Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market rally had another strong week and was nearing a major test.
X
A market pause would come as no surprise and could be healthy after strong gains on generally low volume over the past few weeks. Investors should be cautious about adding more exposure.
Diversified oil giant Exxon Mobile (XOM) sets up near-possible entries as energy stocks take the lead once again. Costco Wholesale (COST) has a cup-and-handle basis, although several key contenders report this coming week. UnitedHealth (UNH) has traded tightly within a buy zone creating another entry. Apple (AAPL) is nearing a breakout as AAPL stock outperforms other megacaps. Microsoft (MSFT) is approaching its 200-day moving average, which could offer an opportunity to initiate a position.
China EV startup Li car (LI) reports gains ahead of Monday’s open. LI stock is among the better EV stocks and has outperformed the giants BYD (BYDDF) and Tesla (TSLA) but needs to break above its 50-day moving average. BYD stock is below its 50-day moving average, while Tesla is just below its 200-day moving average.
UNH stock is on the IBD leaderboard and was Friday’s IBD stock of the day. MSFT stock is an IBD Long-Term Leader.
The video embedded in this article extensively discussed weekly market movements while also analyzing shares in Exxon Mobil, UnitedHealth, and Apple.
Dow Jones futures today
Dow Jones futures open at 6:00 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
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 index rose 3.25%. The Nasdaq Composite rose 3.1%. Small-cap Russell 2000 is up 5%.
The 10-year Treasury yield rose 1 basis point to 2.85%, but with some big moves during the week.
US crude futures rose 3.5% last week to $92.09 a barrel despite Friday’s decline. Gasoline futures rose 6.7%. Natural gas prices rose 8.7% on the week.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) is up 2.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) is up 3.1%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 3%, with MSFT being the leading IGV holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%, recovering from sharp losses after the NVIDIA (NVDA) and micron (MU) Warnings.
The SPDR S&P Metals & Mining ETF (XME) is up 8.3% last week. The Global X US Infrastructure Development ETF (PAVE) is up 4.6%. The US Global Jets ETF (JETS) is up 3.5%. SPDR S&P Homebuilders ETF (XHB) is up 4%, its eighth consecutive weekly gain. The Energy Select SPDR ETF (XLE) is up 7.4% with XOM stock having a huge weight in XLE. The Financial Select SPDR ETF (XLF) rallied 5.4%. Health Care Select Sector SPDR Fund (XLV) is up 1.65% with UNH shares a huge holding.
Mirroring more of a speculative story stock, ARK Innovation ETF (ARKK) is up 3.25% and ARK Genomics ETF (ARKG) is up 3.8% over the past week. Tesla stock is a key position in Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.
The five best Chinese stocks to watch right now
Stocks near buy points
XOM shares rose 6.3% last week to 93.99, moving back above the 50-day moving average. Shares of the energy giant close on a trendline off their early June peak. The official buy point is 105.67, but that would be well above the 50-day moving average. Volume was light last week and hasn’t been great for the last month as Exxon stock rallied. Earnings growth continues to boom.
COST stock fell 0.6% over the past week to 537.21. Stocks are drifting lower in a grip with a buy point of 552.81, according to MarketSmith analysis.
Consider this smaller rival BJ’s Wholesale (BJ) reports next Thursday. Walmart (WMT), which owns the storage chain Sam’s Club, will appear on Tuesday morning target (TGT) reported on Wednesday.
UNH shares rose 1.6% to 543.70. The health insurance giant is still within reach of a buy point of 518.80 while still below the April 14th high. UnitedHealth stock has not forged a three-week tight pattern, only surpassing the weekly moving limit. But investors could still use 545.84 as an alternative buy point.
Apple shares rose 4.1% last week to 172.12. It was the sixth consecutive weekly gain, but all hit low volume. On the upside, the line of relative strength has made several new highs, reflecting AAPL stock’s outperformance versus the S&P 500. Apple stock is heading towards a double bottomed buy point of 179.71. Technically, stocks are about to hit a trend line entry. Ideally, AAPL shares would forge a hold.
MSFT stock is up 3.2% to 291.91, but unlike Apple, it’s still below its 200-day moving average. A large move above the 200-day moving average could present an opportunity to enter MSFT stock as a long-term leader. The RS line is not far off the 2022 high, even as MSFT stock is well below its late November record high of 349.67.
Li car receipts
According to FactSet, Wall Street expects a net loss of 2 cents a share on revenue of $1.4 billion in the second quarter. That’s compared to a 1 cent loss last year to $780.4 million.
Li Auto has been profitable for the past three quarters, but Covid shutdowns took their toll on second-quarter production and shipments. Li Auto currently has only one model, the hybrid SUV Li One.
But it has started selling the premium hybrid SUV, the L9, with deliveries slated to begin later this month. Pre-orders have been strong, with Li Auto forecasting L9 shipments of 10,000 or more in September.
LI stock fell 3.4% last week to 32.49, which gave it more room against its 50-day moving average and continued a downtrend that started in late June. This was followed by a huge surge from early May. The shares closed in the top half of their weekly range. Li Auto stock would have a new base with a buy point of 41.59 if it starts building the right side. A strong move above the rising 50-day level could offer an early entry.
Tesla vs. BYD: EV giants are now frenemies
Tesla and BYD stock
Tesla shares rallied 4.1% last week to 900.09. That’s back above its 200-day moving average and reclaiming its 40-week moving average on Friday. A break of the 200-day moving average and the 4th August high of 940.82 would provide an aggressive entry for TSLA stock. The official buy point is 1,208.10.
BYD shares fell 0.2% to 36.69 last week, trading tight but below the 50-day moving average. The Chinese EV and battery giant has a base buy point of 43.71. A decisive move above the 50-day level would provide an early entry.
According to reports, BYD is supplying Blade batteries to Tesla Berlin. Blade-powered Model Ys are slated to roll off the assembly line in a few weeks. Meanwhile, BYD will begin deliveries of the Seal sedan, a much cheaper rival of the Model 3, in the next few weeks. BYD will also begin deliveries of the Atto 3 in Australia in a few days, entering a new one as part of a huge international expansion Market.
Analysis of the market rally
The stock market rally had a few unsightly intraday reversals Monday and Thursday but ultimately delivered solid gains for the major indices.
The Dow Jones, S&P 500 and Russell 2000 have decisively cleared their early June highs and joined the Nasdaq. The Russell 2000 is just above its 200-day moving average, closely followed by the S&P 500 and Dow Jones. The Nasdaq has a little more work to do to reach this long-term level if it hits the 13,000 level.
A breach of the 200-day moving average would be evidence that the current uptrend is more than a significant bear market rally. A pause or pullback would not come as a surprise after a sharp rise in the major indices, largely on lackluster volume. Friday’s rally, an inside day for the S&P 500 and Nasdaq, came with very little volume.
A pause or modest pullback over several days or a few weeks could be constructive, but the market will do what it will.
Energy stocks continue to look strong but will rise or fall with underlying oil and natural gas prices.
A wide range of medical professionals are doing well. Chip makers, lithium games, some steel games, transportation and more show positive action.
Time the market with IBD’s ETF market strategy
What now
As Invest with Rules’ Scott Bennett told IBD Live on Friday, investors don’t need to hit the brakes, but they might want to slow down.
Be careful about adding exposure on the very short term as the market rally may be stretched out and face another key area of resistance. Taking partial profits is still a good strategy and a way to prevent new purchases from increasing engagement.
Still, some quality stocks continue to give buy signals or establish themselves. Investors should get involved in this market and look for new opportunities. So keep building those watch lists.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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