Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell threatening a big one late next week. The share price rally pulled back last week from key resistance as Treasury yields moved back towards 3%.
Highly valued growth names, which had made big moves in the past two months, were among the biggest losers. Bitcoin and other cryptocurrencies sold off hard on Friday.
Investors should wait to see how the pullback in the market plays out before adding new exposure.
Warren Buffett shares apple (AAPL) and Occidental Petroleum (OXY) is worth watching. Occidental Petroleum broke out on Friday as Warren Buffett’s Berkshire Hathaway won regulatory OK to lift its OXY stake to 50%. AAPL stock is trading right around a trendline entry. Tesla (TSLA), Celsius Holdings (CELH), AstraZeneca (AZN), Monolithic power systems (MPWR) and Isolate (PODD) is also near various points of purchase.
CELH shares and Monolithic Power are on the IBD Leaderboard Watch List. AZN stock is on SwingTrader. MPWR stock is on the IBD Long-Term Leaders. Celsius, Monolithic and Tesla stocks are at the IBD 50. Monolithic and OXY stocks are at the IBD Big Cap 20.
Insulet and AstraZeneca were the IBD Stock Of The Day picks last week.
Fed chief Powell
Fed chief Powell will deliver a policy speech on Friday at the annual Jackson Hole meeting. Powell has used this speech in previous years to highlight notable policy changes. It is unclear what he might say that will surprise the markets. The Federal Reserve is in the midst of a rate hike cycle to combat high inflation. Policymakers may soon move to smaller rate hikes at the Fed, but Powell may not be ready to tip his hand.
The markets are divided about whether the Fed will raise interest rates by 75 basis points for the third time in a row at the meeting on 20-21. September, or choose a half-point move.
Even after his speech, there will still be several key economic reports ahead of the September Fed meeting, including the August jobs report and the consumer price index.
Bitcoin is falling
Bitcoin fell on Friday after retreating modestly earlier in the week. It was trading near $21,000 Friday night. After falling below $18,000 in June, the Bitcoin price had rebounded to nearly $25,000 on August 14. Like speculative growth stocks, Bitcoin and cryptocurrencies are struggling with rising government interest rates. Higher interest rates also strengthen the dollar.
Bitcoin-related stocks such as Coin base (COIN) also fell sharply in the last week.
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 stock rallied to start the week moving toward or above key resistance, but eventually retreated, largely or entirely, on Friday.
The Dow Jones Industrial Average fell 0.2% in last week’s trading. The S&P 500 index fell 1.2 percent. The Nasdaq composite fell 2.6 percent. The small-cap Russell 2000 skidded 2.9%.
The 10-year Treasury yield rose 14 basis points to 2.99%, including 11 basis points on Friday.
US crude oil futures fell 1.4% to $90.77 a barrel last week, but recovered well from weekly lows. Natural gas futures traded around 14-year highs.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 2.9% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.4%, erasing strong weekly gains. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3.9%. The VanEck Vectors Semiconductor ETF ( SMH ) fell 4.2%, with MPWR stock a stake.
The SPDR S&P Metals & Mining ETF ( XME ) fell 4.2% last week. The Global X US Infrastructure Development ETF ( PAVE ) fell 1.4%. The US Global Jets ETF (JETS) fell 4.2%. The SPDR S&P Homebuilders ETF (XHB) turned lower, dropping 3%, ending an eight-week winning streak. The Energy Select SPDR ETF (XLE) rose 1.3% with OXY stock a notable holding. The Financial Select SPDR ETF (XLF) returned 1.8%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.5% last week but rallied on Friday.
ARK Innovation ETF ( ARKK ) reflects more speculative stock stocks, plunging 14% last week, undercutting its 50-day line. The ARK Genomics ETF ( ARKG ) plunged 13% to just above its 50-day mark.
Tesla stock is a large holding across Ark Invest’s ETFs.
Top five Chinese stocks to watch now
Warren Buffett stocks
OXY shares rose 9.9% to 71.29 on Friday, running past a 66.26 cup handle buy point in triple normal volume, according to MarketSmith analysis. Shares are now slightly extended from the 5% buy zone, so investors may want to wait for a pullback.
Occidental Petroleum has outperformed many other oil stocks as Warren Buffett’s Berkshire has amassed an OXY stock stake of just over 20% in recent months.
On Friday, Berkshire revealed that the Federal Energy Regulatory Commission approved its request to buy up to 50% of Occidental Petroleum, triggering the breakout. Berkshire applied for the right to do so on July 11, the company said Friday.
Berkshire’s No. 1 position is in Apple, which outperformed other megacaps and the broader market over the past two months. Apple shares fell 1.7% to 171.55 on Friday. The Dow Jones tech giant ended a six-week winning streak but fell just 0.3%. AAPL stock is back below a downtrend line, currently around 173, which could serve as an early entry. The official buy point is 183.04. Ideally, Apple stock would form a handle soon.
Other stocks to watch
Tesla shares fell 1.1% to 890, retreating below the 200-day mark. On Tuesday, TSLA stock hit 944, a three-month high and managed an aggressive entry. Tesla held up much better overall than rival electric car makers and Ark-type stocks last week, but is a long way from the official buy point of 1208.10.
On August 25, TSLA stock will split 3-for-1. It is unclear whether this will be a positive or negative catalyst. Tesla proposed the split months ago, while shareholders approved it on August 4.
Tesla vs. BYD: Which EV giant is the best buy?
CELH shares fell 6.5% to 98.28 last week, but are finding support around their 21-day moving average. A short undercut of the 21-day line can be helpful. After rallying since late May, Celsius stock has now formed a handle on a deep nine-month consolidation, offering a buy point at 109.84.
AZN shares rose 0.8% to 67.17 last week, nearly reclaiming an old buy point of 67.50 after pulling back from the 50-day line the previous week. The relative strength line has weakened in recent weeks as AstraZeneca shares consolidated while the broader market advanced. But AZN shares and other defensive growth names may be poised to outperform again.
MPWR stock fell a little over 3% in the past week to 511.65, which was an inside week compared to the previous week. Monolithic Power stock has a buy point at 541.49 cup handle after the chipmaker rallied from early July to early August. A drop to the 21-day moving average would coincide with the 500 level and only undermine the handle’s lows.
PODD stock fell 1.2% to 267.42 last week. The diabetes product maker’s stock has a buy point at 276.48 in a deep double bottom base. Insulet stock could use a bit more of a shakeout, perhaps to the 21-day moving average.
Market rally analysis
The stock rally hit resistance around the 200-day moving average last week. The S&P 500 came within one point of that key level while the Dow Jones and Russell 2000 moved above it during the week, but ultimately finished below.
At first, the major indexes stalled, resisting the pullback, although ARKK and highly valued growth names saw heavy losses. But on Friday, the Nasdaq finally fell below its 10-day moving average, moving toward its 21-day line.
The major indexes had been rising for weeks, with many former leaders rising 50%, 100% or more from their lows. So the 200-day line was a logical place for a pullback.
Rising Treasury yields helped provide some news for last week’s retreat. Higher prices are a draw for stocks, especially highly valued growth names. Rising energy prices, if sustained, could limit or even halt inflation’s decline while leading to larger Fed rate hikes for a longer period of time.
However, higher energy prices are good news for oil and gas stocks such as Occidental Petroleum, which was among the big winners last week.
Drug makers and defensive growth stocks held up relatively well, including AZN shares and Hershey (HSY).
A pullback to the 21-day line is likely to be good news for the market rally, allowing stocks like Monolithic and Celsius to make deeper handles for a proper shakeout. But you never know if a modest pullback will turn into something more serious, or which sectors might have a tougher time.
Time the market with IBD’s ETF market strategy
What to do now
Investors should be cautious about adding net exposure right now, as the stock market rally pulls back. If you decide to buy a new stock, you can offset it by taking partial or full profits in other holdings.
There is no need to cut exposure so far, but don’t let decent gains drop to zero and be quick to cut losing positions.
This is a great time to work on watchlists. There is still a lot of leadership or potential leadership in the market. Many stocks may make handles, bases or pullbacks in the coming days, creating a number of buying opportunities.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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