Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market rally is in the midst of a modest pullback after a strong run off the mid-March lows.
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Major indices still look healthy. However, investors should be wary of very short-term new purchases and be prepared to close positions if they don’t work. Growth and shipping stocks ran into trouble late last week as Dutch Bros (BROS) and JB Hunt Transport Services (JBHT).
apple stock, Exxon Mobile (XOM) and SolarEdge Technologies (SEDG) set up near buying points.
Tesla deliveries due
Tesla deliveries are expected Saturday morning but may not arrive until Tuesday evening. Analysts expect Tesla (TSLA) reports 309,000 deliveries worldwide for Q1. The Tesla plant in Berlin has just started deliveries, while the Shanghai plant was closed for several days in March due to China Covid restrictions.
Tesla stock continued to climb towards the 1208.10 cup base buy point or a trendline entry around 1,145 last week but may start working on a handle.
Electric car giant from China BYD (BYDDF) is also expected to report March sales in the next few days, with some expecting EV and plug-in hybrid sales to surpass 100,000 for the first time. BYD stock recaptured its falling 50-day moving average on Friday. But it remains below its 200-day moving average.
Tesla vs. BYD: Which Booming EV Giant Is the Better Buy?
Tesla and BYD sales will be down after deliveries in March Xpeng (XPEV), no (NIO) and Li car (LI). Nio shares and Li Auto recaptured their 50-day moving averages on Friday, while XPEV shares are also up. In addition to strong deliveries, Chinese EV names rallied along with other US-listed Chinese stocks on a report that eased fears of a delisting.
Tesla stock is on the IBD Leaderboard and the IBD 50. XOM stock is on the IBD Big Cap 20, which is full of energy and commodity names. The video embedded in this article analyzes and discusses the market rally Apple (AAPL), JBHT shares and SEDG shares.
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 started strong last week but ended with modest gains or small losses.
The Dow Jones Industrial Average fell 0.1% in trading last week. The S&P 500 index rose less than 0.1%. The Nasdaq Composite rose 0.7%. Small-cap Russell 2000 was also up 0.7%.
The 10-year government bond yield fell 11 basis points to 2.38% last week. The two-year Treasury yield rose to 2.48%, well above the 10-year rate. This yield inversion is a possible recession signal – in the future – as the Fed is set to hike rates aggressively in the upcoming meetings. Experts are divided on whether the yield curve inversion poses a serious recession risk. Fed Chair Jerome Powell recently noted that the very short end of the yield curve is still well below long-term rates.
Nevertheless, the yield curve must be kept in mind.
US crude oil futures plunged nearly 13% to $99.27 a barrel, its biggest weekly loss in nearly two years. President Biden said Thursday the US would release 1 million barrels a day from strategic reserves for six months to combat high gasoline prices.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) is down 1.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) is down 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) is up 2.2%. But the VanEck Vectors Semiconductor ETF (SMH) sold off 3.6%, falling sharply from mid-week.
SPDR S&P Metals & Mining ETF (XME) is down 1.4% last week but has bounced back sharply from lows. The Global X US Infrastructure Development ETF (PAVE) lost 1.5%. The US Global Jets ETF (JETS) rose 4.3% on lower fuel costs. The SPDR S&P Homebuilders ETF (XHB) fell 2.8% to a 52-week low.
The Energy Select SPDR ETF (XLE) lost 2.15% but rebounded from lows. XOM stock is a large XLE holding. The Financial Select SPDR ETF (XLF) fell 3.3% as the inverted yield curve hit bank stocks. The Health Care Select Sector SPDR Fund (XLV) rose 1.3%.
Mirroring more of a speculative story stock, ARK Innovation ETF (ARKK) is up 4.7% and ARK Genomics ETF (ARKG) is up 7.3% over the past week. Tesla stock is Ark Invest’s #1 ETF. Cathie Wood has recently started buying some Nio stock and has added to Ark’s BYD position. Ark also owns some XPEV stock.
The five best Chinese stocks to watch right now
Apple stock
Apple shares broke above a double bottom buy point of 176.75 on Tuesday. But after an 11-day winning streak, it came as no surprise that the iPhone giant pulled back, falling slightly in the last three sessions. For the week, AAPL shares fell 0.2% to 174.31. It’s now working on a handle on a daily chart, but that needs at least two more days to get right. On a weekly chart, Apple stock technically has a small grip with a buy point of 179.71. But investors should probably wait for at least a daily price to form, perhaps with a bit more depth.
The line of relative strength for Apple stock is right at record highs.
Exxon stock
Exxon shares, like many other energy companies, have shown resilience in the face of falling crude oil prices. Shares fell 2.4% to 83.12 last week but rebounded from a 10-week line test, according to MarketSmith analysis. At just 2.9% above this key level, investors could buy XOM shares here. You could also wait for the oil major to consolidate further and form a proper base, although that would take a few weeks.
SolarEdge warehouse
SEDG stock tends to make big intraday swings on a daily basis, but tightens a bit on a weekly basis. SolarEdge stock fell 3.7% last week to 322.83 and found support at its 21-day moving average. Shares are just below a 335.67 cup with Henkel buy point. SEDG stock is still well above the 50-day moving average, so a longer break would be helpful.
JB Hunt Stock
JB Hunt stock had a strong breakout on March 16 and initially retreated gradually before failing decisively this week. After falling below the buy point earlier in the week, JBHT plunged below the 50-day moving average on Friday and closed below its 200-day moving average for the first time in almost two years. JBHT shares fell 9.6% on Friday, leading all falls in the S&P 500. On the week there was a minus of 13.2%.
Other trucking stocks, as well as rail companies, were big losers amid industry concerns about slowing freight demand. Union Pacific (UNP) is down 4.85% on Friday, nearly recouping a modest gain from a breakout in early March.
Analysis of the market rally
The stock market rally continued through Tuesday, breaking through new resistance levels. Then the major indices retreated, with the Nasdaq stopping just short of the 200-day moving average while the Dow Jones fell back below that key level.
So far, all is still normal, with Friday’s push for easy gains suggesting the rally is in solid shape. But investors don’t know whether stocks will recover quickly, continue to decline or trade sideways for a few weeks, or if conditions will deteriorate quickly.
Apple stocks, Tesla and many others are working on possible handles. But these are usually still work in progress.
While the overall market looks strong, key sectors have had an ugly few weeks.
Many tech stocks struggled late last week, especially chips. Some of these names were still deep in the base, but others like Alpha and Omega semiconductors (AOSL) were failed breakouts. AOSL shares plunged 18% last week, with an even bigger reversal from Wednesday’s highs.
The sell-off in JBHT stock, Union Pacific and others could be related to weakness in chip and PC names. Having stayed close to home during the pandemic, Americans could shift their spending from goods to trips and nights on the town.
Last week’s weak guidance from upscale furniture retailer RH (RH) and mattress manufacturer Tempur Sealy (TPX) also point to a slowdown in demand for housewares.
House builders and banks are in a downward trend and are struggling with rising interest rates and flat to inverted yield curves.
Meanwhile, cyclicals such as energy, steel, fertilizer and more rebounded towards the end of the week. Some like XOM stocks and sleeve (SHEL) are close to buy points while others are being lengthened.
Time the market with IBD’s ETF market strategy
What now
The powerful initial stock market rally is over. Investors should also step back and take a look at their holdings.
Do you focus too much on certain industries? While the major indices ended the week relatively flat, some sectors and stocks suffered sharp losses. Whether this is the return of sector rotation or just a narrowing market rally, investors need to listen to these market signals and act accordingly.
Keeping positions small and diversified, with modest overall exposure, can limit the consequences. Fast profit-taking and fast elimination of losses are still crucial.
Work on those watch lists. Recent market action could create a wave of new buying opportunities. So you want to be ready.
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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