Dow Jones Futures: Market Rally Resilient; Apple, Tesla, these 5 chip stocks can use this
Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. The stock rally had a generally positive week, with the Nasdaq and small caps leading the way.
But with the major indexes at resistance levels after strong recent gains, the market rally showed resilience amid some mixed headlines.
Berkshire Hathaway (BRKB) earnings are due on Saturday morning. Investors are watching to see if Warren Buffett added to Apple shares and other core holdings, and if Berkshire increased its net exposure to stocks near the bottom of the market.
BRKB stock fell 2.8% last week to 292.07, trading between the 200-day and 50-day lines. Berkshire shares have rebounded from their June lows, but are still well off their peak of 362.10 in late March.
Chip stocks are on the rise again, a positive sign for any market rally. Monolithic power systems (MPWR), CLOTHES (KLAC), Analog devices (ADI), Axcelis Technologies (ACLS) and All together (ON) is rising but is currently in no man’s land, extended from early entries but below traditional buy points.
apple ( AAPL ) may still be within range of an early entry, but investors may want to wait to see if AAPL stock can forge a handle.
Tesla shares sold off on Friday, but the electric car giant must take a break. Meanwhile, the California DMV has charged Tesla (TSLA) of false advertising to promote autopilot and full self-driving.
Finally, Celsius (CELH) received a heat check after huge increases in recent days and weeks. What Should Investors Do With CELH Stock’s Earnings Loss Tuesday?
MPWR stock is on the IBD Long-Term Leaders. The KLAC share is on the list of long-term leaders. CELH stock, Axcelis Technologies, Onsemi, KLA and Monolithic Power are all on the IBD 50. ADI stock, Onsemi and Monolithic Power are on the IBD Big Cap 20. ACLS stock was Friday’s IBD Stock Of The Day. Monolithic Power and ON shares were the Stock of the Day earlier in the week.
The video embedded in this article discussed the market action and analyzed it Vertex Pharmaceuticals (VRTX), EQT (EQT) and ACLS shares.
Dow Jones Futures today
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The Dow Jones Industrial Average was down 0.1% in last week’s trading. The S&P 500 index rose 0.4 percent. The Nasdaq composite rose 2.15 percent. The small-cap Russell 2000 advanced 1.9%.
The 10-year Treasury yield jumped 20 basis points to 2.84%, including 16 basis points on Friday after the hot jobs report. The odds of an interest rate increase of 75 basis points on 21 September rose to two-thirds from approx. 40% ahead of the employment data.
U.S. crude futures plunged 9.7% for the week to $89.01 a barrel, hitting their lowest levels since before Russia’s invasion of Ukraine in late February.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) jumped 2.9% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.7%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 3.7%. VanEck Vectors Semiconductor ETF (SMH) rose 2.7%.
The SPDR S&P Metals & Mining ETF ( XME ) climbed 0.5% last week. The Global X US Infrastructure Development ETF ( PAVE ) rose 0.15%. The US Global Jets ETF (JETS) rose 3.2%. The SPDR S&P Homebuilders ETF ( XHB ) advanced 0.2%, its seventh straight weekly gain. The Energy Select SPDR ETF (XLE) plunged 6.8% and the Financial Select SPDR ETF (XLF) fell 0.1%. The Health Care Select Sector SPDR Fund ( XLV ) retreated 0.7%, despite strength in biotech.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) was up nearly 11% last week and the ARK Genomics ETF ( ARKG ) 10.5%. Tesla stock remains a large holding across Ark Invest’s ETFs.
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Monolithic Power shares rose nearly 15% to 532.33 last week on strong earnings. Perhaps investors could have bought MPWR shares on the earnings gap on Aug. 2, when it removed some other areas of resistance. But at Friday’s close, Monolithic stock was 17% above its 200-day line and 24% above its 50-day line. The relative strength limit is already at a high level, signaling MPWR stock’s outperformance compared to the S&P 500 index. The stock has a buy point of 580.10 from the consolidation back to the end of November. But ideally, stocks would pause and form a handle. That will provide a lower entry as well as allow the moving averages to catch up some ground.
It’s the same story for Axcelis, Onsemi and KLAC shares, which all reported earnings in the past two weeks and are now extended from moving averages but below traditional breakouts. ADI stock is about the same, although Analog Devices earnings are in the red on August 17th.
Apple shares rose 1.75% to 165.35, their fifth straight weekly gain. Investors could have bought AAPL shares when they cleared the 200-day line on July 29 after earnings. At 3.7% above the 200-day mark, it is still arguably possible as an early entry. The RS line for Apple stock is already at peaks. The official buy point is 13.04, but a handle, at current levels or slightly higher, would be appealing.
Tesla shares fell 6.6% to 864.51 on Friday, down 3% for the week as it erased much of a seven-day winning streak. It also pushed shares back below the 200-day mark. But if TSLA stock can stall for a few days around today’s levels, breaking above Thursday’s high of 940.82 could signal an aggressive entry. That would be too low for a traditional handle.
At Tesla’s annual meeting on Thursday night, shareholders approved a 3-to-1 stock split, although it had been expected for months. CEO Elon Musk spoke at length about Tesla’s prospects, but did not say anything dramatic. Elon Musk’s ongoing Twitter saga could weigh on TSLA stock.
That’s what legal experts say Twitter (TWTR) has a strong case that Musk must go ahead with his $54.20 per share takeover deal. The Musk-Twitter trial will take place in October. Amid the latest legal filings, TWTR stock rose 3.6% to 42.52 on Friday, reclaiming the 200-day line and hitting its best levels in nearly three months.
Meanwhile, the California Department of Motor Vehicles on July 28 accused the EV giant of misleading customers about the capabilities of Autopilot and FSD, according to filings first reported by the Los Angeles Time. But if the state DMV wins the action, it will likely only require Tesla to change its advertising and marketing.
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Celsius stock has been on a huge tear since it exploded above the 200-day line on July 5. News came on August 1 that PepsiCo (PEP) took a large CELH stake and would be the main distributor for the energy drink maker.
On Friday, CELH stock fell 9% to 98.62, though it bounced off the 10-day line and still jumped nearly 11% for the week. Celsius will move up from the small-cap S&P 600 to the S&P MidCap 400. But fewer mutual funds and ETFs track the midcap fund vs the S&P 600, so the result is that fewer index funds can own CELH shares. Also energy drink leader Monster Drink (MNST) was down 5% on Friday due to weak earnings.
Celsius earnings are due Tuesday, so investors have decisions to make. If you bought CELH shares near the 200-day or resistance around 72, then you still have plenty of cushion. You can choose to lock in some partial profits. For those who bought extended, say on Monday’s Pepsi news, you may have a small cushion or be sitting on a loss heading into results. Celsius shares tend to move a lot on earnings.
Market rally analysis
It was a mixed week for the stock market rise. Growth stocks and small caps led the way, while the Dow Jones and S&P 500 were little changed
But given the flood of earnings and a red-hot jobs report signaling big Fed rate hikes for longer, the market rally could have sold off late last week after stocks ran up to resistance levels. But they stopped at most. Friday’s action in particular was encouraging.
The Nasdaq is above the peaks at the beginning of June, but is approaching a trend line from the beginning of the year. The Russell 2000 is right at its early June highs, while the S&P 500 and Dow Jones are still working at that key level.
A longer pause or modest withdrawal would be healthy. The market recovery has gone up a long way, with most of the progress on relatively low volume.
Meanwhile, many leading stocks or potential leaders could use a breather. The major indices stalling or retreating will provide an opportunity for the likes of Monolithic Power and Onsemi to forge handles, creating lower entries and allowing moving averages to catch up.
The same applies to the Apple share, Tesla and many others.
Market management is expanding. Biotech, chips, aerospace/defense, solar, steel and energy, just to name a few, are showing strength.
These are encouraging signs. But this could still be a bear market rally that eventually runs out of steam.
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What to do now
Investors should play this market, but not for all the marbles. There is still reason to be cautious about today’s market. At any given time, there are not many stocks flashing buy signals, while shakeouts and sector rotations can make holding positions difficult.
So add exposure carefully. There is still an argument for taking partial profits.
Build your watchlists. Be sure to cast a wide net so that you see potential leaders from a variety of sectors.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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