Dow Jones futures open Sunday evening along with S&P 500 futures and Nasdaq futures. A stock market rally attempt is underway, but the major indexes all hit resistance at key levels as Treasury yields continue to climb. Tesla (TSLA) once again will be in the headlines over the week.
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The stock market rally is at an inflection point. The major indexes need to get above their resistance levels and follow through to confirm the new rally attempt.
Microsoft (MSFT), Nvidia (NVDA), Sea Limited (SE), Fortinet (FTNT) and Google parent Alphabet (GOOGL) all rebounded last week to around their 50-day moving averages. Except for perhaps, Nvidia stock, they could be considered actionable in a confirmed market rally. But investors neglect the “M” in CAN SLIM at their peril
Meanwhile, Tesla FSD Beta will start to open up to more Full Self-Driving owners at Friday midnight, according to CEO Elon Musk. Tesla also will hold an event at its Berlin factory on Saturday, with questions about when that plant will be operational. Tesla stock is holding in a buy zone.
Tesla, Google and Microsoft stock are on IBD Leaderboard. SE stock is on SwingTrader. Microsoft, Google and FTNT stock are on IBD Long-Term Leaders. Google stock is on the IBD 50.
The video embedded in the article analyzed the market rally attempt and reviewed Google, Microosft, Nvidia stock and Doximity (DOCS).
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
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
Coronavirus News
Coronavirus cases worldwide reached 237.96 million. Covid-19 deaths topped 4.85 million.
Coronavirus cases in the U.S. have hit 45.12 million, with deaths above 732,000.
Stock Market Rally Last Week
The stock market rally attempt rebounded from Monday’s lows, then hit resistance late in the week.
The Dow Jones Industrial Average rose 1.2% in last week’s stock market trading. The S&P 500 index climbed 0.8%. The Nasdaq composite edged up 0.1%. The small-cap Russell 2000 dipped 0.3%.
The 10-year Treasury yield is at 1.605%, the highest in four months. The 10-year yield jumped 14 basis points last week, the seventh straight weekly gain and the biggest advance since the week ended Feb. 19. That February spike coincided with the Nasdaq top.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.9% last week, after tumbling 8.7% in the prior week. The Innovator IBD Breakout Opportunities ETF (BOUT) rose 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.2%, with MSFT stock a major component and Fortinet also a holding. The VanEck Vectors Semiconductor ETF (SMH) retreated 0.7% with Nvidia stock a key member.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.5% and ARK Genomics ETF (ARKG) tumbled 4%. Tesla stock remains the top holding across ARK Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) edged up 0.1% and Global X U.S. Infrastructure Development ETF (PAVE) climbed just over 1%. U.S. Global Jets ETF (JETS) slumped 3.7%. SPDR S&P Homebuilders ETF (XHB) rose 0.7%. The Energy Select SPDR ETF (XLE) surged 5.1% and the Financial Select SPDR ETF (XLF) popped 2.3%.
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Tesla FSD Beta Opens Up
At Friday midnight, Tesla FSD Beta will add 1,000 Full Self-Driving owners, starting with those who had perfect 100 scores on a safety test measuring their driving ability by various metrics. It’ll continue to add FSD owners and subscribers over several days, at least for several days.
Tesla will also release FSD Beta 10.2 Friday night.
Meanwhile, a Tesla Berlin event on Saturday could drop hints or actual forecasts as to when that facility will be operational. Musk made comments over the summer that were interpreted as meaning that production could begin as soon as October, but he may have been referring to regulatory approval. It’s not clear that the factory is close to being finished.
FSD Beta and the Berlin factory are key to the Tesla growth story, especially with no new vehicles or new substantial markets planned in 2022.
A successful FSD Beta could be a continued money-spinner and brand-builder for Tesla. But if FSD drivers become complacent and several accidents occur, that could damage the brand and risk a regulatory response. Meanwhile, the Berlin and Austin plants will substantially boost Tesla capacity. The question is: Will there be enough demand, especially as overall auto production slowly recovers from chip woes and a slew of new EV rivals enter the U.S. market?
Tesla stock rose 1.3% to 785.49 last week, the seventh straight weekly gain. Shares are in buy range from a 764.55 handle buy point.
Google Stock
Google stock rebounded from Monday’s lows to close just above its 50-day moving average but below its 10-week line. It’s also right at a trend line. The relative strength line is just below record highs after a strong run. In a confirmed market rally, this would probably be an early entry within its flat base. The official buy point is 2,925.17, according to MarketSmith analysis. But if the market rally flops, Google is likely to come under pressure. The good news is that it probably won’t crash like some highfliers.
Nvidia Stock
Nvidia stock came up to its 50-day line on Thursday, but has edged back a little bit. It likely needs the market to pick up steam to make a real run. If the stock market rally does follow through and Nvidia breaks above its 50-day line and trend line, it’ll be actionable. It’s working on a new consolidation that will be an official base after one more week.
SE Stock
Sea Limited, which had pulled back to its 50-day line in late September, held up well in Monday’s market sell-off. On Thursday, SE stock rebounded above its 21-day line, hitting a trend line, but closed near session lows. On Friday, it reversed lower, back to just above its rising 50-day but below its 10-week line. If SE stock can get above Thursday’s high in a healthy market, that would be actionable. It also has a flat base on a weekly chart with a 359.94 buy point.
Fortinet Stock
FTNT stock pulled back to below its 50-day line in late September, but after a long run. Shares bounced from its 50-day and above a trend line on Thursday, then edged lower Friday. Investors likely should wait for the market rally to show more strength and use Thursday’s high of 313.24 as an entry. FTNT also has a new flat base with a 322.10 buy point.
Microsoft Stock
The Microsoft stock chart looks a lot like Google’s. MSFT stock is just above its 50-day average and just below its 10-week line, sitting on a trend line. It boasts a 305.94 flat-base buy point.
Market Rally Analysis
The stock market rally attempt is at an inflection point. After Monday’s sell-off, the major indexes rebounded. The market was looking oversold on Monday, so a bounce for a couple of days wasn’t a surprise. But the real trick is whether or not big institutions will commit to this new market rally, which is why a follow-through day is key.
So the major indexes rose on Tuesday, Wednesday and Thursday, but then stalled Friday as rising Treasury yields took their toll. The Dow Jones and S&P 500 hit resistance at their 50-day moving averages while the Nasdaq stopped short of its 21-day line, below the 50-day.
The indexes need to get above their resistance levels and confirm the new uptrend. If they fall back, there’s a serious risk that this correction will take a new leg down.
This past week, many leading stocks flashed early entries or other buy signals, or were on the cusp of doing so. That includes tech titans such as Microsoft, Google and Nvidia as well as high-beta names such as Upstart Holdings (UPST) and Bill.com (BILL). If this market rally has legs, many or most of them will advance. But if this rally sputters, the vast majority of these potential new leaders will fizzle as well.
When the 10-year Treasury yield went on a tear in late 2020 and early this year, stocks initially kept rallying, but ultimately fell back. The Nasdaq struggled for months, even after yields peaked.
This time, market pressures roughly coincided with the 10-year yield moving higher, especially since mid-September. Over the next few weeks, stock and bond investors are going to focused on the Fed, and whether it will begin to taper bond buys. Even though Fed chief Powell has very slowly moved toward a taper, the beginning of the end of easy money could weigh on financial markets for a long period.
Another factor is that President Joe Biden is expected to announce his choice to head the Federal Reserve in the coming weeks as well, with Powell’s term expiring early next year. Biden could nominate Powell for a second term, likely pleasing Wall Street. But might not. That could raise uncertainty at a delicate time.
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What To Do Now
If you made a few pilot buys during the market rebound and you’re still flat or slightly up on them, you could hold onto them, though they bear close watching. But right now this is not a great time to be adding. While there could be a quick upside if the market rally strengthens next week, the downside from any new buys could be severe.
At this point, with the initial bounce over, investors should wait to see if big institutions are really going to support this new market rally.
If they do, and the major indexes follow-through and break above their 50-day lines, you need to be ready. There are dozens of stocks that are potentially actionable or setting up. Have those on a watchlist, and hone in on a handful that you’re most interested in.
Meanwhile, if the major indexes break down, you need to be quick to cut new buys that aren’t working and consider moving entirely into cash.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
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