Dow Jones futures open on Sunday evening along with S&P 500 futures and Nasdaq futures. A stock market rally attempt is underway, but major indices are all facing resistance at major levels as US Treasury bond yields continue to rise. Tesla (TSLA) is set to hit the headlines again later this week.
The stock market rally is at a turning point. The major indices must rise above their resistance levels and move on to confirm the new rally attempt.
Microsoft (MSFT), Nvidia (NVDA), Sea Limited (I KNOW), Fortinet (FTNT) and Google Parents alphabet All of them rebounded to around their 50-day moving averages last week. Perhaps Nvidia stocks aside, they could be seen as actionable in a confirmed market rally. But investors neglect the “M” in CAN SLIM at their own risk
In the meantime, according to CEO Elon Musk, Tesla FSD Beta will open to more full self-driving owners starting Friday midnight. Tesla will also hold an event at its Berlin facility on Saturday asking questions about when that facility will be operational. Tesla stock is in a buy zone.
Tesla, Google and Microsoft stocks are on the IBD leaderboard. SE share is on SwingTrader. Microsoft, Google and FTNT stocks are on IBD Long-Term Leaders. The Google share is on the IBD 50.
The video embedded in the article analyzed an attempt at a market rally and reviewed the stocks of Google, Microosft, Nvidia and Doximacy (DOCUMENTS).
Dow Jones Futures today
Dow Jones futures open on Sunday at 6:00 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily result in an actual trade in the next regular trading session.
Join the IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Coronavirus cases reached 237.96 million worldwide. Covid-19 deaths exceeded 4.85 million.
Coronavirus cases in the US have reached 45.12 million, with deaths exceeding 732,000.
Stock market rally last week
A stock market rally attempt bounced from Monday’s lows and then met resistance later in the week.
The Dow Jones Industrial Average rose 1.2% in trading last week. The S&P 500 index rose 0.8%. The Nasdaq composite gained 0.1%. The small-cap Russell 2000 lost 0.3%.
The 10-year Treasury yield is 1.605%, the highest in four months. The 10-year yield rose 14 basis points last week, the seventh straight weekly gain and the largest increase since the week ending February 19th. This February peak coincided with the Nasdaq high.
Among the best ETFs, innovator IBD 50 ETF (FFTY) lost 0.9% last week after falling 8.7% the previous week. The innovator IBD Breakout Opportunities ETF (BOUT) rose 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 0.2%, with MSFT stocks a major component and Fortinet a position as well. The VanEck Vectors Semiconductor ETF (SMH) lost 0.7%, with Nvidia stock being a key member.
The ARK Innovation ETF (ARKK) lost 0.5% and the ARK Genomics ETF (ARKG) fell 4%. Tesla stock remains the top position among ARK Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) was up 0.1% and Global X US Infrastructure Development ETF (PAVE) was up just over 1%. The US Global Jets ETF (JETS) slumped 3.7%. SPDR S&P Homebuilders ETF (XHB) rose 0.7%. The Energy Select SPDR ETF (XLE) rose 5.1% and the Financial Select SPDR ETF (XLF) rose 2.3%.
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Tesla FSD Beta opens
On Friday at midnight, Tesla FSD Beta will add 1,000 fully self-driving owners, starting with those who scored a perfect 100 on a safety test that measures their driving skills using various metrics. FSD owners and subscribers will continue to be added over several days, at least for several days.
Tesla will also release FSD Beta 10.2 Friday night.
In the meantime, a Tesla Berlin event on Saturday could drop any clues or actual predictions about when that facility will go live. Musk made comments over the summer that were interpreted to mean that production could begin as early as October, but he may be referring to the regulatory approval. It’s not clear if the factory is near completion.
FSD Beta and the Berlin plant are key to Tesla’s growth story, especially since no new vehicles or new major markets are planned for 2022.
A successful FSD beta could be another money maker and brand maker for Tesla. However, if FSD drivers become complacent and multiple accidents happen, it could damage the brand and risk a regulatory response. Meanwhile, the Berlin and Austin plants will significantly increase Tesla capacity. The question is: will there be enough demand, especially as entire auto production is slowly recovering from chip problems and a number of new EV rivals are entering the US market?
Tesla stock rose 1.3% last week to 785.49, the seventh straight weekly gain. The shares are in a buy range of one 764.55 handle buy point.
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 on a trend line. The relative strength line is just below the record highs after a strong run. With a confirmed market rally, this would likely be an early entry into the flat base. According to MarketSmith analysis, the official buy point is 2,925.17. But if the market rally fails, Google is likely to come under pressure. The good news is that it probably won’t crash like some high-flyers.
Nvidia stock hit its 50-day line on Thursday but is down a bit. The market probably needs to really pick up speed. If the stock market rally continues and Nvidia breaks above its 50 day line and trend line, this is actionable. A new consolidation is being worked on, which will become an official base after another week.
Sea Limited, which had scaled back to its 50-day line in late September, held up well in the market sell-off on Monday. On Thursday, SE shares rallied above their 21-day line and hit a trend line, but closed near the daily low. It reversed on Friday, back to just above its rising 50-day line but below its 10-week line. If SE stock can climb above Thursday’s high in a healthy market, it would be workable. It also has a flat base on the weekly chart with a buy point of 359.94.
FTNT shares fell below their 50-day line in late September, but after a long time. Stocks rallied from their 50-day mark and above a trendline on Thursday, then fell on Friday. Investors should likely 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 buy point of 322.10.
Microsoft’s stock chart looks very similar to Google’s. MSFT stock is just above its 50-day average and just below its 10-week line and is on a trend line. It has a 305.94 flat-base buy point.
Analysis of the market rally
The attempt at a stock market rally is at a turning point. After the sell-off on Monday, the major indices rebounded. The market appeared oversold on Monday so a few days’ rebound was no surprise. The real trick, however, is whether or not large institutions will join this new market rally, which is why a following day is crucial.
The main indices rose on Tuesday, Wednesday and Thursday, but then stalled on Friday as rising government bond yields took their toll. The Dow Jones and S&P 500 encountered resistance at their 50-day averages, while the Nasdaq stopped below the 50-day line below its 21-day line.
The indices need to rise above their resistance levels and confirm the new uptrend. If they fall behind, there is a serious risk that this correction will pull a new leg down.
In the past week, many leading stocks have flashed or were on the verge of early entries or other buy signals. This includes tech titans like Microsoft, Google, and Nvidia, as well as high beta names like Upstart stocks (UPST) and Bill.com (INVOICE). If this market rally has legs then many or most of them will move forward. But if this rally stutters, the vast majority of these potential new leaders will also fizzle out.
When 10-year US Treasury yields plummeted in late 2020 and early this year, stocks initially continued to rebound, but eventually fell back. The Nasdaq struggled for months even after yields peaked.
This time, market pressures roughly coincided with the rise in 10-year yields, particularly since mid-September. For the next several weeks, equity and bond investors will focus on the Fed and whether it will start reducing bond purchases. Even if Fed Chairman Powell is moving very slowly in the direction of rejuvenation, the beginning of the end of easy money could continue to weigh on the financial markets for a long time to come.
Another factor is that President Joe Biden is also expected to announce his election as head of the Federal Reserve in the coming weeks, as Powell’s term expires early next year. Biden could nominate Powell for a second term, which Wall Street would likely like. But maybe not. That could create uncertainty at a difficult time.
Time-the-market with IBD’s ETF market strategy
If you’ve made a few pilot buys during the market rally and you’re still flat or slightly up, you might be holding onto them even though they need to be watched closely. But right now this is not a good time to add. While there could be a quick uptrend if the market rally intensifies next week, the downside from new buying could be severe.
At this point, after the initial upturn, investors should wait and see if large institutions will really support this new market rally.
If it does, and the major indices are following and exceeding their 50-day lines, then you need to be ready. There are dozen of stocks that are potentially actionable or can be set up. Put these on a wish list and look for a handful that interests you most.
When major indexes crash, you need to quickly reduce new purchases that don’t work and consider switching to cash entirely.
Read The Big Picture daily to keep up 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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