Dow Jones futures will open Sunday night with S&P 500 and Nasdaq futures.
The stock rally got off to a roller coaster ride last week, with volatile daily action ending where it started. The Dow Jones, S&P 500 and Nasdaq composite closed with fractional losses while the small-cap Russell 2000 edged higher.
The market rally will likely be inspired by a deluge of earnings reports next week. You’re here (TSLA) kicks off earnings Monday, with Google parent Alphabet (GOOGL), Microsoft (MSFT), Apple (AAPL), Facebook (FB) and Amazon.com (AMZN) also expected this week.
These earnings reports alone have a big impact on the stock rally. All six stocks are on the S&P 500 and Nasdaq, with Apple and Microsoft stocks on the Dow Jones Industrial Average.
Apple stock has a market cap of $ 2.25 trillion, with Microsoft, Amazon, and Google each worth over $ 1.5 trillion. In total, these six stocks have a market capitalization of just over $ 9 trillion. In addition, their results will have major implications for competitors, customers and suppliers.
Tesla stock has a mug purchase point with handle. Amazon’s stock also formed a handful in a long consolidation. The Facebook stock is just above an initial buying point, although it also has alternate entries. Apple and Google stocks have tight models, though it’s unclear whether either is exploitable. MSFT stock is consolidating at record levels.
Microsoft stocks are listed on the IBD Rankings and IBD Long Term Leaders. Google’s stock is on Big Cap 20.
Dow Jones Futures today
Dow Jones futures will open at 6 p.m. ET on Sunday, as will S&P 500 and Nasdaq 100 futures.
Keep in mind that overnight action on Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks during the stock market rally on IBD Live.
Coronavirus cases around the world have reached 146.67 million. Covid-19 deaths have exceeded 3.10 million.
Coronavirus cases in the United States have reached 32.74 million, with deaths exceeding 585,000.
The United States will resume Johnson & johnson (JNJ) coronavirus vaccines and shipments after a CDC advisory committee concluded Friday that the benefits outweigh the risks. About fifteen women under the age of 50 have developed a very rare but serious blood clotting problem from the single-dose J&J vaccine.
Stock market rally last week
The stock rally had its ups and downs, but ended with minimal weekly changes.
The Dow Jones Industrial Average plunged 0.5% in equity trading last week. The S&P 500 Index edged down 0.1%. The Nasdaq composite lost 0.25%. The Russell 2000 wins 0.5%
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.6%, rebounding from strong losses during the week, while the Innovator IBD Breakout Opportunities (BOUT) ETF gained 1.2 %. The iShares Expanded Tech-Software Sector (IGV) ETF fell 0.7%, although the MSFT stock of the top components edged up. The VanEck Vectors Semiconductor ETF (SMH) fell 1.3%.
The SPDR S&P Metals & Mining ETF (XME) fell 0.4% and the Global X US Infrastructure Development ETF (PAVE) climbed just over 1%. US Global Jets ETF (JETS) fell 1.9%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) slipped 0.55% and ARK Genomics ETF (ARKG) climbed 1%. The Tesla share is the number 1 ETF of ARK Investments.
Five stocks near buying points for an unusual market
Tesla stock fell 1.4% to 729.40 last week, but found support at its 21 and 50 day lines. The electric vehicle giant now has a point of purchase for handles 780.89.
However, the middle of the grip is just above the middle of the deep, jagged base. The 50-day moving average continues to decline. Tesla’s line of relative strength is not far from recent lows. The RS line, the blue line in the charts provided, tracks a stock’s performance against the S&P 500 Index.
Tesla will be the first electric vehicle maker and the first notable automaker to report on the current earnings cycle. Ford (F) and China EV rival Nio (NIO) report later in the week.
Microsoft’s revenues are due Tuesday night. MSFT stock edged up 0.2% to 261.15 last week, ending Friday at a record close. That’s just above the 5% pursuit zone from a buy point of 246.23.
Microsoft, with ServiceNow (NOW), which is also close to a point of purchase with revenue at the helm next week, will provide insight into demand for software. Tech giant Dow will also offer clues about PC demand. But Microsoft’s growth has been i
n the cloud, with its Azure unit giving a good image, with Amazon Web Services and Google Cloud, of the growth of cloud computing services.
Google’s revenue is also late on Tuesday. GOOGL stock rose 0.75% to 2,299.33 last week. Friday’s 2.1% gain pushed stocks to an all-time high, slightly extended from a previous base. Google’s stock technically now has a tight three-week pattern with a buy point of 2,306.22, but it’s just above Friday’s high. Along with the increase in revenue, Google stock doesn’t seem to offer a safe entry right now.
Google’s results will reveal the strength of online advertising, both in search and on YouTube.
Facebook revenues are due Wednesday night. FB stock fell 1.65% to 301.13, its second consecutive weekly decline. But it rose 1.55% to 301.13, coming back above its 21-day line and buy point of 299.81 after a handful of consolidation dating back to late August. Investors might consider 315.98 as an alternate entry. Investors could also use a breakout of a downtrend line as an aggressive entry.
Apple’s earnings are also available Wednesday night. Apple stock rose 0.1% to 134.32 last week, with Friday’s 1.8% gain canceling out a week on the decline and a potential handful on a weekly chart. AAPL stock might have a grip after Monday’s close, but it would likely be very shallow, shaking a few weak holders. Technically, Apple has a three-week lead time with an entry of 135.63, according to MarketSmith analysis. But tight models are usually best after a breakout, not before.
Apple’s profit and guidance will be essential for iPhone suppliers such as Skyworks (SWKS) and Broadcom (AVGO).
Amazon profits are late Thursday. Amazon’s stock fell 1.7% to 3,340.88. It now has a handle buy point of 3,436.50 on a consolidation dating back to early September. This grip entry is roughly equal with the short-term peak in Amazon stock in early February.
Amazon will offer insight into e-commerce and consumer spending in general. AWS remains the leader in cloud computing, despite the rapid loading of Microsoft Azure.
Analysis of market rallies
The stock rally has had an interesting week. Major indices retreated on Monday and Tuesday, with major stocks posting notable successes. Executives led Wednesday’s rebound. The market reversed lower Thursday on reports that President Biden would go ahead with a plan to nearly double the top tax rate on capital gains. But Friday’s rally brought the indexes back to where they started.
Last week was a good example of why investors should look at the weekly charts to try to put the daily stock in perspective. Admittedly, some stocks from chips and other leaders didn’t look very good on a Wednesday morning weekly chart.
In the end, the week was relatively positive. The Dow Jones and S&P 500 are a little closer to their 50-day moving average, although the S&P 500 at 5.1% is not far from being extended. The Nasdaq is near the top of what looks like a handful just below record highs.
The Russell 2000 is back above its 50 day line. On Friday, it hit its highest level since April 6 and its best close since March 19. Given that major stocks have tended to trade like the Russell 2000 recently – check out the FFTY chart above – this is particularly encouraging.
Preparation of the earnings week
With the biggest week of income at your fingertips, you need to be prepared.
First and foremost: are any of your stocks reporting profits next week. If so, do you have sufficient cushion in these actions? A good rule of thumb is to want a 10% gain in a stock that is heading for profit, or at least 5%. But it depends on market conditions, the company’s earnings history, and your belief in the stock. You can choose to own all of your shares, sell part or all of your stake.
Are key competitors, customers or suppliers reporting their income next week. This could influence your holdings, especially if they have not yet been declared. Apple earnings could tip SWKS stock ahead of earnings the following night.
EV stocks and tech giants signal Fed to meet: investment action plan
The winning season can trigger a number of breakouts. So keep a close eye on the main stocks near buying points with owed profits. Set up alerts and watch out for ones you might buy if strong reports are fueling the stock.
Be ready to act, but don’t rush. Wait at least five minutes after opening, or even the first hour, before buying. Stocks can soar or dive in the open, then reverse quickly.
Finally, if the stocks you own are selling despite seemingly strong earnings, don’t get caught up in trying to explain “why” or insist that the market was wrong. Focus on the “what” – what the stock is doing about profit. Then decide “what” to answer.
Read The Big Picture daily to stay in sync with market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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