Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. Shares rose last week, but the major indices reduced losses at the end of Friday, with Nasdaq again facing a major obstacle.
Dow Jones component UnitedHealth (UNH) rose in a buying zone on Friday with strong earnings, and led other health insurance companies past buying points, including Hundreds (CNC) and Humana (NYNNE). Option Care Health (OPCH) and Shockwave Medical (SWAV) also jumped into buying areas.
It’s a big week for EV giants Tesla (TSLA) and China BYD (BYDDF). Tesla revenues fall due on Wednesday night, with investors wanting to see how the carmaker managed the Covid shutdown and other headwinds last quarter. BYD, which announced a booming preliminary earnings in the first half of this past week, will begin sales of the Seal sedan, a Model 3 rival, on Monday. Both the Tesla stock and BYD fell significantly last week, and need time to repair.
Chip stocks are nowhere near actionable. But they show some signs of strength in the middle of a long, painful downtrend. This is a positive sign for a sustained market rally.
The UNH stock is on the IBD Leaderboard. The UnitedHealth and CNC stock is at IBD 50. The HUM stock is at IBD Big Cap 20. Option Care Health was Friday’s IBD stock of the day.
Dow Jones Futures today
Dow Jones futures open at 6pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The rise in the stock market fell most of the week, but made up for most of the losses towards the end.
The Dow Jones Industrial Average fell 0.2% in last week’s trading. The S&P 500 index fell 0.9 percent. The Nasdaq composite retreated 1.7%. Small-cap Russell 2000 fell 1.4%
The 10-year government interest rate fell 17 basis points to 2.93%. The two-year government interest rate rose 5 basis points to 3.12%. The inverted yield curve for the Treasury from two years to 10 years is a recession warning, but it is slightly less inverted than in the middle of the week. The 1-year yield, which moved above the 2-year yield for large parts of the week, closed at 3.1%.
US crude oil futures fell 6.9% to $ 95.78 a barrel last week, even after jumping some from Thursday’s lowest level.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.9% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.6. iShares Expanded Tech-Software Sector ETF (IGV) fell 4.4%, by one ServiceNow (NOW) warning takes a toll on the sector. VanEck Vectors Semiconductor ETF (SMH) rose almost 3%.
SPDR S&P Metals & Mining ETF (XME) fell 0.1% last week. Global X US Infrastructure Development ETF (PAVE) received 1 cent. The US Global Jets ETF (JETS) rose 1.4%. SPDR S&P Homebuilders ETF (XHB) rose 0.5%. Energy Select SPDR ETF (XLE) fell 3% and Financial Select SPDR ETF (XLF) fell 0.9%. Health Care Select Sector SPDR Fund (XLV) fell 0.4%, recovering late in the week. The UNH share is a large XLV shareholding.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, fell 5.9% last week and ARK Genomics ETF (ARKG) fell 2.9%, with software and highly valued growth struggling. The Tesla stock is a large holding for Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.
Five best Chinese stocks to see now
Shares in buying zones
UnitedHealth earnings easily beat second-quarter impressions early Friday. The UNH share jumped 5.4% on Friday to 529.75, and jumped over a buy point of 518.80 from what is either a cup-with-handle base or a double-bottom base with handles. For much of the week, UnitedHealth shares fell, testing their 50-day line on Thursday before returning for a small gain. The relative strength line, the blue line in the charts, is record high, which reflects the UNH share’s strong excess return.
UnitedHealth revenues also lifted rivals. Centene shares fell 4.55% to 89.66, back above an 87.44 double-bottom buying point, according to MarketSmith analysis. The Humana share climbed 3.2% to 487.54, taking back an entry of 475.54. Both Centene and the HUM share reported earnings later this month.
Option Care shares rose 7.7% on Friday to 31.58 in heavy volume. It managed a buying point of 31.18 cups. But the better entry was 30.41, just above a not quite handle. The RS line for the OPCH stock has risen to new heights. The Option Care Health income is due on July 27.
Shockwave shares rose 5.2% to 209.90 on Friday, and managed a not quite handle that gave an early entry of 208.28. That the SWAV share inflow also coincides with a long trend line from the top in November. The RS line is already at a new high, even with Shockwave heights. However, Friday’s low volume was not ideal.
Tesla’s income loom
Tesla revenues fall due Wednesday night. The second quarter was marked by a prolonged closure of the factory in Shanghai due to the city’s Covid closure, followed by a prolonged rise to full production. The Berlin and Austin factories have also seen a slow rise. Analysts still expect Tesla revenues to increase by 26% compared to a year earlier, although it will end a five-quarters series of triple-digit growth. Sales growth should be cooled to an annual gain of 42%. Both EPS and revenue are expected to fall significantly compared to Q1.
Investors will look ahead for guidance for the rest of the year, as well as any hints about future products. CEO Elon Musk said on Friday that the prices of Tesla cars, which have risen over the past year, could fall if raw material costs fall.
Tesla shares fell 4.3% to 720.20 last week, falling just below the 50-day limit, but staying above the 21-day limit. Undoubtedly, the TSLA share has created a bottom base, but it is not much of a previous trend from the lowest in May.
BYD approval stamp?
The BYD seal will officially go on sale on 18 July. The Model 3 competitor, with similar range and dimensions, but for $ 10,000 cheaper, is likely to begin delivery a few days later.
Pre-orders for the seal, which began in late May, are reportedly very high.
While Tesla and BYD can both claim the EV crown, this is the first clear case of the car manufacturers going against each other. It will not be the last. BYD is expected to launch Sea Lion, a Model Y crossover rival, later this year.
The BYD share fell 8.6% to 37.74 last week. Shares fell on rumors that Warren Buffett Berkshire Hathaway (BRKB) sold part or all of its large, long-term BYD share. There has been no confirmation so far.
The BYD share actually recovered well from weekly lowest levels of 32.91 after the electric car and battery giant reported a flourishing preliminary earnings for the first half of the year that were far above expectations. Analysts expect even stronger profits and margins in the second half of the year as production continues to plummet and BYD switches to more expensive vehicles with higher margins.
Nevertheless, the BYD share map needs some time to repair and forge a new base.
Tesla vs. BID: Which EV giant is the best buy?
Analysis of market rally
In the end, the big indices ended with slim to modest losses, but it was not a quiet week.
The rise in shares got off to a bad start, with Nasdaq falling back on Monday from its 10-week line, where it has met with resistance several times. The large indices continued to slide, but managed to recover well from the lows on Wednesday and Thursday, despite white-hot inflation reports that increased the odds of even larger interest rate increases from the Fed. On Friday, the shares jumped sharply, with the Nasdaq, Dow Jones and S&P 500 taking back their 21-day line.
Despite some large fluctuations, the Nasdaq actually had an indoor week, although the other indices briefly fell below last week’s lowest level. Nasdaq is once again close to its 50-day and 10-week averages. Will the technology-heavy composite once again turn its tail near these levels? A decisive move over 10 weeks – which will probably also mean removing the peaks in late June / early July – will be a positive signal. But there will still be several other important levels of resistance along the way.
For the time being, the market upturn is still under pressure, reach and very volatile. It is a difficult time to invest.
The macroeconomic climate remains difficult. Wednesday’s CPI report was gloomy, with a scary headline figure and details indicating recent inflationary pressures even when petrol prices fall. Friday’s economic data was more positive. Retail sales in June and the New York Fed’s Empire State Production Index for July were stronger than expected. Of crucial importance was that import prices, price gauges in the Empire factory survey and inflation expectations bode well for future inflation.
The medical sector remains the key area for market power. While some names faltered in the middle of the week, many withdrew from key levels on Thursday, while UNH revenues strengthened rivals and others on Friday.
Discount dealers look healthy.
More generally, there are some glimmers of hope and encouraging green shoots.
Do you want to make a quick profit and avoid big losses? Try SwingTrader
Chip shares rose for the second week in a row, helped by strong Taiwan semiconductor (TSM) earnings and guidance. This is a positive sign, because it is difficult to have a broad market rally without chips playing a significant role. The semiconductor sector has great market value, especially for Nasdaq, so weight alone is important. In addition, there are chips in almost everything, from PCs to phones to cars. So if the chips do well, a lot of the market is likely to flourish.
Nevertheless, the SMH ETF remains well below its 50-day line while few individual names are above that key level.
Weak earnings and guidance helped push stocks down early in the week, while strong results, including from UnitedHealth, Taiwan Semiconductor and Citigroup, helped stimulate gains later.
Time market with IBD’s ETF market strategy
What to do now
Earnings season increases this week, with Tesla, Netflix (NFLX) and Johnson & Johnson (JNJ) among the notable reports.
Over the past week, investors may have been shaken out of the shares as they fell significantly. In many cases, these names eventually came back. It is okay. You follow the rules not to be right every time, but to be right most of the time – and to avoid big losses. If a stock shakes you out and then a new buy signal flashes, such as UnitedHealth, do not be afraid to buy it back, even at a higher price.
There is still a time to keep the exposure light on. The market upturn is again close to key resistance, so a reversal would not be out of character. Until there is clear evidence of a sustained upward trend, cash should remain your number 1 asset.
But there are some glimmers of hope. Stay engaged and build your watch lists so you can be ready to take advantage of it.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
CAN YOU ALSO LIKE:
Best growth stocks to buy and look at
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools and Analyzes today
200-day average: last helpline?
Warm inflation is the “tailwind for growth” for this healthcare system