What To Do In New Stock Market Correction Ahead Of Fed Meeting

Dow Jones futures rose 120 points after Monday’s stock market rally ahead of the Federal Reserve’s two-day policy meeting. Despite Monday’s gains, the stock market trend is still in a correction following last week’s big market losses.


Stock Market Today

On Monday, the Dow Jones Industrial Average advanced 0.6%, while the S&P 500 rose 0.7%. The tech-heavy Nasdaq composite rallied 0.8%. And the small-cap Russell 2000 also gained 0.8%.

Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved up 0.6%, and SPDR S&P 500 (SPY) climbed 0.8%.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 31019.82 +197.40 +0.64
S&P 500 (0S&P5) 3900.00 +26.67 +0.69
Nasdaq (0NDQC ) 11535.02 +86.62 +0.76
Russell 2000 (IWM) 180.52 +1.53 +0.85
IBD 50 (FFTY) 27.06 +0.10 +0.37
Last Update: 4:28 PM ET 9/19/2022

Key earnings reports this week are coming from Costco (COST), Darden Restaurants (DRI), General Mills (GIS), KB Home (KBH) and Lennar (LEN).

EV giant Tesla (TSLA) rallied 1.9% Monday. Among Dow Jones leaders, Apple (AAPL) traded up 2.5%, while Microsoft (MSFT) lost 0.1% in today’s stock market.

In the market’s current weakness, Continental Resources (CLR), DoubleVerify (DV) and Vertex Pharmaceuticals (VRTX) — as well as Dow Jones stocks Chevron (CVX) and Merck (MRK) — are among the top stocks to watch. Keep in mind that the new stock market correction is a good reason for investors to be mostly, if not entirely, on the sidelines.

DoubleVerify is an IBD Leaderboard stock, but its position size was trimmed during last week’s losses. Tesla was featured in this week’s Stocks Near A Buy Zone column.

Dow Jones Futures Today: Treasury Yields, Oil Prices

Ahead of Tuesday’s open, Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures gained 0.45% and Nasdaq 100 futures traded 0.55% above fair value. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

The 10-year Treasury yield ticked higher to 3.49% Monday, topping the 11-year high of 3.48% set on June 14. Meanwhile, U.S. oil prices reversed from sharp losses to move modestly higher Monday, as West Texas Intermediate futures traded above $85 a barrel.

Fed Meeting To Kick Off

The Federal Reserve’s two-day meeting will kick off Tuesday, with an interest-rate decision on Wednesday. Markets show an 82% chance the central bank will raise rates by 75 basis points and an 18% chance of a 100-basis-point hike.

Investors will be looking for hints at the pace of future rate hikes, and how high the central bank will eventually go.

What To Do In The Stock Market Correction

After last week’s big losses, IBD downgraded its market trend from “uptrend under pressure” to “market in correction.” That means that investors should be mostly, if not entirely, in cash.

To prepare for a new stock market rally, investors should be waiting for a follow-through day. When the market is in a correction, look for at least one major index to attempt a bottom. The first day the index closes higher counts as Day 1 of its attempted rally. (Monday is Day 1 of rally attempt). The action on Day 2 and Day 3 is irrelevant as long as the index doesn’t undercut its latest low. If that low is undercut, the rally try is done and the market needs to try again.

On Day 4 and later, you are looking for the Nasdaq or S&P 500 to rise sharply in higher volume than the previous session. That’s a follow-through day. It gives investors the green light to start buying leading stocks breaking out past correct buy points. It should put your portfolio and mindset in sync with the stock market action by gradually committing capital to leading stocks.

While you’re waiting for a new uptrend, build a watchlist of potential market leaders by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, the RS line angles upward. If a stock lags the broad market, the line will point lower.

Friday’s The Big Picture column commented, “Since getting turned away near its 200-day moving average, the Nasdaq has swan-dived below all its main moving averages. It is now down nearly 28% so far in 2022.”

If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth-stock lists, such as Leaderboard and SwingTrader.

Investors also can create watchlists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Five Dow Jones Stocks To Watch Now

Dow Jones Stocks To Watch: Chevron, Merck

Dow Jones stock Chevron is building a cup with handle that has a 166.93 buy point, according to IBD MarketSmith chart analysis, amid a strong performance by energy stocks so far this year. The stock was up 0.3% Monday, finding much-needed support at its 50-day line.

CVX stock shows a strong 97 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

Drug giant Merck is also fighting the stock market downtrend. Shares are building a flat base that has a 95.82 buy point. But MRK stock is stuck below its 50-day line. Merck shares lost 1.2% Monday.

4 Top Growth Stocks To Watch In The Current Stock Market Correction

Top Stocks To Watch: Continental, DoubleVerify, Vertex

Oil explorer and producer Continental Resources is building a cup with handle with a 72.80 buy point, according to IBD MarketSmith chart analysis. The relative strength line hit a recent high last week but remains a bit off its 52-week high. CLR shares rose 0.6% Monday.

IBD Leaderboard stock DoubleVerify is still below its 28.07 buy point in a bottoming base despite Monday’s 0.55% rise. While the stock’s breakout attempt is faltering, it did find support around its 50-day line.

Vertex Pharmaceuticals is back below its 50-day line following Monday’s 1.6% loss. The stock has been holding up well during the ongoing market weakness, as indicated by an RS line that is approaching new highs. There is no new base yet, but the stock’s resilience makes it a top idea to watch.

Join IBD experts as they analyze leading stocks in the current stock market correction on IBD Live

Tesla Stock

Tesla stock rallied 1.9% Monday, rebounding from Friday’s slight loss. Shares are approaching short base’s 314.74 buy point. Meanwhile, keep an eye out for additional buy points if the stock is able to climb further up the right side of its larger consolidation, which spans back to January.

Bullishly, the stock’s RS line is at its highest level since early April. Shares are about 25% off their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares climbed 2.5% Monday, ending a two-day losing streak and recovering a portion of last week’s losses. Last week, the stock closed at its lowest level since July 18.

Microsoft lost 0.1% Monday, slashing losses after hitting a new 52-week low. The software giant is about 30% off its 52-week high.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.


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MarketSmith: Research, Charts, Data And Coaching All In One Place

How To Research Growth Stocks: Why This IBD Tool Simplifies The Search For Top Stocks


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