Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The major indexes fell solidly in the past week, capping a terrible September. The S&P 500 index and Dow Jones are at bear market lows, with the Nasdaq on the verge of doing so. Treasury yields backed off from 4%, but extended their weekly win streak.
Investors should be extremely cautious in the current environment, as the bear market appears to be starting a third leg down.
Tesla AI Day: Optimus Robot Not-Yet Prime
Tesla (TSLA) is in focus over the weekend. Friday night, Tesla unveiled a prototype of the Optimus robot, showing limb movement and hands that can grasp. But it’s unable to walk yet, indicating that Tesla Optimus is many years behind what other robotics firms can do. Tesla spent time discussing the Optimus mechanics and software.
CEO Elon Musk has said Optimus could eventually replace factory workers. Many experts say a useful, general-purpose humanoid robot is decades away from reality.
AI Day, which Musk said is primarily about recruiting staff, also showed off features related to driver-assist software and more. Tesla’s Full Self-Driving system, despite its name, is a Level 2 driver-assist system.
On Saturday or Sunday, the EV giant will likely release third-quarter production and delivery data. Tesla deliveries will hit a record easily, but there are concerns about China demand.
Li Auto (LI) early Saturday local time reported September deliveries that were solidly better than its recently lowered forecast. Fellow Tesla rivals Nio (NIO), and Xpeng (XPEV) will report September deliveries on Saturday as well.
Nio stock, BYD, Li Auto and Xpeng all are struggling. Tesla stock looks better, but has hit resistance at its 50-day and 200-day moving averages.
Along with Tesla stock, Arista Networks (ANET), Enphase Energy (ENPH), On Semiconductor (ON) and Celsius Holdings (CELH) all have relative strength lines at or near highs, but with the stocks trading below their 50-day lines. But, there is an upside to that technical flaw.
The video embedded in the article discussed the bear market action in depth, while also analyzing Arista Networks, Wolfspeed (WOLF) and Tesla stock.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Last Week
The major indexes tried to bounce at various points this past week, but ultimately fell solidly for the week, right at bear market lows.
The Dow Jones Industrial Average skidded 2.9% in last week’s stock market trading. The S&P 500 index also retreated 2.9%. The Nasdaq composite lost 2.7%. The small-cap Russell 2000 gave up 1.4%. For September, the Dow lost 8.8%, the S&P 500 9.3%, the Nasdaq 10.5% and the Russell 2000 10.1%.
The 10-year Treasury yield rose 11 basis points in the past week to 3.81%. The yield backed off after topping 4% early Wednesday morning, but rebounded from Friday’s lows. The 10-year Treasury yield has risen for nine straight weeks.
U.S. crude oil futures rose 1% to $79.49 a barrel in the past week, even with Friday’s 2.1% loss.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.45% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.7%. The VanEck Vectors Semiconductor ETF (SMH) slumped 3.8%.
SPDR S&P Metals & Mining ETF (XME) rose 2.2% last week. The Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.9%. U.S. Global Jets ETF (JETS) descended 2.9%. SPDR S&P Homebuilders ETF (XHB) gave up 1.2%. The Energy Select SPDR ETF (XLE) rose 2.2% while the Financial Select SPDR ETF (XLF) declined 2.2%. The Health Care Select Sector SPDR Fund (XLV) gave up 1.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.3% last week, closing near weekly lows. ARK Genomics ETF (ARKG) rose 2.2%. TSLA stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD stock.
China EV Sales
Li Auto reported September deliveries of 11,531. Li Auto had warned recently, signaling that September deliveries would be about 10,500.
In its first full month, L9 SUV hybrid deliveries jumped to 10,123. The soon-to-end Li One accounted for the rest. The L8, a scaled-down L9, will begin deliveries in November. Li Auto on Sept. 30 also began presales of another hybrid SUV, the L7.
Nio now has three new EVs released in 2022, the luxury ET7, the ES7 SUV and the ET5 sedan. The ET5, a Model 3 rival, just began deliveries on Sept. 30. With new models and a Europe expansion, Nio expects record deliveries in every month of the fourth quarter.
Xpeng is struggling a bit with less-than-fresh lineup. Its G9 SUV will begin deliveries in Q4.
BYD will likely report yet another month of record sales, with Q3 deliveries well above 500,000. That will increase its lead over Tesla, though BYD’s sales are roughly split between full-electric “BEVs” and plug-in hybrids. BYD has entered Australia, New Zealand, Singapore and India in the past several weeks, with deliveries starting Europe and several new Asian nations in the next few months. The automaker also keeps adding new models, beginning deliveries of the Model 3 rival Seal in late August.
China EV Stocks
Nio stock fell 10.6% this past week to 15.77, hitting a four-month low after hitting resistance at the 200-day line on Sept. 30. LI stock, a huge winner from early May to late June, has plunged to four-month lows as well, down 8% last week. XPEV stock lost 12.8% last week to fresh record lows.
BYD stock has struggled ever since Warren Buffett’s Berkshire Hathaway (BRKB) sold a sliver of its longtime holdings. BYDDF sank 6.25% in the past week, hitting six-month lows.
After Friday night’s AI Day that may or may not have big news, Tesla will likely release Q3 delivery figures over the weekend. Analysts expect to see somewhere around 355,000-365,000 vehicles. That would easily be a record and a big gain from the shutdown-hit Q2.
But it’s a relatively modest increase from the end of 2021, given that Tesla has added two new plants in Berlin and Austin and ramped up capacity at its huge Shanghai facility.
There are signs of weaker China demand, or at least demand not keeping up with a newly expanded Shanghai plant. It’s possible that Tesla will lower China vehicle prices somewhat in October. Keep in mind that Q4 production should be much higher than in Q3, especially for the broader Eurasian market, so demand will need to ramp up as well.
The China EV market is incredibly competitive, and only growing more so.
Tesla stock hit resistance at its 50-day line on Wednesday, tumbling to undercut recent lows Friday. Shares fell 3.7% to 265.25 for the week. TSLA stock’s bottoming base now has a double-bottom pattern, with a 313.90 buy point.
Stocks To Watch
ANET stock is working on a base within a long consolidation, with a possible 132.97 buy point. There’s a trendline entry that’s currently slightly above the 50-day and 200-day lines, but for now it’s hitting resistance at a sliding 21-day average. Still, Arista stock rose 2.7% to 112.89 for the week. The RS line is at a record high.
ENPH stock dipped 0.7% to 277.47 last week, trading around its fast-rising 50-day line, closing below it on Friday. The solar power leader arguably could have an entry from a decisive move above its 50-day and 21-day lines, though a longer pause would be helpful.
CELH stock broke hard below its 50-day line on Sept. 22. The ongoing recovery has been lackluster in terms of price and volume, but the energy drink maker did climb 2.4% for the week. A decisive move above the 50-day line would likely coincide with a downward-sloping trendline, offering an early entry in an emerging new consolidation.
ON stock also decisively broke its 50-day on Sept. 22, and hasn’t made much of a bounce since, falling 1.55% last week. The EV-focused chipmaker could have an early entry from reclaiming the 50-day line and a trendline.
All of these stocks, including Tesla, need to get back above their 50-day lines. But that’s actually a positive in the current bear market. If Onsemi stock and these others are going to make that charge above key resistance, the overall market will likely need to show some more strength.
There are a few stocks that are actionable now, such as Vertex Pharmaceuticals (VRTX), but that’s without any clear signs of a market bottom.
Stock Market Analysis
The bear market didn’t plunge as it did in the prior two weeks, but the major indexes fell solidly once again, with much of the decline coming Friday. The S&P 500 and Dow Jones have broken below their June lows, doing so again Friday. The Nasdaq and Russell 2000 have yet to undercut their bear market lows, but are getting very close. The Nasdaq 100 did undercut its June lows on Friday, with Apple (AAPL) and Tesla stock among the many big-cap drags.
Bulls tried to put up a fight several times during the week, but rebounds quickly fizzled. Wednesday’s strong gains were quickly erased the next session.
The Nasdaq tried to bounce again Friday, rising almost 1.4% at session highs, before reversing lower. It’s not a coincidence that Friday’s bounce fizzled as the 10-year Treasury yield erased early losses and reversed higher.
None of the major indexes even touched their 10-day moving averages this past week, let alone blasting above more-significant levels. It’s hard to see the market making a serious rebound with Treasury yields trending higher. And yields will likely trend higher as long as the Federal Reserve is raising rates aggressively.
In addition to the hawkish Fed, rising Treasury yields and soaring dollar, investors have to watch out for earnings disappointments amid a very tough business environment. Nike (NKE) and Carnival Corp. (CCL) are just the latest examples, with earnings season starting in just a couple of weeks.
Bottom line, the bear market appears to be in the process of starting a third leg down. If so, the next logical support area might be the February 2020 pre-Covid high.
What To Do Now
The bear market is right at lows. Investors should be all or nearly all in cash right now. If you want to nibble on some stocks flashing buy signals, keep the positions small and be ready to take quick profits.
Build up your watchlists so you’ll be ready to jump into the big winners in the next true bull market. Focus on relative strength leaders. Many, such as Arista Networks, Enphase and Tesla, may be below their 50-day lines.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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