Resilient market rally, but the fight continues

Resilient market rally, but the fight continues

Futures on the Dow Jones will open on Sunday evening, along with futures on the S&P 500 and Nasdaq.


The stock market rally has shown strength and resilience over the past week. Major indexes soared on Wednesday in a bullish reaction to Fed Chief Jerome Powell’s speech, with the S&P 500 resuming its 200-day moving average. On Friday, the S&P 500 tested and held that key level for a second straight session, despite a hot jobs report.

Investors could gradually increase their exposure, but the 200-day line is still in play. Don’t get too aggressive until there is a decisive breakout from this long-term level.

Dow Jones Giant Boeing (BA), lithium giant (m²), Dexcom (DXCM), Energy Cheniere (LNG) and the Invesco Solar ETF (TAN) are all close to buy points. Boeing, Dexcom, SQM stocks and the TAN ETF — which includes First Solar (FSLR), Enphase Energy (ENPH) and many other big names – are now workable. The LNG stock has a new flat base.

Chip Giants Taiwan semiconductor (TSM) and Nvidia (NVDA) have rallied strongly over the past few weeks, approaching their 200-day moving averages. Shares of Taiwan Semi and Nvidia back above the 200-day lines would not offer buying opportunities, but would be a positive sign for tech and the overall market recovery. Chips almost always participate in the latest uptrends in the market, given their heft in the market and their key role in so many industries.

Enphase and DXCM stocks are on the IBD ranking. BA stock is on SwingTrader. ENPH stock is on the IBD 50. ETF TAN was the IBD stock of the day on Friday.

Earnings season is finally softening, while the economic calendar is less intense in the coming week. But on Sunday, OPEC+ will meet, with the oil cartel and its key allies considering another production cut.

Dow Jones Futures Today

Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.

Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live

Stock market rally

The stock market rally had a good week. Index gains were modest to solid, but found support and moved past key resistance.

The Dow Jones Industrial Average edged up 0.2% in stock trading last week. The S&P 500 index climbed 1.1%. The Nasdaq composite jumped 2.1%. The Small Cap Russell 2000 1.3%.

The 10-year Treasury yield plunged 18 basis points to 3.51%, the lowest since late September. The yield at 10 rebounded on Friday with the strong jobs report, but eventually closed slightly lower on the day.

U.S. crude oil futures rose 4.9% to $79.98 a barrel last week, but fell back below $80 on Friday. Natural gas plunged more than 14%.


Among the best ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) gained 2%.

ETF VanEck Vectors Semiconductor (SMH) climbed 1.1% last week, but fell back below its 200-day line on Friday. Both TSM stock and Nvidia are major components. Taiwan Semi edged up 0.1% for the week. Nvidia stock rose 3.7%.

The SPDR S&P Metals & Mining (XME) ETF jumped 4.4%% last week to the best level in nearly six months. The Global X US Infrastructure Development ETF (PAVE) climbed 1%. The US Global Jets (JETS) ETF rose. 0.7%. The SPDR S&P Homebuilders ETF (XHB) rose 0.9%. ETF Energy Select SPDR (XLE) fell 1.7% and ETF Financial Select SPDR (XLF) 1.7%. The SPDR healthcare sector fund (XLV) gained 1.9%, approaching a record high. DXCM stock is an XLV component.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) rebounded 6% last week and ARK Genomics ETF (ARKG) 4%.

Five best Chinese stocks to watch now

Stocks close to buy points

Boeing stock rose 2.5% to 182.87 for the week. Boeing jumped 4% on Friday, according to a Wall Street Journal report that United Airlines (UAL) is about to buy “tens” of 787 Dreamliner jets. BA stock is just beyond the 5% hunting zone of a buy point of 173.95 cups, but investors could look to clearing recent levels as an alternative entry.

SQM stock was down 7.8% at 99.85 last week, rebounding near its 200-day line and recovering its 50-day. While the lithium giant has an official buy point of 112.45 cups with handle, an early entry around current levels might be safer.

DXCM stock rebounded from its 21-day line last week, breaking the downtrend of a short-term consolidation to offer early entry. Shares closed 5.5% higher at 118.11, still relatively close to its 21-day line, with its 10-week line to catch up. Dexcom stock is now flat on a weekly chart with a buy point of 123.46, according to MarketSmith analysis. This flat base could be considered a handle for a deep cup dating back to early April.

LNG stock edged up nearly 1% to 174.72, finding support at its 50-day line. Stocks have been up for three straight weeks, but on anemic volume, which isn’t great. On a weekly chart, Cheniere Energy now has a flat base with a buy point of 182.45, just off a cup base with failing handle. LNG stock may have an early entry above Thursday’s high of 178.12, which matches some key recent trading levels.

The Invesco Solar ETF is in the range of a buy point of 83.20 cup with handle, climbing 1.5% to 83.76 for the week. FSLR stock and Enphase are the clear leaders, but the whole bunch is bouncing back again. TAN is a bit less volatile than individual solar stocks, but can still make big moves.

Market rally analysis

The stock market rally had an impressive week, although the lagging Nasdaq was the only major index with a strong gain.

On Wednesday, Fed Chief Powell broadly reiterated expectations of a slowdown in rate hikes, but no quick end to the tightening. But major indices jumped on the day, with the S&P 500 resuming its 200-day line for the first time since early April.

A damaging market sell-off wouldn’t have come as a shock on Friday given the hot jobs report and Wednesday’s big move. But the indices closed narrowly mixed. The S&P 500 pared its losses and held support at its 200-day line. The Russell 2000, which also moved back above its 200-day line on Wednesday, quickly rebounded from a 200-day test on Friday to close higher

The Nasdaq bounced around its 50-day moving average mid-week to hit two-month highs. The Dow Jones, which led the market rally, rose slightly, just to seven-month highs.

Still, the S&P 500 has yet to decisively cross its 200-day line and is just sitting on a trendline of falling highs.

At the end of March, the S&P 500 looked well above its 200 days. But the Nasdaq hit resistance at its 200-day line, falling back and dragging the other indices lower.

Today, the Nasdaq has some way to go before it hits its 200-day average, but this will also serve as a big test. This is yet another reason investors will want to see shares of Taiwan Semiconductor and NVDA clear their 200-day lines, even though TSM stock is listed on the NYSE.

Yet, while some chip names are leading and others are gaining momentum, semiconductors and technologies as a whole are not leading the current market rally.

Industrial, infrastructure, solar, financial and medical groups are among those doing well.

Time the Market with IBD’s ETF Market Strategy

What to do now

The stock market rally continues to perform well, coming out on top after a big week of Fed-related news.

But the uptrend is unclear as the S&P 500 is still very active.

Investors can gradually add exposure here, although sticking to current holdings remains a solid strategy. If this market rally ends up having real legs, you’ll have plenty of time to fully invest yourself.

Either way, be prepared to evolve if conditions change. Taking partial profits relatively quickly still makes a lot of sense.

When researching possible purchases, keep looking for the first few entries. With individual stocks, sectors and the overall market always subject to wild swings, buying on too much strength has often meant buying near a short-term high.

Keep working on your watchlists. Look beyond traditional tech growth names, which are still lagging behind overall.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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