The market rally is resilient, but this battle continues; what to do now

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




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

Investors could increase exposure incrementally, but the 200-day line is still in play. Don’t get too aggressive until there is a decisive clearing of that level in the long run.

Giant Dow Jones boeing (BA), lithium giant SQM (SQM), Dexcom (DXCM), Cheni̬re energy (LNG) and Invesco Solar ETF (TAN) are all close buy points. Boeing, Dexcom, SQM shares and TAN ETFs, which includes Prime Solar (FSRL), Emphasis Energy (ENPH) and many other important names Рare now usable. LNG stock has a new flat basis.

Chip giants Taiwan semiconductor (TSM) and Nvidia (NVDA) have rallied sharply in recent weeks, approaching their 200-day moving averages. Taiwan Semi and Nvidia stocks returning above the 200 day lines would present no buying opportunities, but would be a positive sign for tech stocks and the overall market rally. Chips almost always participate in the latest uptrends in the market, given their weight in the market and their key role in so many industries.

Enphase and DXCM stock are on the IBD chart. BA shares are on SwingTrader. ENPH stock is on the IBD 50. ETF TAN was the day’s IBD stock on Friday.

Earnings season is finally easing, while the economic calendar is less intense in the coming week. But OPEC+ meets on Sunday, with the oil cartel and key allies mulling 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 in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.


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


Stock market rebound

The stock market rally has had a strong week. The indices’ gains were modest to solid, but they found support and broke through key resistance.

The Dow Jones Industrial Average rose 0.2% in stock trading last week. The S&P 500 index rose 1.1%. The Nasdaq composite jumped 2.1%. The small-cap Russell 2000 1.3%.

The yield on the 10-year Treasury fell 18 basis points to 3.51%, the lowest since the end of September. The 10 yield rebounded on Friday on the strong jobs report but ultimately closed slightly lower that day

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

ETFs

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

The VanEck Vector Semiconductor (SMH) ETF was up 1.1% last week, but dipped below the 200-day line on Friday. Stock TSM and Nvidia are both major components. Taiwan Semi rose 0.1% for the week. Nvidia shares rose 3.7%.

The SPDR S&P Metals & Mining (XME) ETF jumped 4.4%% last week to its best level in nearly six months. The Global X US Infrastructure Development (PAVE) ETF was up 1%. The US Global Jets ETF (JETS) was up. 0.7%. SPDR S&P Homebuilders ETF (XHB) advanced 0.9%. The Energy Select SPDR ETF (XLE) was down 1.7% and the Financial Select SPDR ETF (XLF) was down 1.7%. The Health Care Select Sector SPDR Fund (XLV) advanced 1.9%, approaching a record high. DXCM stock is an XLV component.

Reflecting the stock’s more speculative stories, ARK Innovation ETF (ARKK) rebounded 6% last week and ARK Genomics ETF (ARKG) rebounded 4%.


Five top Chinese stocks to watch now


Actions near purchase points

Boeing shares rose 2.5% to 182.87 for the week. Boeing lost 4% on Friday, according to a Wall Street Journal report United Airlines (UAL) is close to purchasing “dozens” of 787 Dreamliner jets. BA stock is just beyond the 5% chase zone of a 173.95 cup base buy point, but investors could consider offsetting recent levels as an alternative entry.

SQM stock moved 7.8% to 99.85 last week, bouncing near its 200-day line and recouping its 50-day line. While the lithium giant has an official buy point of 112.45 cups with a handle, an early entry around current levels may be safer.

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

LNG inventories rose nearly 1% to 174.72, finding support at the 50-day line. The stock has rallied for three straight weeks, but on anemic volume, which isn’t great. On a weekly chart, Cheniere Energy now has flat base with a buy point of 182.45, right next to a failed cup-and-handle base. LNG stock could 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 one buy point range of 83.20 cups with a handle, rising 1.5% to 83.76 for the week. FSLR stock and Enphase are the clear leaders, but the group as a whole is once again on the upswing. The TAN is a little less volatile than individual solar stocks, but can still make big moves.

Analysis of market rallies

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

On Wednesday, Fed Chief Powell largely reiterated expectations of slower rate hikes, but no quick end to the tightening. But the major indexes jumped that day, with the S&P 500 recovering its 200-day line for the first time since early April.

A damaging market sell-off wouldn’t have been shocking on Friday, given Wednesday’s hot jobs report and big move. But the indices finished slightly mixed. The S&P 500 has cut 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 rebounded around its midweek 50-day moving average to hit two-month highs. The Dow Jones, which led the market rally, moved higher, right to a seven-month high.

However, the S&P 500 has not yet permanently cleared its 200-day line and is right on a declining trendline.

At the end of March, the S&P 500 appeared to be well above its 200 days. But the Nasdaq met resistance at its 200-day line, pulling back and dragging the other indices lower.

Today, the Nasdaq is some distance short of hitting its 200-day average, but that too will serve as a big test. That’s another reason investors will want to see Taiwan Semiconductor and NVDA stocks cancel their 200-day lines, even though TSM stock is listed on the NYSE.

However, while some chip names have been leading and others are setting in, semiconductors and technologies in general aren’t 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 equity market rally continues to play well after a big week of Fed-related news.

But the uptrend is unclear, with the S&P 500 still very much in play.

Investors can gradually increase exposure here, although keeping up with current holdings remains a solid strategy. If this market rally ends up having real legs, you will have plenty of time to fully invest.

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

When researching possible purchases, keep looking for anticipated entries. With individual stocks, sectors and the broader market still prone to big swings, buying too hard has often meant buying near a short-term high.

Keep working on your watchlists. Look beyond traditional tech growth names, which by and large remain laggards.

Read The Big Picture daily to stay abreast of 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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