Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally had another strong week, moving into a major test.
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A pause in the market would not be a surprise, and may be healthy, after strong price gains on generally light volume over the past few weeks. Investors should be careful about adding more exposure.
Diversified oil giant Exxon Mobil ( XOM ) settles near possible entry points as energy stocks once again take the lead. Costco Wholesale ( COST ) has a mug-handled base, though several key competitors will report this coming week. UnitedHealth ( UNH ) is trading tightly within a buy zone, creating another entry. Apple ( AAPL ) is nearing a breakout as AAPL stock outperforms other mega caps. Microsoft (MSFT) is approaching its 200-day line, which could offer a chance to initiate a position.
China electric car startup Li Auto ( LI ) reported earnings before the open on Monday. LI shares are among the best EV stocks, outperforming giants BYD ( BYDDF ) and Tesla ( TSLA ), but they need to break above their 50-day line. BYD shares are below the 50-day line, while Tesla is just below the 200-day.
UNH stock is IBD’s top pick and was IBD’s Stock of the Day on Friday. MSFT stock is a long-term IBD leader.
The video embedded in this article discusses the week’s market action in depth, while analyzing shares of Exxon Mobil, UnitedHealth, and Apple.
Dow Jones futures today
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD’s experts as they analyze active stocks on IBD Live’s stock market rally
Stock market rallies
The stock market rally closed at weekly highs despite some reversals during the week.
The Dow Jones Industrial Average rose 2.9% in trading last week. The S&P 500 jumped 3.25%. The Nasdaq composite rose 3.1%. The small-cap Russell 2000 jumped 5%.
The 10-year Treasury yield rose 1 basis point to 2.85%, but with some big moves on the week.
U.S. crude futures rose 3.5 percent to $92.09 a barrel last week, despite Friday’s retreat. Gasoline futures jumped 6.7%. Natural gas prices jumped 8.7% for the week.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 2.3% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 3.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) advanced 3%, with MSFT being IGV’s largest holding. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.7%, rebounding from sharp losses after warnings from Nvidia ( NVDA ) and Micron ( MU ).
The SPDR S&P Metals & Mining ETF ( XME ) jumped 8.3% last week. The Global X US Infrastructure Development ETF (PAVE) jumped 4.6%. The US Global Jets ETF (JETS) rose 3.5%. The SPDR S&P Homebuilders ETF (XHB) rose 4%, its eighth straight weekly gain. The Energy Select SPDR ETF (XLE) jumped 7.4%, with XOM shares heavily weighted in the XLE. The Financial Select SPDR ETF (XLF) jumped 5.4%. The Health Care Select Sector SPDR Fund ( XLV ) rose 1.65%, with UNH shares the biggest holdings.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) rose 3.25% last week and the ARK Genomics ETF ( ARKG ) rose 3.8%. Tesla stock is a major holding in Ark Invest’s ETF. Cathie Wood’s Ark also owns some shares of BYD.
The five best Chinese stocks to watch now
Stocks near points of purchase
Shares of XOM rose 6.3% to 93.99 last week, moving back above the 50-day line. Shares of the energy giant have been closing on a trend line since the beginning of June. The official buy point is 105.67, but that would be well above the 50-day line. Volume was light last week and hasn’t been heavy over the past month as Exxon shares have recovered. Earnings growth continues to rise.
Shares of COST were down 0.6% for the past week at 537.21. According to MarketSmith analysis, shares are down with a buy point of 552.81.
Note that smaller competitor BJ’s Wholesale ( BJ ) reports this coming Thursday. Walmart ( WMT ), which owns the Sam’s Club department store chain, is expected to exit Tuesday morning, and Target ( TGT ) reported Wednesday.
Shares of UNH rose 1.6% to 543.70. The health insurance giant is still in the 518.80 cup-handled buy range, still below the April 14 high. UnitedHealth stock didn’t form a three-week tight pattern, it just broke through the weekly moving limit. But investors can still use 545.84 as an alternative buy point.
Apple shares advanced 4.1% to 172.12 last week. It was the sixth straight weekly gain, but all have come on thin volume. On the upside, the relative strength line made several new highs, reflecting the outperformance of AAPL shares against the S&P 500. Apple shares are moving toward a 179.71 double-bottom buy point. Technically, the stock is just reaching the trend line. Ideally, AAPL stock would forge a handle.
Shares of MSFT rose 3.2% to 291.91 but, unlike Apple, are still below their 200-day moving average. A big move above the 200-day line could offer a chance to enter MSFT shares as a long-term leader. The RS line is not far from its 2022 high, even if MSFT shares are well below their late November high of 349.67.
Li Auto Profits
Wall Street expected a net loss of 2 cents per share on $1.4 billion in sales in the second quarter, according to FactSet. That compares with a loss of 1 cent a year earlier on $780.4 million.
Li Auto has been profitable for the past three quarters, but the Covid shutdown affected production and deliveries in Q2. Currently, Li Auto has only one model, the hybrid SUV Li One.
But sales of the premium L9 hybrid SUV have begun, with deliveries due to begin later this month. Pre-orders are strong, with Li Auto forecasting L9 deliveries of 10,000 or more in September.
Shares of LI fell 3.4% to 32.49 last week, creating more space above its 50-day line and extending a downtrend that began in late June that followed a huge run since early May. The stock closed in the upper half of its weekly range. Shares of Li Auto will have a new base with a buy point at 41.59 if they start building to the right side. A strong move above the rising 50-day period could suggest an early entry.
Tesla Vs. BYD: EV giants are now enemies
Tesla and BYD Stock
Tesla shares jumped 4.1% to 900.09 last week. It is back above its 200-day moving average, retracing its 40-week line on Friday. A break above the 200-day line and the August 4 high of 940.82 would suggest an aggressive entry for TSLA stock. The official buy point is 1208.10.
BYD shares fell 0.2% last week to 36.69, trading tight but below the 50-day line. The Chinese electric vehicle and battery giant has a 43.71-point buy base. A decisive move above the 50-day would suggest an early entry.
According to some reports, BYD is supplying Blade batteries to Tesla Berlin. The Blade-powered Model Y should start rolling off the production line in a few weeks. Meanwhile, BYD will begin shipping the Seal sedan, a much cheaper competitor to the Model 3, in the next few weeks. BYD is also starting deliveries of the Atto 3 in Australia in a few days, entering a new market as part of a massive international expansion.
Market Rally Analysis
The stock market rally had a few nasty intraday reversals on Monday and Thursday, but the major indexes ended up with solid gains.
The Dow Jones, S&P 500 and Russell 2000 decisively broke their highs since early June, joining the Nasdaq. The Russell 2000 is just above its 200-day line, with the S&P 500 and Dow Jones close behind. The Nasdaq has a little more work to do to reach this long-term level as it reaches the 13,000 level.
A break above the 200-day line would be evidence that the current uptrend is more than a significant uptick in a bear market. A pause or pullback would not be a surprise after strong advances for the major indexes, largely due to weak volume. The bounce on Friday, an intraday for the S&P 500 and Nasdaq, came on very little volume.
A pause or moderate pullback for a few days or a few weeks can be constructive, but the market is going to do what it’s going to do.
Energy stocks continue to look strong, but will rise or fall with underlying oil and natural gas prices.
A wide range of medical professionals do well. Chipmakers, lithium plays, some steel plays, transportation and others are showing positive action.
Time the Market with IBD’s ETF Market Strategy
What should we do now
As Scott Bennett of Invest with Rules told IBD Live on Friday, investors shouldn’t hit the brakes, but they may want to ease off the gas.
Be cautious about adding exposure in the very short term, as the market’s rally could be extended and face another key area of resistance. Taking partial profits is still a solid strategy and a way to avoid increasing exposure from new purchases.
Still, some quality stocks continue to flash buy or adjust signals. Investors should participate in this market and look for new opportunities. So keep creating those watchlists.
Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and much more.
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