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Dow Jones futures will open Sunday night, along with S&P 500 and Nasdaq futures. The stock rally posted modest losses last week, but struggled to find support as Wednesday’s rebound fizzled out on Friday.
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The S&P 500 Index fell below its 50-day moving average. Apple (AAPL) also crossed the 50-day line, but manufacturers, including the Dow Jones caterpillar (CAT), along with miners, steelmakers and materials companies were the big losers.
But growth stocks had a strong week overall. Microsoft (MSFT), unlike its fellow tech titan Apple, has recovered from its 10-week line. The small caps held the key holder.
Oil and gas inventories had a big week, with Devon Energy (DVN) erasing an early entry and flirting with outright escape. Specialty Shoe Games Crocs (CROX), Outdoor Deckers (BRIDGE) and Boot barn (BOOT) rallied, with the latter two potentially leading to action. Mexican Grill Chipotle (CMG) is one of several restaurant chains trying to get back on the investment menu.
Stocks of chips were mixed overall, but Entégris (ENTG) erupted while Advanced micro-systems (AMD) teases a possible entry if the market rally cooperates.
But here is the catch. Will the stock rally find support at current levels, or will the pullback turn into an outright correction?
Microsoft, Devon Energy and Deckers stocks are listed on the IBD rankings. Microsoft and ENTG stocks are among the long-term leaders IBD. Crocs and DECK stocks are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday. The same will apply to S&P 500 futures and Nasdaq 100 xx% futures.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Coronavirus news
Coronavirus cases around the world have reached 228.41 million. Covid-19 deaths have exceeded 4.69 million.
In the United States, coronavirus cases have reached 42.79 million, with more than 690,000 deaths.
Stock exchange rally
The stock rally had a strong midweek but got off to a bad start and ended that way.
The Dow Jones Industrial Average edged down 0.1% in equity trading last week, having already fallen below its 50-day line. The S&P 500 Index fell 0.6%. The Nasdaq composite fell 0.5%, thanks to Friday’s 0.9% decline. The Russell 2000 small cap advanced 0.4%.
Apple stock fell 1.95% last week, almost entirely on Friday, weighing on the Dow Jones, S&P 500 and Nasdaq composite. Microsoft fell on Friday, but still rose 1.4% on the week, giving major indices a boost.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.75% last week, rebounding from notable losses early on. The ETF Innovator IBD Breakout Opportunities (BOUT) lost 0.3%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 0.1%, even with MSFT stock as the main component. The VanEck Vectors Semiconductor (SMH) ETF lost 0.5%, with AMD stock being a major component.
The SPDR S&P Metals & Mining ETF (XME) fell 5.3% and the Global X US Infrastructure Development ETF (PAVE) fell 2.2%. The US Global Jets ETF (JETS) rose 2.4%. The S&P Homebuilders (XHB) SPDR ETF fell 0.85%. The Energy Select SPDR (XLE) ETF jumped 3.2%, with DVN stock as a component. The Financial Select SPDR ETF (XLF) finished just below the breakeven point.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) rose 0.5% and ARK Genomics ETF (ARKG) rose 0.2%, helped by Friday’s gains of 2.1% and 3%, respectively.
Five best Chinese stocks to watch right now
Market rally analysis
Last week’s losses in major indexes were insignificant, but where and how they occurred has been disappointing. On Wednesday, the S&P 500 found support at its 50-day line, exactly where you’d expect it, as the broader equity market rally rebounded. Thursday appeared to show some grain, as indices reduced or erased intraday losses. But Friday’s pullback, with the S&P 500 index closing just below its 50-day line, suggested a possible change in character.
On the positive side, growth stocks performed well overall, with highly valued ARK-like games turning solid over the weekend. The Russell 2000 rebounded from its 200 day line and closed above its 50 day line. These suggest that the stock rally is in better shape than indicated by the S&P 500 and other major indices.
Again, growth and small caps gained ground against small weekly losses for the major indices. If the latter drops significantly below the 50 day line, which is now clearly a risk, then it will be a big challenge for growth names to continue to rise, especially highflips like Reached (UPST) who have done huge races in recent weeks.
Time the market with IBD’s ETF market strategy
What to do now
This is why IBD warned investors to cautiously increase their exposure on Wednesday and Thursday, despite a number of promising buying opportunities. The direction of the short-term market rally was on the move – and still is. Some recent purchases can hold up, while others can feel flimsy.
Investors should again be less aggressive. For investors who reduced their exposure during the pullback and didn’t add much during last week’s short-lived rebound, a wait-and-see approach may make sense. Investors who are fully invested or have made a lot of mid-week purchases may consider cutting spending, cutting losers, and taking partial profits.
Whatever your particular situation, analyze your current holdings and rework your watchlists. Then, develop a game plan for what to do if the market rally strengthens, providing new buying opportunities, or continues to decline.
Stay flexible. With the market rally seemingly at a turning point, you could be bullish in the morning and bearish at the close.
Read The Big Picture every day to stay in tune with the 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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