Dow Jones Futures: Market rally stronger than visible; Tesla leads 5 stocks in buyout zones
Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. The stock market rallied last week, with major indices moving above key resistance.
It’s not a sure win, although it’s close. Leading stocks and other indicators point to a market rally that is healthier than the big-cap index alone. While plenty of market challenges remain, investors should add risk gradually and be ready to dive deeper.
Tesla (TSLA) stock, Arista Networks (ANET), Enphase Energy (ENPH), Neurocrine Biosciences (NBIX) and Pure Storage (PSTG) are in or near buy zones. Tesla (TSLA) and ANET stocks are arguably around early entries, while Pure Storage clearly did so on Friday. ENPH shares opened lower on Friday, but recovered after staying above the trendline entry. NBIX stock is also trading well above a trendline.
NBIX stock is on the IBD leaderboard. PSTG stock is on swing trader. TSLA Stock, Arista Networks, Enphase Energy and Pure Storage are at IBD 50. ENPH stock and Arista are also at IBD Big Cap 20.
Videos embedded in the article analyzed the action of the market rally last week and analyzed Tesla, GlobalFoundries (GFS) and PSTG stocks.
dow jones futures today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.
Join IBD experts as they analyze stock market rally actionable stocks on IBD Live
stock market rally
The stock market rally extended recent losses on Tuesday, but then rebounded for strong weekly gains.
The Dow Jones Industrial Average rose 2.7% in last week’s stock market trading. The S&P 500 index rose 3.65%. The Nasdaq Composite jumped 4.1%. The small-cap Russell 2000 rose just over 4%.
The 10-year Treasury yield rose 13 basis points to 3.32%, marking its sixth weekly advance and close to June’s 11-year high of 3.48%.
US crude futures fell during the week to their lowest level since January, but were down just 0.1% at $86.79 a barrel. Natural gas futures fell 9 per cent.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) jumped 2.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2.55%. The iShares Extended Tech-Software Sector ETF (IGV) jumped 5.6%. The VanEck Vector Semiconductor ETF (SMH) was up 4.35%.
The SPDR S&P Metals & Mining ETF (XME) gained 6.1% last week. The Global X US Infrastructure Development ETF (PAVE) jumped 5.1%. The US Global Jets ETF (JETS) rose 5.2%. The SPDR S&P Homebuilders ETF (XHB) gained 4.5%, even as Treasury yields were running higher. The Energy Select SPDR ETF (XLE) gained 0.8% and the Financial Select SPDR ETF (XLF) gained 4.5%. Health Care Select Sector SPDR Fund (XLV) rose 4.4%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) gained 9.9% last week and the ARK Genomics ETF (ARKG) 8.85%. Tesla stock is a major holding in Arch Invest’s ETF.
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stock to watch
Tesla stock rose 10.9% to 299.68 last week, rebounding from its 50-day line to move back above the 200-day moving average. However, the volume was anemic. Investors can probably buy TSLA stock here or above the 300 level, with 314.74 as half-handle entry. The EV giant is still a long way from official buying points.
Tesla has bounced back from COVID restrictions and greatly expanded production capacity. But rivals are also growing rapidly, with Chinese EV makers churning out new models especially in volume and expanding their international presence. It’s definitely going to be an interesting several months in the EV space.
ANET stock rose 6.1% to 124.11 last week, rebounding from the 10-week moving average and retesting the 200-day and 21-day lines, albeit on weaker volumes. Arista Networks stock has a handle buy point of 132.97 from double-bottom basis, but investors can take early entry near current levels. Arista’s earnings and sales growth have accelerated over the past three quarters.
ENPH stock rose 9.5% to 305.70 last week. Shares reclaimed their 21-day line on Tuesday, arguably offering an early entry on a short consolidation that hit new highs after earnings. On Wednesday, Enphase stock was certainly actionable, moving to new highs. On Friday, ENPH stock fell to 294.20 intraday on an analyst downgrade, but bounced off lows after never hitting a trendline entry or hitting its 21-day line.
The relative strength line, aside from Friday’s drop, has hit record highs, as Enphase stock outperformed the S&P 500.
NBIX stock rose 3.4% to 106.51 in the short week, reversing from the 10-week line. Shares cleared a trendline entry on Thursday, then topped it on Friday.
PSTG stock climbed 3.9% for the week to 30.30 after testing its 50-day and 200-day lines. After the August breakout flopped, a new handle was formed with 31.62 buy point. But on Friday, shares broke that handle’s downtrend and moved above the 21-day line, offering an early entry.
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market rally analysis
On Tuesday, the rally of the stock market appeared in its last moments. Major indices started losing their 50-day line after retreating from the 200-day line in mid-August. The Nasdaq Composite undercut eased in late July, but it did not specifically close below that area.
From there, the key averages rebounded.
On Friday, the S&P 500 and the small-cap Russell 2000 reclaimed their 50-day moving averages at the open, joined by the Nasdaq in the afternoon. The Dow Jones briefly cleared its 50-day line, but closed just below that key level.
While the S&P 500 is now holding some position above the 50-day line, it is probably too early to say that the overall market rally has conclusively cleared the crucial test.
One reason is that megacap stocks have a noticeable drag for the big-cap Dow, S&P 500 and Nasdaq Composite, which tends to mask the underlying bullish action.
The NYSE advances crushed the decline 5-1, while the Nasdaq winners beat the losers 5-to-2.
The S&P Midcap 400 reclaimed its 50-day line on Thursday, then retested the 21-day on Friday.
The Invesco S&P 500 Equal Weight ETF (RSP), which weighs no more than megacaps such as Apple (AAPL), Microsoft (MSFT) and Tesla, reclaimed its 50-day line on Wednesday, adding to gains on Thursday. , then on Friday the 21-day line of the rally was confirmed.
To be fair, MegaCaps did well on Friday. Tesla stock posted solid gains while Apple stock and Microsoft moved towards key levels.
Despite ENPH stock withdrawal on Friday, with pollution control and various medical names, solar stocks remain market leaders. But tech stocks like ANET Stock and Pure Storage are also starting to arrive.
Steel names are bouncing back, while retail and restaurants have scattered strength.
Oil and gas names remained stable along with the underlying commodity prices after a fall at the start of the week.
Market rally remains “under pressure”.
It won’t take long for the index to break below the 50-day line and revisit last week’s lows. On the upside, the 200-day moving average remains a major test.
Aside from technical hurdles, Tuesday’s August Consumer Price Index is big. The CPI inflation report likely won’t deter the Federal Reserve from raising 75 basis points for the third straight meeting on September 21. But a similar report could strengthen expectations for slower rate growth later in the year.
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What should we do now
The stock market rally over the past three sessions has made real progress. Investors should probably add some investments by this point.
Investors may be more aggressive if the Nasdaq clears the 50-day moving average decisively, with the index having little room to move before reaching the 200-day moving average.
Create your watchlist. Cast a wide net overall, but definitely focus your attention on actionable or potentially actionable names.
Be flexible in looking for opportunities. If the market rally falters again, be prepared for a more defensive mindset and portfolio changes once again.
Read The Big Picture every day to keep up with the market direction and key stocks and sectors.
Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.
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