Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures. The share rise had another strong week, and went up to a big test.
A market pause would not be a surprise, and may be healthy, after strong price increases in generally low volume in recent weeks. Investors should be cautious about adding more exposure.
Diversified oil giant Exxon Mobil (XOM) sets up near possible entries, as energy stocks once again take the lead. Costco Wholesale (COST) has a cup with handles, although several key rivals report this week. UnitedHealth (UNH) has traded closely within a buy zone, creating a new entry. apple ( AAPL ) is nearing a breakout as AAPL stock outperforms other megacaps. Microsoft (MSFT) is approaching its 200-day line, which could offer a chance to initiate a position.
China EV startup Li Auto (LI) reports earnings before Monday’s opening. The LI share has been among the better EV shares, and has outperformed the giants BID (WILL) and Tesla (TSLA), but must break above the 50-day line. BYD shares are below the 50-day line, while Tesla is just below the 200-day.
The UNH share is on the IBD Leaderboard and was Friday’s IBD Stock Of The Day. MSFT stock is a long-term IBD leader.
The video embedded in this article discussed the weekly market action in depth, while also analyzing Exxon Mobil, UnitedHealth and Apple stocks.
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 trading session.
Join IBD experts as they analyze actionable stocks in the Stock Market Rally on IBD Live
Stock market rally
The stock market rally closed at weekly highs despite some reversals during the week.
The Dow Jones Industrial Average rose 2.9% in last week’s trading. The S&P 500 index rose 3.25 percent. The Nasdaq composite rose 3.1 percent. The small-cap Russell 2000 jumped 5%.
The 10-year Treasury yield rose 1 basis point to 2.85%, but with some big moves during the week.
US crude oil futures rose 3.5% to $92.09 a barrel last week, despite Friday’s pullback. Gasoline futures rose 6.7 percent. The prices of natural gas rose by 8.7 per cent for the week.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 2.3% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) gained 3.1%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 3%, with MSFT as the top IGV holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%, rebounding from sharp losses after Nvidia (NVDA) and Micron (MU) warnings.
The SPDR S&P Metals & Mining ETF (XME) gained 8.3% last week. The Global X US Infrastructure Development ETF (PAVE) rose 4.6%. The US Global Jets ETF (JETS) rose 3.5%. The SPDR S&P Homebuilders ETF (XHB) rose 4%, its eighth straight weekly gain. The Energy Select SPDR ETF (XLE) jumped 7.4%, with XOM stock a huge weight in the XLE. The Financial Select SPDR ETF ( XLF ) jumped 5.4%. The Health Care Select Sector SPDR Fund ( XLV ) climbed 1.65%, with UNH stock a large holding.
ARK Innovation ETF ( ARKK ) mirrors more speculative stock stocks, climbing 3.25% last week and ARK Genomics ETF ( ARKG ) 3.8%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.
Top five Chinese stocks to watch now
Shares close to buy points
XOM shares rose 6.3% to 93.99 last week, moving back above the 50-day line. Shares in the energy giant are approaching a trend line from the peak of early June. The official buy point is 105.67, but it will be well above the 50-day mark. Volume was low last week and hasn’t been much over the past month as Exxon stock rebounded. Earnings growth continues to boom.
COST stock was down 0.6% in the past week to 537.21. Shares are trading lower in a handle with a buy point of 552.81, according to MarketSmith analysis.
Remember the smaller rival BJ’s Wholesale (BJ) reports next Thursday. Walmart (WMT), which owns the Sam’s Club department store chain, will come out Tuesday morning, with Goal (TGT) reports on Wednesday.
The UNH share rose 1.6% to 543.70. The health insurance giant remains within a 518.80 cup-with-handle buy point, while still below the April 14 high. UnitedHealth stock didn’t quite break out a three-week tight pattern, only exceeding the weekly move limit. But investors can still use 545.84 as an alternative buy point.
Apple shares rose 4.1% to 172.12 last week. It was the sixth weekly increase in a row, but all have come on light volume. On the upside, the relative strength line has hit several new highs, reflecting AAPL stock’s outperformance compared to the S&P 500. Apple stock is moving toward a double bottom buy point at 179.71. Technically, the shares are only hitting a trendline entry. Ideally, AAPL stock will forge a handle.
MSFT shares climbed 3.2% to 291.91, but unlike Apple are still below their 200-day moving average. A big move above the 200-day line could offer a chance to enter MSFT stock as a long-term leader. The RS line is not far from the 2022 high, even with MSFT stock significantly below the late November record high of 349.67.
Li Auto Earnings
Wall Street expects a net loss of 2 cents a share on $1.4 billion in second-quarter sales, according to FactSet. That compares with a year-earlier loss of 1 cent on $780.4 million.
Li Auto has been profitable for the past three quarters, but shutdowns due to Covid took their toll on production and deliveries in Q2. Li Auto currently has only one model, the Li One hybrid SUV.
But sales of the premium L9 hybrid SUV have begun, with deliveries set to start later this month. Pre-orders have been strong, and Li Auto predicts L9 deliveries of 10,000 or more in September.
LI shares fell 3.4% to 32.49 last week, creating more space relative to the 50-day line and extending a downtrend that began in late June, which followed a huge rally from early May. Shares closed in the upper half of their weekly range. Li Auto stock will make a new base with a buy point at 41.59 if it starts building to the right. A strong move above the rising 50-day could offer an early entry.
Tesla vs. BYD: EV Giants are now Frenemies
Tesla and BYD shares
Tesla shares jumped 4.1% to 900.09 last week. It bounces back above the 200-day moving average, regaining its 40-week line on Friday. Breaking above its 200-day line and the August 4 high of 940.82 would offer an aggressive entry for TSLA stock. The official buy point is 1,208.10.
BYD stock fell 0.2% last week to 36.69, trading close but below its 50-day line. The China EV and battery giant has a base with a buy point of 43.71. A decisive move above the 50-day would offer an early entry.
BYD is supplying Blade batteries to Tesla Berlin, according to some reports. Leaf-powered Model Ys should start rolling off the production line in a few weeks. Meanwhile, BYD will begin deliveries of the Seal sedan, a much cheaper rival to the Model 3, in the coming weeks. BYD is also starting Atto 3 deliveries in Australia within days, entering a new market as part of a huge international expansion.
Market rally analysis
The stock market rally had a couple of unsightly intraday reversals, on Monday and Thursday, but in the end had solid gains on the major indices.
The Dow Jones, S&P 500 and Russell 2000 have all cleared their early June highs, joining the Nasdaq. The Russell 2000 is just above its 200-day line, with the S&P 500 and Dow Jones close behind. The Nasdaq has a little more work to do to get to the long-term level when it comes to the 13,000 level.
Breaking above the 200-day mark would be evidence that the current uptrend is more than a significant bear market rally. A pause or pullback would not be a surprise after a strong advance for the major indexes, mostly on low volume. Friday’s bounce, an insider’s day for the S&P 500 and Nasdaq, came on very low volume.
A pause or modest pullback over several days or a few weeks can be constructive, but the market is going to do what it’s going to do.
Energy stocks continue to look strong, but will rise or fall with underlying oil and natural gas prices.
A wide range of medicines do well. Chipmakers, lithium plays, some steel plays, transporters and more are showing positive action.
Time the market with IBD’s ETF market strategy
What to do now
As Scott Bennett of Invest with Rules told IBD Live on Friday, investors don’t need to hit the brakes, but they may want to ease off the gas.
Be careful about adding exposure in the very short term, with the market rally perhaps stretched and facing yet another key area of resistance. Taking partial profits is still a good strategy, and a way to prevent the exposure from increasing from new purchases.
Still, some quality stocks continue to flash buy signals or set up. Investors should take part in this market and look for new opportunities. So keep building those watch lists.
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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