Dow Jones futures will open on Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market rally made strong gains last week, breaking through some key resistances. The technicians left on Friday Nap (NAP) and other poor earnings.
Apple (AAPL), Microsoft (MSFT), main Google Alphabet (GOOGLE), amazon.com (AMZN) and father of Facebook Metaplatforms (GOAL) headline a massive week of earnings.
META and Google shares sold off sharply on Friday due to the Snap results and lack of guidance. Microsoft shares fell back to their 50-day line. Amazon simply cut big weekly profits. But Apple stock is one of the five, even near its 200-day line, and it has no obvious buying point in sight.
Meanwhile, the Federal Reserve meets, with another big 75 basis point rate hike likely on Wednesday. Guidance for future moves will be key. Investors have started to downsize the September rate hike, with limited tightening after that. That’s largely because the economy is slowing rapidly, perhaps even slipping into a recession. A recession, coupled with still-high inflation, is not a good combination for corporate profits.
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While recent action in major indices has been promising, investors still need to be cautious as they add exposure.
Not many leading stocks have been showing signs of buying. Meanwhile, several up-and-coming stocks have experienced flash selloffs, including dollar tree (RTDL), lanteus (LNT), Agilon Health (AGL) Y li car (LI), forcing investors to make difficult decisions.
LNTH shares are active IBD classification table, while Agilon came out on Friday. Li Auto stock and Agilon are in the IBD 50. MSFT and Google shares are in IBD long-term leaders.
The video embedded in the article reviewed the important market action, while also analyzing Cross Country Medical Care (CCRN), shares of Li Auto and DLTR.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 and Nasdaq 100 futures.
Remember that the overnight action in dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock Exchange session.
Join IBD Experts as They Discuss Actionable Actions in the Stock Market Rally on IBD Live
stock rally
The stock market rally had strong weekly gains, even with Friday’s pullback.
The Dow Jones Industrial Average rose 2% in the past week stock trading. The S&P 500 index gained 2.6%. The Nasdaq Composite jumped 3.3%. The small-cap Russell 2000 jumped 3.7%.
The 10-year Treasury yield fell 15 basis points to 2.78%, falling 25 basis points on Thursday and Friday. The Treasury yield curve inverts from one year to 10 years. The six-month Treasury bill rate of 2.94% is significantly above the 10-year Treasury yield. All of that reflects growing recession risks.
US crude futures fell nearly 3% to $97.59 a barrel last week.
ETFs
Between best ETFsthe Innovator IBD 50 ETF (FFTY) lost 0.6% last week, while the Innovator IBD Breakout Opportunities ETF (COMBAT) advanced 0.45%. The iShares Extended Technology Software Sector ETF (VAT) jumped 5.4%, with MSFT shares as the main component. The VanEck Vector Semiconductor ETF (SMH) rose 5.6%.
The SPDR S&P Metals & Mining ETF (XME) rebounded 1.9% last week. The US Global X Infrastructure Development ETF (TO PAVE) jumped 5%. US Global Jets ETF (JETS) rose 0.9%. SPDR S&P Home Builders ETF (XHB) shot up 6%. The Energy Select SPDR ETF (XLE) gained 3.7% and the Financial Select SPDR ETF (XLF) 3%. The SPDR Fund of the Select Sector of Health Care (XLV) submerged 0.3%.
Mirroring more speculative historical stocks, ARK Innovation ETF (ARKK) rose 4.85% last week and ARK Genomics ETF (ARKG) 1.2%, although both gave up more than half of their weekly gains on Friday.
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Stock Shakeouts, Shakedowns
When a leading stock sells at or below the point of purchase, investors are faced with a difficult decision: stand firm, exit or cut the position. There is not necessarily a “correct” answer. Sometimes stocks will bounce back immediately, others will continue to fall, perhaps after briefly bouncing. A more cautious approach may make more sense in today’s volatile market. Shopping near the entrance can also offer a little more protection.
DLTR shares had been gradually climbing into a buy zone this week when they suddenly fell nearly 5% intraday on Thursday. Stocks slightly undermined the buy point of 166.45, but found support at the 21-day line, according to MarketSmith Analysis. At the close, DLTR shares were down just under 1%. On Friday, shares of Dollar Tree briefly broke out of the buy zone before closing little changed.
LNTH shares reached an all-time high on Wednesday, just coming out of a base of cup, but closing nearly 14% above the 50-day line. On Thursday, shares of Lantheus fell 7.8% intraday, although they trimmed their loss to 3.1%. A quick shake? Maybe not. LNTH shares fell 4.5% on Friday.
Agilon shares broke Thursday from a bottom with a buy point of 27.12. But the shares fell 8.3% to 25.18 on Friday.
Li Auto shares rebounded from their 21-day line on July 13 and posted solid gains on Monday, July 18. But shares fell below the intraday 21-day line on Tuesday, though recovered to close above that key level, down 4.7%. On Wednesday, LI shares sank 3.7%, right off Tuesday’s low. On Thursday, Li Auto nearly regained its 21-day line, but then sold off convincingly on Friday. Ultimately, it was a bearish downside reversal week for China’s electric vehicle maker.
Market recovery analysis
The stock market rally took significant steps last week. Major indices broke above their 50-day and 10-week moving averages, which had been a key hurdle in recent months.
Weak Snap results, Verizon (VZ), Seagate technology (STX) Y intuitive surgical (ISRG) served as a catalyst for Friday’s pullback.
But arguably the market was due to pull back, especially the Nasdaq and growth stocks. It is better to get that pullback before the full onslaught of profits.
If everyone is bullish on earnings, that’s a recipe for big sell-offs in actual results. That may be especially true this time, with guidance especially unclear given the rapidly deteriorating economy.
Friday’s pullout underscores how treacherous earnings season is, and not just for the company. Snap’s earnings report criticized the actions of Meta and Google, along with other companies dependent on online ads and the market in general.
Friday’s pullback also shows the risks of bottom fishing, buying battered growth stocks as they pull back.
The market may have bottomed out in mid-June, but that doesn’t necessarily mean it’s a quick and easy march to all-time highs and beyond. The market bottomed out in late 2002 and late 2008, but did not trend on a sustained basis for several months.
In addition to tech titans Apple, Microsoft, Meta, Google and Amazon, other notable results from next week include exxonmobile (XOM), Chevron (CLC), Merck (MRK), Pfizer (PFE), general motors (GM) Y Qualcomm (QCOM).
Apple, Microsoft, Merck, and XOM stocks are all components of Dow Jones.
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What to do now
Investors should still have modest exposure at most. There haven’t been many good stocks to buy, and they can be prone to flash sell-offs. Earnings season and the Fed meeting could send the market, various sectors and individual stocks in all sorts of directions.
So be very careful for the next few days. If you make new purchases, look for early buying opportunities and try to shop as close to those tickets as possible.
Keep working on your watch lists. The market rally has shown some strength. You want to be ready to take advantage.
Read The panorama every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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