tech ETF climbed 2.35% to 78.79, moving 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 broad way to play the EV trend.
Market Rally Analysis
The market rally rebounded bullishly on the inflation report, quieting talk — for now — that the uptrend was due for an extended pause or pullback.
The Nasdaq composite moved back up to Monday’s intraday highs, testing a trendline going back to January. The S&P 500 and Dow Jones cleared their early June highs.
The next major resistance level for the major indexes is the 200-day moving average.
Chip stocks bounced after the one-two punch of Nvidia (NVDA) and Micron (MU) warnings. Onsemi (ON) now has a handle in its consolidation, with several other hot chip plays trying to carve out handles.
That’s one reason why some sideways market action would be positive for the market rally. More leading stocks could forge bases and handles, while moving averages catch up.
In addition to Albemarle, lithium stocks and some chip names, steel and metal plays are shaping up, along with some medical device makers and heavy construction firms. Some energy plays are flashing buy signals, notably natural gas-focused names such as Cheniere Energy (LNG).
Solar stocks and health insurers continue to do well, but are generally extended.
What To Do Now
The market rally moving into a power trend is certainly a positive signal. The major indexes, after initially hitting resistance this week at some key levels, are getting back to or above those levels.
Investors should be looking to increase exposure. You don’t need to be fully invested, and you shouldn’t try to ramp up buys quickly.
Work on those watchlists. A lot of interesting stocks are shaping up.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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