Dow Jones Futures rise after market rally ends losing streak; 5 shares close to buy points
Dow Jones futures rose modestly early Friday, along with S&P 500 futures and Nasdaq futures. Lululemon, Costco and Broadcom reported earnings after the close.
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Shares rallied modestly on Thursday, but recouped only a small part of the losses of the past few days. Investors should remain cautious amid choppy market action. The S&P 500 remains below its 200-day line with most indexes also hitting resistance at their 21-day moving averages.
Semiconductor stocks did well, with chipmakers Nvidia (NVDA) among the S&P 500’s top performers on Thursday. But chip-equipment makers are generally in better shape, with KLA Corp. (KLAC), Axcelis Technologies (ACLS) and Ultra Clean Holdings (UCTT) flashing buy signals on Thursday. ASML (ASML) and Materials used (AMAT) is among the close buy points.
Key income
Costco Wholesale (COST), Lululemon Athletica (LULU) and Broadcom (AVGO) reported late Thursday.
COST stock was little changed overnight after Costco’s earnings and sales just missed views. Costco shares lost a fraction in Thursday’s regular session, but are down nearly 11% so far this month.
LULU stock fell in extended trading after the yoga apparel retailer guided slightly lower for the critical holiday quarter. Lululemon earnings slightly topped Q3 views. Lululemon shares rose 0.6% to 374.11 on Thursday, nearing a buy point at the 370.56 cup handle. But it is set to fall out of that buying range.
AVGO shares rose solidly in premarket trade as Broadcom earnings and guidance topped the views, and the chip and software giant also raised its dividend. Broadcom shares closed up 2.4% at 531.08, just below the 200-day mark. Last week’s high of 552.42 may offer some sort of entry.
LULU stock is on the IBD Leaderboard as an earnings options play. KLAC stock is on the IBD Long-Term Leaders.
Dow Jones Futures today
Dow Jones futures rose 0.3% relative to fair value. S&P 500 futures rose 0.4% and Nasdaq 100 futures rose 0.5%.
Crude oil futures rose slightly.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Stock market rally
The stock rally had a solid session, with the indices largely sideways after the first hour of trading.
The Dow Jones Industrial Average rose 0.55% in Thursday’s trading. The S&P 500 index rose 0.75 percent. The Nasdaq composite rose 1.1 percent. The small-cap Russell 2000 rose 0.7%.
U.S. crude fell 0.8% to $71.46 a barrel, with some big swings during the day. Crude futures are now at levels the Biden administration signaled would trigger replenishment of the Strategic Petroleum Reserve, which has been drained to long-term lows this year to reduce energy costs.
The 10-year Treasury yield fell 8 basis points to 3.49%, but that was an intraday after it fell to 3.41% on Wednesday.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8%. VanEck Vectors Semiconductor ETF (SMH) gained 2.55%. Nvidia shares, ASML, KLA and AMAT are all SMH holdings. ARK Innovation ETF ( ARKK ) reflects more speculative stock stocks, up 2.4% and ARK Genomics ETF ( ARKG ) 2.2%.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.3% and the Global X US Infrastructure Development ETF ( PAVE ) rose 0.8%. The US Global Jets ETF (JETS) fell 0.3 percent. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.6%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) rose 0.1%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.9%.
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Chip stocks near buy points
Several chip-gear manufacturers are in or near buying zones. In general, semiconductor equipment makers have some bleak forecasts for the year ahead, but chip-gear stocks often bottom out well before business turns.
KLAC shares rose 2% to 395.92, clearing some buy points between 392.60-396.02. Trading was very light, but there were a number of big gains on increasing volume as KLA recovered from the October and November bottoms. The relative strength line is at record high levels, even with shares well off the January peak. KLA stock is a long-term leader, but the time to buy a stock like an LTL is when it’s closer to the 200- or 50-day lines.
ACLS shares fell 4.9% to 81.93, returning above an 80.34 cup-with-handle buy point, according to MarketSmith analysis. Axcelis is well extended from the 50-day line, but the 21-day line has run higher. The RS line for ACLS stock is at a 15-year high.
UCTT shares climbed 5.6% to 36.59, topping a 36.10 cup-handled buy point and hitting their best levels since April. The base formed at the very bottom, without a previous uptrend. But the handle formed mostly above the 200-day line. The RS line for UCTT stock is at an 8-month high.
ASML shares rose 0.9% to 606.89. Shares rose from the bear market lows on October 13th to November 15th. Since then, the advanced Dutch semiconductor equipment giant has consolidated comfortably above the 200-day line, at its best levels since April. The 21-day line is close to catching up. A break above the recent highs could offer an early entry. Ideally, ASML would bounce back from the 21-day line or forge a proper base.
AMAT shares rose 2.4% to 108.61 on Thursday. The shares are just above the 200-day mark after their own Oct. 13-Nov. 15 races. Applied Materials has a three-week tight pattern, offering a buy point at 112.22. Investors can use a short trend line, perhaps with Thursday’s high of 109.43 as a trigger, as a slightly earlier entry.
Meanwhile, chip giant Nvidia gained 6.5% to 171.69, rebounding from its 21-day line. NVDA stock is just below the 200-day mark now. An aggressive trader can use a decisive clearing of the 200-day line as a buy signal. But it might be better to wait for Nvidia stock to clear the 200-day and form some sort of consolidation, a la ASML or AMAT, to spy a safer entry.
Market rally analysis
The stock rally snapped a recent losing streak with modest to solid gains. But it did not fundamentally change the technical picture. The major indices are moving sideways, finding support at key levels but also hitting resistance.
The S&P 500 just managed to close above its 21-day moving average. The benchmark needs to bounce back above its 200-day moving average and its December 1 high.
The Nasdaq composite held support at its 50-day moving average, reclaiming the 11,000 level, but only closed the 21 days. The Russell 2000, which fell below its 200-day and 21-day lines earlier this week, retreated from its 21-day intraday.
The Dow Jones, which closed just above its 21-day moving average on Wednesday, bounced modestly on Thursday.
The markets may not take any decisive action with important news on the way.
The producer price index for November is due Friday morning. Wholesale inflation should show a continued steady slowdown. But the real concern lies in the service prices. The CPI report for November is set for December 13, with the year-end Fed meeting concluding the next day.
These events can be the catalyst for large market movements up or down. Of course, the indices have seen big moves over the past month around the October CPI, Fed Chair Powell’s speech and more, but sideways the choppy action continued.
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What to do now
Some stocks flashed buy signals on Wednesday, including KLAC, ACLS, United Rentals (URI) and Dexcom (DXCM). Investors could have pounced on some of these – or not.
The total exposure should remain low. The current market trend is sideways and choppy. It’s just a tough environment to make progress in stock trading. If you make new purchases and make a decent profit, consider taking partial profits quickly. Too many promising stocks have risen 5%, 10% round trip in recent weeks.
A number of stocks from a number of sectors are establishing themselves. So keep your watchlists up to date and stay engaged.
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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