Dow Jones futures fell modestly Tuesday night, along with S&P 500 futures and Nasdaq futures, with Palantir Technologies (PLTR) jumping late on a big Army contract. The major indexes rebounded Tuesday after Monday’s sell-off. But this stock market rally attempt is not a confirmed uptrend yet.
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Google stock, Microsoft (MSFT), Datadog (DDOG), ServiceNow (NOW), Digital Turbine (APPS), Capital One (COF), Dexcom (DXCM), Revolve (RVLV) and UHaul parent Amerco (UHAL) are among stocks worth watching. Generally they are holding above or reclaiming their 50-day lines. However, APPS stock is bouncing from its 200-day line while Google parent Alphabet (GOOGL) and Microsoft stock are trying to get back to their 50-day lines. But all have relative strength lines at or near highs.
Google stock, Microsoft and ServiceNow Are on IBD Leaderboard while DDOG stock is on the Leaderboard watchlist. Google, Microsoft and NOW stock also are on IBD Long-Term Leaders. DXCM stock and Datadog are on the IBD 50. UHAL stock is Tuesday’s IBD Stock Of The Day.
The video embedded in this article discusses Tuesday’s market action and analyzes Datadog stock, Microsoft and DXCM stock.
Palantir Army Contract
Meanwhile, Palantir announced it won an $823 million contract with the U.S. Army.
“Palantir will deploy the Palantir Gotham Platform to support Army Intelligence users worldwide with a globally federated Intelligence data fabric and analytics platform spanning multiple security classifications,” the company said in a news release.
PLTR stock jumped 14% in extended trade. That would push Palantir above its 50-day and 200-day moving averages. PLTR stock edged up 0.2% to 23.21 on Tuesday.
Dow Jones Futures Today
Dow Jones futures fell 0.35% vs. fair value. S&P 500 futures lost 0.5% and Nasdaq 100 futures retreated 0.6%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally Attempt
The stock market had solid gains, though the major indexes finished somewhat off highs while volume was on the light side.
Meanwhile, the Dow Jones Industrial Average rose 0.9% in Tuesday’s stock market trading. The S&P 500 index climbed just over 1%. The Nasdaq composite advanced 1.25%. And the small-cap Russell 2000 edged up 0.35%, just above its 200-day line and below its 50-day.
Crude oil prices continued to rise. The 10-year Treasury yield climbed five basis points to 1.53%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.7%, with MSFT stock a major component and ServiceNow a notable holding. The VanEck Vectors Semiconductor ETF (SMH) climbed 1.4%.
SPDR S&P Metals & Mining ETF (XME) edged up 0.7% and Global X U.S. Infrastructure Development ETF (PAVE) picked up 0.9%. U.S. Global Jets ETF (JETS) dipped 0.7%. SPDR S&P Homebuilders ETF (XHB) nudged 0.2% higher. The Energy Select SPDR ETF (XLE) rose 0.6% and the Financial Select SPDR ETF (XLF) popped 2%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1.7% and ARK Genomics ETF (ARKG) 1.2%. ARKK rebounded from a four-month low while ARKG bounced from its worst levels since last November.
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Stocks To Watch: Datadog, ServiceNow, Digital Turbine
Datadog stock rose 3.5% to 141.89, rebounding from its 10-week line and regaining its 21-day line. In a better market, aggressive traders might use Tuesday’s move as a chance to start or add to a DDOG stock position.
ServiceNow stock gained 2.5% to 633.42, rebounding from its 50-day. At the end of this week, NOW stock should have a flat base with a 681.20 buy point.
Digital Turbine stock popped 6.1% to 73.56, rebounding from its 200-day. APPS stock rallied from its 200-day line in late September, then fell back with the market.
Stocks To Watch: Capital One, Revolve, Dexcom, Amerco
COF stock rose 1.6% to 168.78. That’s just below a 171.60 cup-with-handle buy point, according to MarketSmith analysis.
Revolve stock gained 5.5% to 65.77, reclaiming its 50-day line. RVLV stock is forming a cup-with-handle base with a 72.37 buy point. In a better market, aggressive traders might have bought the young adult apparel retailer on Tuesday as it broke a downtrend in its handle.
Dexcom stock popped 2.65% to 540.39. Unlike many medical products firms, DXCM stock found support its 50-day line, rebounding from that level Tuesday. Monday’s low also coincided roughly with the top of a prior, short consolidation.
UHAL stock rose 1.5% to 662, working on a 677.44 buy point. Amerco is in a flat base next to a longer consolidation.
Stocks To Watch: Google, Microsoft
Google stock rose 1.8% to 2,720.46. That’s still below its 50-day line. Getting above the 50-day would be a key test, especially because GOOGL stock would also like to reclaim its 21-day line and break a short downtrend. Google has a flat base with a 2,925.17 buy point.
Microsoft stock is showing similar chart action, up 2% to 288.76 on Tuesday. MSFT stock is below its 50-day line, and has a 305.94 flat-base buy point.
Aside from their individual importance, if Google and Microsoft can reclaim their 50-day lines and move toward breakouts, it would be a healthy sign for the stock market rally attempt.
Market Analysis
After Monday’s market sell-off, the Nasdaq looked oversold by some measures. So Tuesday’s bounce should not be too surprising, though it was nice to see tech stocks rebound even with the 10-year Treasury yield up several basis points. Volume declined vs. Monday, which isn’t exactly inspiring. And it was just one day. Friday’s low-volume rebound had some decent price gains, but those were wiped out on Monday.
Finally, the Dow Jones, S&P 500 and Nasdaq are all below their 21-day and 50-day lines. It’s not a good sign when the indexes are living below those levels.
Tuesday marked day one of a new stock market rally attempt for the Nasdaq and S&P 500 index. Both undercut recent lows on Monday.
But the Dow Jones did not undercut recent lows, so Tuesday marked day three of its rally attempt. The Dow Jones could stage a follow-through day in the coming sessions, confirming the new uptrend.
A follow-through day occurs a few days into a rally attempt. It involves a strong gain on one or more of the major indexes in higher volume than the prior session, indicating big institutions are support a new uptrend. This confirms a new market rally. Not all confirmed rallies succeed, but it’s a strong signal to enter the market.
Generally, follow-through days are preferable on the S&P 500 and Nasdaq, but Dow Jones FTDs are valid. Also, with energy and financials among the best-performing sectors now, perhaps a Dow-led rally is appropriate.
In addition to energy and financials, fertilizer stocks are near highs, travel plays are rebounding, staffing firms are acting well while several trucking stocks are hovering near buy points.
Meanwhile, while some techs such as DDOG stock have found support at their 50-day lines, many others have not. Nvidia (NVDA), Snap (SNAP) and, yes, Google stock face a key test.
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What To Do Now
Well, a stock market rally attempt is underway, but it’s early days for a tech revival. There’s no need for investors to try to rush back into the market. And if this market rally has real legs, there will be plenty of opportunities for investors after a confirmed market rally.
If you have a compulsion to add exposure, you could try eating a green banana or rock-hard peach. If you still have an appetite for stocks, keep your positions small and be ready to exit quickly. Also consider buying a broad-based ETF instead of an individual stock.
This is a time to work on those watchlists. Focus on stocks with strong relative strength, holding or reclaiming key support levels. Depending on how long the market correction goes, your watchlist could change considerably.
Read The Big Picture every day to stay in sync with the 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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