Dow Jones futures fell Friday morning, along with S&P 500 futures and Nasdaq futures, signaling a third day of stock market losses. The current stock market rally has hit resistance at the 200-day line, with China trade fears slamming the Dow Jones, S&P 500 and Nasdaq on Thursday. Notably, FANG stocks Amazon (AMZN), Facebook (FB) and Google parent Alphabet (GOOGL) are struggling at the long-term 200-day line, while Netflix (NFLX) is fighting to hold that level. Apple (AAPL), which is still well below its 200-day, also weighed on the indexes.
This is a confirmed uptrend with few distribution days. But investors need to recognize when a stock market rally faces resistance. Stocks, even top stocks from leading sectors, may struggle at such points.
Dow Jones Futures Today
Dow Jones futures lost 0.5% vs. fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures retreated 0.8%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Current Stock Market Rally
The stock market rally clearly is hitting resistance. After slim losses Wednesday, the major averages fell sharply, with the Dow Jones and S&P 500 index losing 0.9% and the Nasdaq 1.2%, though they finished well off session lows. Indications that a China trade deal is still far off spooked investors, who have been increasingly bullish about trade talks in recent weeks. On a technical basis, the S&P 500 index and Nasdaq composite are pulling back after running to their 200-day moving averages. The Dow Jones, which is less important as a technical gauge, cleared the 200-day last week and tested that support Thursday.
Growth stocks also retreated, but not too badly, closing near session highs.
IBD Leaderboard stock CyberArk fell as much as 5.6% intraday, briefly undercutting its buy point, but rebounded to close down 1.2%. ServiceNow (NOW) and TransDigm (TDG), both strong recent breakouts that are also on Leaderboard, rose slightly.
The IBD 50 Innovator ETF (FFTY) lost 0.7%, a far better performance than that of the major averages.
Amazon Stock, Facebook Stock, Google Stock, Netflix Stock
Perhaps not coincidentally, the FANG stocks have struggled at the 200-day line as well.
Amazon stock fell 1.6% Thursday. The e-commerce giant closed pennies above its 200-day line on Jan. 31, but then immediately fell back after issuing weak guidance that night. Shares tested their 50-day line on Thursday.
Facebook stock sank 2.4% Thursday, dropping below its 200-day. The social networking giant has been trading around that key level since gapping up following earnings last week.
Google stock slid 1.5% Thursday. Shares fell 2.5% on Wednesday, retreating from a four-month high and moving back below their 200-day line.
Netflix stock is the only FANG stock holding above its 200-day. But Netflix stock tested that support as it fell 2.1%.
Meanwhile, Apple stock retreated 1.9%, underperforming the market. Despite its post-earnings rally, Apple stock is still far below its 200-day line and a long way from its Oct. 3 peak.
Stock Market Rally, Tech Titans Linked
The current stock market rally and the FANG stocks likely will struggle with the 200-day line in tandem. If and when the broad market clears that resistance level, the FANGs probably will too. It’s unclear which will lead the other higher or lower. But the FANG stocks, and Apple stock, haven’t really led the current stock market rally after underperforming in late 2018.
Apple, Facebook and Google fell about 1% in Friday’s premarket. Amazon and Netflix stock lost closer to 1.5%.
What To Do Now
While top stocks fared reasonably well in Thursday’s market retreat, most lost ground. If the stock market rally goes into reverse, so will top stocks. Pay close attention to the major averages and leading stocks. Watch your overall exposure, avoid buying or pyramiding too high, and be ready to cut losses quickly.
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