Dow Jones futures will open for trading Sunday afternoon, along with S&P 500 futures and Nasdaq futures. The major indexes all hit record highs last week as the stock market rally advanced modestly amid heavy earnings and key economic data.
Earnings season is still active. BioNTech (BNTX), Trade Desk (TTD) and Elanco (ELAN) report before Monday’s open. BNTX stock is greatly extended from a buy point. TTD stock arguably is in range from an early entry, but a strong earnings move could leave it between buy points. Elan stock is finding 50-day support after retreating modestly from a still-valid buy point.
Keep an eye on Exact Sciences (EXAS) and Invitae (NVTA). Reports after Friday’s close said Exact Sciences is approaching genetic testing firm Invitae about a merger. EXAS stock fell slightly in after-hours trading. NVTA jumped more than 10%. Both are well off their highs and near 2021 lows.
Wells Fargo, BioNTech, Square, Tesla and Snap stock are all on IBD Leaderboard. Tesla stock, Snap and Square also are on SwingTrader. Square stock and Snap are on the IBD 50. WFC stock was Friday’s IBD Stock Of The Day. SQ stock and Snap also were Stock Of The Day selections last week.
The video embedded in this article analyzes Wells Fargo, Square and CLF stock, as well as reviewing the week’s stock market action.
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.
Coronavirus cases worldwide reached 202.57 million. Covid-19 deaths topped 4.29 million.
Coronavirus cases in the U.S. have hit 36.44 million, with deaths above 632,000.
New U.S. Covid cases topped 130,000 on Friday, a six-month high, as the delta coronavirus variant spreads rapidly. But the vast majority of hospitalizations and deaths are among non-vaccinated Americans. Meanwhile, Covid fears and restrictions have spurred a big increase in vaccinations over the last few weeks, especially in areas with low immunization rates.
The increase in vaccinations, as well as moves toward backing booster shots, has sent Moderna (MRNA) and BNTX stock surging over the last several weeks.
Stock Market Rally
The stock market rally ended up with solid gains on the major indexes, all hitting record highs.
The Dow Jones Industrial Average rose 0.8% in last week’s stock market trading. The S&P 500 index climbed 0.9%. The Nasdaq composite popped 1.1% The small-cap Russell 2000 also advanced 1.1%.
The 10-year Treasury yield, after tumbling to 1.13% during the week, rose 5 basis points to 1.29%. That includes a 7 basis point gain Friday on the July jobs report.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.2% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.6%. The VanEck Vectors Semiconductor ETF (SMH) climbed 2.1%.
SPDR S&P Metals & Mining ETF (XME) slumped 3.2%, though steel names generally had constructive pullbacks. The Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.2%. U.S. Global Jets ETF (JETS) climbed 1%. SPDR S&P Homebuilders ETF (XHB) edged up 0.5%. The Energy Select SPDR ETF (XLE) nudged 0.3% higher. The Financial Select SPDR ETF (XLF) popped 3.7%, with much of that coming on Friday.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 2.5% last week and ARK Genomics ETF (ARKG) 3.1%, despite Friday retreats. Tesla stock is the No. 1 holding across ARK Invest’s ETFs. SQ stock is another top ARK holding. However, ARK has been paring its TSLA stock and Square holdings in the past couple of weeks. EXAS stock is a top-five ARKG holding.
Apple stock edged up 0.2% to 146.14 last week, continuing to consolidate in declining volume. Shares are slightly extended from a 137.17 cup-with-handle buy point, according to MarketSmith. But it’s within range of a larger consolidation going back to late January, with a 145.19 entry. AAPL stock has been moving sideways in a fairly narrow range since hitting an all-time high 150 on July 15.
Investors could use 150.10 as an alternate buy point. This could develop into a flat base.
Wells Fargo Stock
WFC stock jumped 6.2% to 48.77. The banking giant jumped 3.8% on Friday, clearing a 48.23 buy point in above-average volume. Higher Treasury yields were the catalyst Friday for the lending giant, but Wells Fargo was holding up relatively well in recent weeks when the 10-year yield was tumbling. The relative strength line for WFC stock is improving, though below its 52-week high.
Several other banks broke out or flashed buy signals Friday, including Goldman Sachs (GS).
Cleveland-Cliffs stock pulled back this week from a buy point, but found support around an early entry of 23.55 and has now forged a high handle. Shares fell 3.9% last week to 24.02, but pared losses with Friday’s 3% gain. Investors could buy CLF stock as it breaks the handle’s downtrend, or as it regains the official 24.87 buy point or even 25.93, just above the high handle.
Square stock surged 11.3% to 275.10 this past week in heavy volume amid strong earnings and a deal to buy Afterpay for $29 billion. The up days were much bigger in terms of price and volume than the down days. Square stock is still actionable, even though it’s arguably between two buy points at 267.87 and 283.29.
The Snapchat parent has consolidated since gapping above an earlier consolidation following earnings in late July. Snap stock pulled back to the top of that base and its 10-day line, then rebounded on Wednesday. Investors could use 75.79, just above Tuesday’s intraday high, as an entry. A close below Tuesday’s low of 71.87 could serve as an exit.
Tesla stock rose 1.7% to 699.10 last week, but actually hit its weekly intraday high of 726.94 on Monday as it cleared a 700.10 early entry. On Friday, shares slumped 2.2%, dipping below that buy point. The volume in Friday’s decline was low, compared to a 9.7% three-day rebound from the 200-day line. That 3-day run pushed TSLA stock above a trend line entry, which remains intact, as well as the subsequent 700.10 resistance area. Both of those entry points are aggressive, in the lower half of a deep base. A less-aggressive early entry would be 780.29, just above the April 14 high.
If one views the April high as the start of a cup base within the larger consolidation, then one could view the past week as the start of a handle. But TSLA stock could use a little more of a pullback to shake out weak holders.
Market Rally Analysis
The major indexes rallied to record highs during the week after testing their 21-day moving averages. Growth stocks led most of the way, but the July jobs report on Friday pushed up Treasury yields and raised economic hopes. That lifted financials and a lot recovery sectors while weighing on highly valued techs, notably software.
The Nasdaq didn’t fall that much on Friday. ARK ETFs better reflected the weakness in growth names, but ARKK and ARKG still had strong weekly gains.
The Russell 2000 had a strong gain, though it remains stuck below its 50-day line.
If the Russell 2000 can trend above that key level while the major indexes rise at a steady pace and avoid getting extended, the rally should be in good shape.
Leading stocks generally had a good week, though some wild swings, often tied to earnings, may have whipsawed investors.
What To Do Now
Review your holdings. Are they in good shape? Is your portfolio well balanced? Your watchlists may need some serious revision after the waves of earnings reports.
It’s probably a good idea to diversify, especially if you’re overweight highly valued growth stocks. Sector rotation remains while a rising yield environment probably wouldn’t be great for high PE names.
So consider financials, steel makers as well as medicals. Consider including a Long-Term Leader to reduce volatility.
Try to buy as early as possible and be cautious with add-on purchases. Making small add-on buys can be a way to slowly build up a position in a winning stock. But in a choppy, slow-moving rally, buying a stock after it’s run up 10%-20%-30% has more risks.
A number of software stocks, such as CrowdStrike (CRWD) and Shopify (SHOP), made big moves from early entries. As they’ve gotten to highs they’ve flashed buy signals at various times but have trended sideways. That doesn’t mean they won’t move higher again. But make sure any buys are relatively small and you have an exit strategy for those additional shares.
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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