Dow Jones Futures: Stock Market Rally Passes Inflection Point; Apple, Axon buy flash signals

Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. The stock market rally crossed an inflection point, marking a decisive move last week.

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Investors should buy their positions carefully and not rush to increase exposure.

Apple (AAPL), Exxon Mobil (XOM) and Chevron (CVX) made bullish moves after earnings on Friday. Exxon and CVX stocks offered early entries above their 50-day lines as they moved to the right side of a fair base.

Apple stock became the first megacap to reclaim the 200-day line, while its relative strength line is already at a new high. With earnings risk off the table, investors can use this as a potentially aggressive buy, perhaps a place to initiate a position in AAPL stock.

ON stock crossed the trendline entry on Friday, while its RS line is at new highs. This would usually be a buy signal for this leading chip play. However, Onesemi (ON) earnings are due before Monday’s open, making any new purchases highly risky.

China EV makers Nio (NIO), Xpeng (XPEV) and Li Auto (LI) should report July deliveries before Monday’s opening. China EV and battery giant BYD (BYDDF) is likely to follow in a day or two. All four will be adding capacity and starting deliveries of new models over the next few weeks or months. BYD began selling the sealed sedan with the Tesla Model 3 on Friday.

Exxon, Chevron and Tesla stocks are at IBD 50. The stock IBD Big Cap is at 20. Exxon was Friday’s IBD Stock of the Day. Apple stock and Chevron are Dow Jones constituents.

Video embedded in this article looks at Apple, Exxon Mobil and Vertex Pharmaceuticals (VRTX).

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’s rally at the start of the week fell, amid Walmart (WMT) profit warnings and other concerns. But the major indices rose sharply over the past three days and closed at weekly highs.

The Dow Jones Industrial Average rose 3% in last week’s stock market trading. The S&P 500 index rose 4.3 percent. The Nasdaq Composite jumped 4.7%. The small-cap Russell 2000 jumped 4.25%.

The 10-year Treasury yield fell 14 basis points to 2.64%, its lowest since early April and continues a steep decline from its June 14 peak of 3.48%. The yield curve is inverted from 1-year to 10-year, even the six-month rate (2.89%) is well above the 10-year Treasury yield.

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US crude futures rose 4.1% to $98.62 a barrel last week, up from $101 a barrel at one point on Friday. Front-month oil contracts are still down 6.8% in July.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) jumped 6.1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 4.2%. The iShares Extended Tech-Software Sector ETF (IGV) rose 2.8%. The VanEck Vector Semiconductor ETF (SMH) gained 4.6%.

The SPDR S&P Metals & Mining ETF (XME) gained 10.3% last week, especially as steelmakers stepped up. The Global X US Infrastructure Development ETF (PAVE) jumped 8.5%. The US Global Jets ETF (JETS) rose 2.7%. The SPDR S&P Homebuilders ETF (XHB) climbed 2.9%. The Energy Select SPDR ETF (XLE) jumped 10.2% with XOM stock and Chevron the two major holdings. The Financial Select SPDR ETF (XLF) rose 2.9%. Health Care Select Sector SPDR Fund (XLV) up 2%

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 2.4% last week and the ARK Genomics ETF (ARKG) down 0.3%. Tesla stock is still a major holding in Arch Invest’s ETF. Ark also has some BYD stock and Xpeng.

The five best Chinese stocks to watch right now

China EV Sales

Ahead of Monday’s opening, China EV makers Li Auto, Neo and Xpeng will release July deliveries. There are reports that sales of EVs and hybrids cooled somewhat in July after the new subsidies and the end of the lockdown last month saw a huge jump in sales.

All three are aggressively expanding capacity. Xpeng, which doubled annual production capacity to 200,000 earlier this year, will reach 400,000 by the end of the year, or 600,000 with a double shift. But the EV maker is reportedly offering discounts to boost sales. Is this a sign of weak vehicle pricing for China’s EV market in the coming months?

A new EV SUV later this year could fuel the demand for Xpeng. Nio is adding two new models in the third quarter, while Li Auto will start deliveries of its premium L9 hybrid SUV in late August.

All three stocks have fallen sharply since the end of June. LI stock had hit a 52-week high, so its pullback to the 50-day line looks healthy. In another week, Le Auto will have a new base. Nio stock and Xpeng fell back from their 200-day lines, with XPEV stock decisively even below their 50-day lines.

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Li Auto narrowed losses on Friday to maintain its 50-day line. Nio and Xpeng turned higher, with Nio stock moving above its 50-day line.

As reported Friday, a government council confirmed that EV and plug-in hybrid vehicles will be exempt from auto purchase tax next year.

EV giant BYD likely reports July sales on a Tuesday or Wednesday. BYD continues to rapidly expand capacity, beginning with massive expansions in Asia and Europe. BYD Seal sales began on Friday, with deliveries to begin in August. This is the first clear case of BYD going head-to-head with Tesla, with the Seal priced at $10,000 less than the Model 3.

BYD stock is trading just below its 50-day line, but may also act on fresh ground after hitting record highs in late June.

Tesla China sales won’t be out for a couple of weeks. Tesla Shanghai is undergoing some upgrades that will boost capacity production substantially. Tesla stock rose 9.15% last week to 891.47 after gaining 13% over the past week on strong earnings. It’s racing toward its 200-day line, but isn’t there yet.

Tesla Vs. BYD: Which EV giant is the better buy?

market rally analysis

This past week was a turning point for the stock market rally, which showed a real change of character. In the midst of the biggest week of earnings season, key economic data and the latest Fed rate hikes and guidance, major indices climbed higher – even when the news was not positive.

After testing their 50-day lines at the start of the week, the major indices rebounded to move decisively above that key level. The Nasdaq, which moved above its opening June high, had its best month since April 2020, when the coronavirus rally began.

The 50-day line on the Nasdaq is turning, another sign that the “trend” is positive.

The market rally is back to a certain uptrend.

There is a possibility of the market going lower. That doesn’t necessarily mean that the major indexes will run back to all-time highs, though.

The S&P 500 and Dow Jones are still facing early June highs. Above this, the 200-day line is appearing as a crucial test for the market rally.

Investors are betting that the economy is in the midst of a soft landing that will cool inflation enough for the Federal Reserve to slow and then halt rate hikes. If that outlook changes, the market could struggle.

Investors will get June job openings and July jobs report this coming week. Are labor markets beginning to ease substantially?

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Another potential issue is energy prices. The rally in energy prices is good news for XOM stock and other oil and gas plays. Gasoline futures – still well above their June all-time highs – have bounced from recent lows, suggesting that prices at the pump will soon reverse their recent return. This can limit the fall of inflation, and prevent consumers from shifting spending back to other sectors.

Aside from Energy, some lithium names look interesting, though Albemarle (ALB) and Livent (LTHM) earnings are down this coming week. Some steel plays are trying to break out of the downtrend as they reclaim key levels.

Drug and biotech stocks are pulling back, as are VRTX stocks, but many are still doing well. A little bit of strength can give new entries.

Hershey (HSY) and other food products stocks are showing strength.

The names of the developments are going up from the bottom, but are still mostly away from the highs.

Time Markets with IBD’s ETF Market Strategy

What should we do now

With the market rally in the last few weeks, investors should increase their investments. Do it slowly and look for early entries. There is still the risk that this is a bear market rally that will run out of steam, while sector rotation is still an issue.

There aren’t many stocks that are in a buying position. Some of those that look interesting tap into earnings over the next few days, such as on Vertex or stocks, complicating new purchases.

With such huge earnings on the way, the wave of results to come will be less meaningful to the market as a whole, but they will still be highly relevant to individual stocks and sectors.

Broad-market or sector ETFs are still a good way to ride the current market. Software, chip or other tech ETFs are one way to get rebounding growth stocks that are still out of position.

Keep working your watch list, looking for emerging leaders.

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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