Dow Jones Futures: Sharp Stock Market Correction Often Followed By Choppy Market Rally

Dow Jones futures fell slightly Sunday evening, along with S&P 500 futures and Nasdaq futures. A stock market correction can inflict big losses in a short span, but coming back from an abrupt sell-off often will take far longer. That’s what followed the stock market correction earlier this year and what could be happening now. Investors need to understand current market conditions. Some promising breakouts and groups are struggling while while new sectors come to the fore. Market heavyweights such as Apple (AAPL), fellow Dow Jones stock Boeing (BA) and FANG stocks such as Facebook (FB) are all below their 200-day lines.


Dow Jones Futures Today

Dow Jones futures were 0.1% below fair value. S&P 500 futures sank 0.2%. Nasdaq 100 futures lost 0.1%. Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular stock market session.

Stock Market Correction: Early 2018

During the early 2018 stock market correction, the S&P 500 index lost 11.8% from its Jan. 26 peak to its Feb. 9 low, just 10 sessions later. The S&P 500 index and Dow Jones quickly regained much of that loss — the Nasdaq composite actually hit a new high in early March. But all three indexes once again headed lower. The Dow Jones just undercut its Feb. 9 low on April 2. The S&P 500 index did not, but closed below its 200-day line that after a Feb. 9 rebound from just below that key level.

After that, the major averages rose again, continuing a series of higher highs and higher lows. But it was a choppy market rally, with the lows undercutting the prior highs. It was a hard time to make money. Leading stocks would break out as the market was on a short-term upswing, then pull back when the major indexes fell back.

The S&P 500 index didn’t hit a new high until Aug. 21. The Nasdaq eclipsed its March peak on June 5. The Dow Jones didn’t hit all-time level until Sept. 20, just before the new stock market correction.

Stock Market Correction: September-October

As for the recent stock market correction, the S&P 500 index fell 11.84% from Sept. 21 to its Oct. 29 low. That was 26 sessions, though the market didn’t really fall in the first eight days. All the major indexes fell below their 200-day lines.

The stock market then recouping over half its losses in just six days. That confirmed a new stock market rally.

But then the S&P 500 index, Dow Jones and Nasdaq fell back again, wiping out much of the recent gains and putting the new market rally under pressure.

The market staged a mini-bounce late last week. But it’s unclear if that’s just a blip or the beginning of another upturn.

What Investors Should Do In The Stock Market Today

Of course, today’s stock market action is not the same as the prior stock market correction and recovery. But it’s important to understand that fast recovery from a market correction is no sure thing.

Know the current stock market environment: Read the Stock Market Today columns, from Dow Jones futures overnight to the closing bell. Always read The Big Picture after every market day to stay in sync with the major averages and leading stocks and sectors.

Update your stock watch list: A choppy market means even more upheaval among leading stocks and sectors.

Early in the latest stock market correction, rail operator CSX (CSX) and Medicaid insurer Centene (CNC) were in flat bases just below highs. Then CSX and Centene stock sold off on earnings. Now Centene and CSX stock have regrouped, forging new bases and buy points.

But old leaders don’t always rebound. Apple stock was the best-looking big tech in the stock market correction, with its relative strength line. But then Apple stock plunged after earnings on a cautious holiday outlook. Shares have kept falling, undercutting its October lows as Apple suppliers warn. The Dow Jones-S&P 500-Nasdaq titan was a big factor behind last week’s market pullback, though Apple stock and the broader averages tried to rebound later in the week.

Retailers been an area of strength, with several discounters such as Walmart (WMT), Dollar General (DG) and Burlington Stores (BURL) breaking out. But retailers were big losers last week amid poor-received earnings from Walmart, Macy’s (M), Home Depot (HD) and Nordstrom (JWN). Some of these stocks could quickly bounce back, but as with Apple stock, Facebook stock or Boeing stock, that’s not assured.

Today, medicals such as drugmakers, medical products and medical-services groups are leading. But that could change.

Buy stocks carefully: If you do buy stocks, buy as close to the entry point as possible. You might buy a half position then add more shares if the stock advances a little further. Be quick to cut losses.

Be cautious with your overall portfolio: You don’t have to go on heavy margin in this market environment. Consider your own personal risk tolerance.


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Originally posted 2019-09-19 23:25:43.


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