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Dow Jones Futures: 3 Reasons To Stay In Cash As Bulls, Bears Battle For Stock Market Control

Dow Jones futures fell slightly late Wednesday, along with S&P 500 futures and Nasdaq futures. Bulls and bears are fighting for stock market control, but there are good reasons to keep your powder dry on the sidelines. The stock market correction isn’t over yet. Breakouts aren’t happening. A few top stocks are holding up well, such as Apple (AAPL), AMD (AMD), UnitedHealth (UNH), TJX (TJX) and Microsoft (MSFT), but even those ranks continue to thin out.




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Note that Netflix (NFLX) is not a leading stock right now. The FANG member popped on strong subscriber growth Wednesday, reclaiming a key support level. But Netflix stock closed in the bottom half of its range. Meanwhile, its base is both late stage and looking sloppy.

Dow Jones Futures Today

Dow Jones futures fell about 0.1% vs. fair value. S&P 500 futures slid 0.1%. Nasdaq 100 futures lost 0.1%. Remember that Dow futures and other overnight action don’t necessarily translate into actual trading in the next regular session.

In Wednesday’s stock market trading, the major averages were up and down in an inconclusive session. The Dow Jones fell 0.35%, dragged down by IBM (IBM) and Home Depot (HD). The S&P 500 index and Nasdaq composite finished just below break-even.

1. It’s A Stock Market Correction

The Dow Jones, S&P 500 index and Nasdaq composite all hit recent intraday lows on Oct. 11 and began moving higher on Oct. 12. The rally attempt is four days old, with all the major averages back above their 200-day lines. But the stock market correction isn’t over. Investors should wait until a follow-through day to indicate institutional support for a new rally. That’s a strong gain in one or more major stock market averages in higher volume than the prior day. The more powerful the price and volume action, the better.

Honestly, this is all the reason you need to stay on the sidelines (unless you’re adding to long-term holdings of diversified stock mutual funds or ETFs). But here are two more.

2. Top Stocks Aren’t Breaking Out

If you still insisted on jumping into an ongoing stock market correction, here’s another issue. Breakouts, especially of top stocks, have fallen to almost zero in recent weeks. Investors should buy when the market is in good shape and stocks are in buy zones. Neither condition is present.

3. Apple Stock Holds Up, But Most Top Stocks Struggle

Apple stock is holding just above its 50-day moving average. So is fellow Dow Jones component UnitedHealth stock and a few other health insurers. Discount retailers TJX (TJX), Dollar General (DG) and Ross Stores (ROST) are also showing strength. AMD (AMD) is a rare chip name above its 50-day line. Ulta Beauty (ULTA) is looking good.

Adobe (ADBE) and Dow Jones component Microsoft stocks are just below 50-day lines but close to highs. So is Intuitive Surgical (ISRG), which will report earnings Thursday night.

All of these stocks have relative strength lines near highs, signaling their outperformance vs. the S&P 500 index. Stocks that hold up well during a market correction may be big winners in the next uptrend.

But many growth stocks have suffered more serious damage, breaking below their 50-day or even 200-day lines. Auto parts retailers, which had been holding up very well, sold off sharply Wednesday, with several stocks breaking key support.

It’s Not A Bear Market

Let’s keep some perspective. The market averages sold off in early October, with growth stocks hard hit, but so far it’s been a normal pullback. A confirmed market uptrend could come any day. When that occurs, top stocks will soon set up and begin to break out of bullish bases.

So stay engaged. Build your watch list of top stocks. Follow the action of the major averages and leading stocks. Reading the Stock Market Today column and The Big Picture will keep you in sync with the market.

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