Dow Jones Futures: Today’s Stock Market Is Dark Mirror Version Of Early 2018 Stock Market Correction

Dow Jones futures rose Monday evening, along with S&P 500 futures and Nasdaq futures. In Monday’s stock market, the Dow Jones, S&P 500 index and Nasdaq composite plunged below recent stock market correction lows, with the S&P 500 tumbling below early 2018 levels. The ongoing stock market slump looks a lot like the early 2018 stock market correction, but it’s a dark mirror image. The major averages are hitting lower highs and lower lows since the October plunge, and living below the long-term 200-day moving average. Apple (AAPL), Microsoft (MSFT) and FANG stocks Facebook (FB), (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL) are looking worse than earlier this year. And, last but not least, economic and earnings growth look weaker going forward.


Dow Jones Futures Today

Dow Jones futures rose 0.5% vs. fair value, signaling solid gains but just a fraction of Monday’s sell-off. S&P 500 futures climbed 0.4%. Nasdaq 100 futures advanced 0.5%. Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular session.

Stock Market

The Dow Jones, S&P 500 index and Nasdaq all undercut their stock market correction lows Monday. The S&P 500 index undercut February’s intraday low, hitting its worst levels in over a year. The Nasdaq composite set a 52-week closing low while the Dow Jones almost did.

Growth stocks were hammered. Software in particularly was hit hard, with Workday (WDAY) plunging back below a buy point after gapping higher on Nov. 30 following strong Workday earnings.

With the major averages hitting new lows and leading stocks and groups plunging, this is an important day to read The Big Picture.

Why Today’s Market Is Worse Than The Early 2018 Stock Market Correction

Here are four reasons why the current stock market is worse than the early 2018 stock market correction:

1. Lower Stock Market Highs, Lower Lows

In the early 2018 stock market correction, the S&P 500 index plunged in late January and early February, then began to rebound in a series of higher highs and higher lows. The Nasdaq composite briefly hit a record high in March, while the Dow Jones just undercut its February lows in April, but there was a broad, very choppy upward trend.

In the current stock market, the pattern is a mirror image. After October lows, the major averages have made a few short-lived rallies with lower highs and lower lows. It’s almost impossible to make money going long in such a market.

2. Stock Market Living Below 200-Day Line

In the current market, the major averages have spent most of their time below the 200-day moving average, which has been a key resistance level. During the early 2018 stock market correction, the 200-day line acted as support. The S&P 500 index just touched its 200-day on Feb. 9, sparking a broad market rebound. The S&P 500 did test its rising 200-day in April, closing below that level one time. But that was it. The Dow Jones tested its 200-day a few times, but didn’t close below that upwardly trending line until July 30. The Nasdaq composite never did.

3. Apple Stock, Microsoft Stock, FANG Stocks Aren’t Leading

Apple stock and the FANGs are such a big share of the stock market that their performance has a big impact on the major averages.

During the late January-early February stock market correction, Apple stock initially sold off more than the S&P 500 index. But its relative strength line, which tracks a stock’s performance vs. the S&P 500 index, began to rally on Feb. 2, a week before the S&P 500 bottomed. Netflix stock barely paused during that stock market correction, while Amazon stock also held up well. Facebook stock and Google stock were weak in February and March but then rebounded from the end of March to late July.

Microsoft undercut its 50-day line a few times in the early 2018 stock market correction, but never came close to its 200-day line. Its relative strength line generally trended higher.

In the current sell-off, FANG stocks have been weak. Facebook, Google and Netflix shares have been laggards since some point in July. Amazon stock has struggled.

Apple stock fared well in October but crashed 20% in November and is down 8% so far in December. Shares are trading at their lowest levels in nearly eight months with its RS line just above recent lows.

Microsoft stock actually has held up relatively well in the current stock market, but fell back below its 200-day line Monday. Its RS line is still near record highs, which is a reflection of the market’s weakness.

4. Economic Growth, Earnings Outlook Weaker

In early 2018, the U.S. economy was about to unleash its best GDP growth in years. Earnings skyrocketed amid a strong economy and big corporate tax cuts. Now the U.S. economy is slowing somewhat, while China and Europe show more weakening. Earnings growth will come back to normal, at best, in 2019.

Another Fed rate hike is expected Wednesday, though that’s no sure thing. It could be the last in a while. That could be a stock market catalyst, but it would reflect weaker economic conditions.


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Originally posted 2019-09-19 23:28:25.


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