Dow Jones Futures: Why This Correction Is More Dangerous Than A Bear Market

Dow Jones futures fell solidly late Monday, along with S&P 500 futures and Nasdaq futures, as Asian trading got underway. A fitful rally attempt continues in an ongoing stock market correction. In Monday’s mixed trading, a number of top stocks regained their 50-day moving averages, including Apple (AAPL), Abbott Laboratories (ABT) and TJX (TJX). But others fell below that key support level, such as UnitedHealth (UNH), Amgen (AMGN), American Express (AXP) and HCA Healthcare (HCA).


Meanwhile, other stocks that rebounded Monday, such as Advanced Micro Devices (AMD), are well off Friday’s close or especially last Tuesday’s peak.

Dow Jones Futures Today

Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures sank 0.4%. Nasdaq 100 futures retreated nearly 0.3%. U.S. futures retreated as Asian markets opened. Japan’s Nikkei fell 1.2% in early Tuesday trading. The Shanghai composite, which jumped 4.1% Monday and helped buoy U.S.-listed Chinese stocks, was not yet open.

Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular session. That can be especially true in a stock market correction, when volatility is higher.

In Monday’s session, the Nasdaq composite rose 0.3% but found resistance at its 200-day moving average. The S&P 500 index slid 0.4%, falling further below its long-term trend line. The Dow Jones retreated 0.5%.

Stock Market Correction: Hope Doesn’t Float

Stock market corrections like the one currently underway can be more dangerous than a more severe pullback or full-blown bear market. Why? At least with a much larger, sustained market correction, investors realize the odds are overwhelmingly stacked against them.

But in situations like the current stock market correction, investors still have hope.

To use an analogy, you’re not going to go sailing into a hurricane. But if it’s overcast and just raining a little, perhaps you’d venture out into the open seas, putting yourself at risk.

Apple Stock

After a sharp sell-off in early October, stocks have come back a little, though there’s been no follow-through day to confirm a new uptrend. Every day, some growth stocks make some promising moves. Apple stock rallied back above its 50-day Monday. Apple’s relative strength line, which tracks a stock’s performance vs. the S&P 500 index, is right at record highs.

UnitedHealth Stock

But other growth plays slumped in Monday’s stock market trading. UnitedHealth, like Apple a Dow Jones component, dropped below its key 50-day line. That’s after the health insurance giant hit a record high Oct. 16 on strong earnings.

Remember: In a choppy market, stocks are likely to swing up and down but not make much overall progress. If you try to jump into a stock that appears to be making a positive move, such as UnitedHealth or AMD did last Tuesday, you might be buying near a short-term top and soon be sitting on losses.

It’s far better to wait for a sustained uptrend. When you buy a top stock breaking out of a base in a confirmed rally, you’re not buying at the bottom. But the odds are high that the stock will rise — a lot.


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Originally posted 2019-09-19 23:23:22.


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