The Dow Jones futures will open Sunday evening, along with the S&P 500 and Nasdaq futures. There is an attempt at a stock market rally, but major indices have affected resistance at key levels as Treasury yields continue to rise. Tesla (TSLA) will be back in the headlines during the week.
The stock market rally is at a turning point. Major indices should outperform their resistance levels and continue to confirm the new rally attempt.
Microsoft (MSFT), Nvidia (NVDA), Sea Limited (IS), Fortinet (FTNT) and father of Google Alphabet (GOOGL) all bounced back last week to around their 50-day moving averages. Except, perhaps, Nvidia shares could be considered actionable in a confirmed market rally. But investors rule out CAN SLIM’s “M” at its peril
Meanwhile, Tesla FSD Beta will begin opening to more full-drive owners on Friday at midnight, according to CEO Elon Musk. Tesla will also hold an event at the Berlin factory on Saturday, with questions about when this plant will be operational. Tesla shares remain in a buying zone.
Shares of Tesla, Google and Microsoft are in the IBD ranking. SE shares are on SwingTrader. Shares of Microsoft, Google and FTNT are among IBD’s long-term leaders. Google shares are at IBD 50.
The video included in the article analyzed the attempt to concentrate the market and reviewed Google, Microosft, Nvidia and Proximity (DOCS).
Dow Jones Futures Today
The Dow Jones futures will open Sunday at 6 p.m. ET, along with the S&P 500 and Nasdaq 100 futures.
Remember that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading at the next regular stock market session.
Join IBD experts as they analyze the actions that can be taken at the stock market rally on IBD Live
News about the coronavirus
Coronavirus cases worldwide reached 237.96 million. Deaths by Covid-19 exceeded 4.85 million.
Coronavirus cases in the US have reached 45.12 million, with more than 732,000 deaths.
Stock market rally last week
The stock market rally attempt rebounded from Monday’s lows, and then reached resistance over the weekend.
The Dow Jones industrial average rose 1.2% in the stock market last week. The S&P 500 index rose 0.8%. The Nasdaq compound rose 0.1%. The small-cap Russell 2000 fell 0.3%.
The ten-year Treasury yield stands at 1.605%, the highest in four months. The ten-year yield jumped 14 basis points last week, the seventh consecutive weekly gain and the biggest advance since the week ended Feb. 19. That February rise coincided with the Nasdaq high.
Among the best ETFs, the Innovator IBD 50 (FFTY) ETF fell 0.9% last week, after falling 8.7% the previous week. The ETF (BOUT) Innovator IBD Breakout Opportunities increased 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) ETF fell 0.2%, with MSFT shares as the main component and Fortinet also with a stake. The VanEck Vectors Semiconductor (SMH) ETF retreated 0.7%, with Nvidia shares as a key member.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 0.5% and ARK Genomics ETF (ARKG) fell 4%. Tesla shares remain the first holdings of ARK Invest’s ETFs.
The SPDR S&P Metals & Mining (XME) ETF rose 0.1% and the US Development Infrastructure Development (PAVE) ETF rose just over 1%. The United States Global Jets ETF (JETS) fell 3.7%. The SPDR S&P Homebuilders (XHB) ETF 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 full standalone owners, starting with those who have scored 100 perfect scores on a safety test that measures their ability to drive according to various metrics. It will continue to add FSD owners and subscribers for several days, at least for several days.
Tesla will also release FSD Beta 10.2 on Friday night.
Meanwhile, a Tesla Berlin event on Saturday could drop real suggestions or predictions about when this facility will be operational. Musk made comments over the summer that were interpreted as meaning that production could begin as early as October, but perhaps he was referring to regulatory approval. It is not clear that the factory is about to end.
FSD Beta and the Berlin factory are key to Tesla’s growth history, especially with no new vehicles or substantial new markets planned for 2022.
A successful FSD Beta could be a continuous model of generating money and creating brand for Tesla. But if FSD drivers get complacent and several accidents occur, this could damage the brand and risk having a regulatory response. Meanwhile, the Berlin and Austin plants will substantially increase Tesla’s capacity. The question is: will there be enough demand, especially because global car production is slowly recovering from chip problems and a lot of new EV rivals are entering the US market?
Tesla shares rose 1.3% to 785.49 last week, the seventh consecutive weekly gain. The shares are in a buy range from a buy point of 764.55.
Google shares rebounded from Monday lows to close above the 50-day moving average, but below its ten-week line. It is also correct on a trend line. The line of relative strength is just below record highs after a strong race. In a confirmed market rally, it would probably be an early entry to its flat base. According to MarketSmith analysis, the official point of purchase is 2,925.17. But if the market rally falls, Google is likely to be under pressure. The good news is that it probably won’t fall like some highfliers.
Shares of Nvidia reached their 50-day line on Thursday, but have retreated a bit. You probably need the market to catch steam to make a real run. If the stock market rally continues and Nvidia goes above the trend line and the 50-day line, action can be taken. Work is underway on a new consolidation that will be an official basis after another week.
Sea Limited, which had returned to its 50-day line in late September, held sales well on Monday. On Thursday, SE stocks rebounded above their 21-day line, hitting a trend line, but closed near session lows. On Friday it made a lower investment, again hovering just above the 50-day rise, but below the ten-week line. If SE stocks could exceed Thursday’s highs in a healthy market, it would be feasible. It also has a flat base on a weekly chart with a buy point of 359.94.
FTNT shares retreated below its 50-day line in late September, but after a long period. Shares jumped from their 50-day high and crossed the trend line on Thursday, then fell on Friday. Investors are likely to have to wait for market concentration to show more strength and use Thursday’s high, 313.24, as input. FTNT also has a new flat base with a 322.10 point of purchase.
Microsoft’s stock chart is very similar to Google’s. MSFT shares are just above the 50-day average and just below the ten-week line, on a trend line. It has a flat base purchase point of 305.94.
Market Rally Analysis
The stock market rally attempt is at a turning point. After Monday’s sell-off, major indices rebounded. The market seemed oversold on Monday, so a rebound for a couple of days was no surprise. But the real trick is whether or not the big institutions will commit to this new market concentration, which is why a follow-up day is key.
Thus, the main indices rose on Tuesday, Wednesday and Thursday, but then stagnated on Friday as Treasury yields rose. The Dow Jones and S&P 500 reached resistance on their 50-day moving averages while the Nasdaq stopped below its 21-day line, below 50 days.
Indices should outperform their resistance levels and confirm the new uptrend. If they are removed, there is a serious risk that this correction will slow down.
Last week, many leading stocks recorded early entries or other buy signals, or were about to do so. This includes tech titans like Microsoft, Google and Nvidia, as well as names with high beta, such as Upstart Holdings (UPST) i Bill.com (INVOICE). If this market rally has legs, many or most will move forward. But if this rally springs up, the vast majority of these new potential leaders will also fall.
When the ten-year Treasury yield stalled in late 2020 and early this year, stocks initially continued to rise, but eventually retreated. The Nasdaq struggled for months, even after yields peaked.
This time, market pressures roughly coincided with the rise in yield to ten years, especially since mid-September. Over the next few weeks, investors in stocks and bonds will focus on the Fed and itself will begin to reduce bond purchases. Although the head of the Fed, Powell, has moved very slowly towards a reduction, the beginning of the end of easy money could weigh on the financial markets for a long time.
Another factor is that President Joe Biden is expected to announce his election to head the Federal Reserve in the coming weeks as well, with Powell’s term expiring early next year. Biden could name Powell for a second term, probably liking Wall Street. But maybe not. This could increase uncertainty at a delicate time.
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What to do now
If you’ve made some pilot purchases during the market bounce and are still flat or slightly up, you could cling to them, even if they are very pending. But right now is not a good time to add. While there would be a rapid rebound if market concentration strengthens next week, the downside of new purchases could be severe.
At this point, with the initial rebound over, investors should wait to see if the big institutions will really support this new market concentration.
If they do, and the major indices follow and exceed their 50-day lines, you should be prepared. There are dozens of actions that can be triggered or configurable. Have those on your watchlist and take advantage of a handful that interest you the most.
In the meantime, if the most important indexes are broken down, you’ll need to quickly reduce new purchases that don’t work and consider switching to cash in full.
Read the big picture every day to stay in sync with market leadership and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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