Market Rally takes up Steam, here’s what to do; 10 stocks flashing buy signals
Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, after a strong session for the stock market rally.
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The major indexes rose sharply on Wednesday. Bank fears continue to ebb while Micron technology (MU) gave some hope of a bottom in chips despite a gloomy report and outlook in the short term.
A number of stocks are flashing buy signals, including Micron shares, Microsoft (MSFT), Shift4Payments (FOUR), Mobileye Global (MBLY), STMicroelectronics (STM), Wynn Resorts (WYNN), DraftKings (DKNG), Rambus (RMB), Skyline Champion (SKY) and Workday (WDAG).
Microsoft, Rambus, Workday and STM shares are above traditional buy points. MU stocks, Shift4Payments, Wynn, DraftKings, and Skyline bounce back from key areas, breaking down sloping trend lines for early entries. MBLY shares have regained key levels.
The SKY share, Rambus and Wynn Resorts are on the IBD Leaderboard. WYNN stock and DraftKings are on SwingTrader. MSFT stock is on the IBD Long-Term Leaders. STMicro, DraftKings, Shift4Payments and WDAY stocks are at the IBD 50. MBLY stocks are at the IBD Big Cap 20. Skyline Champion was also Wednesday’s IBD Stock Of The Day, while FOUR stocks were Tuesday’s.
Regional banks haven’t rallied much this week, but at least they’re not falling. The battle First Republic (FRC) has bounced. Larger banks such as JPMorgan Chase (JPM) and Bank of America (BAC) has rebounded this week after hitting at least 2023 lows on Friday.
Investors should look to add exposure, given the action in the major indexes and leading stocks. But don’t rush in.
Dow Jones Futures today
Dow Jones futures lost a fraction of their fair value. S&P 500 futures were flat and Nasdaq 100 futures fell 0.1%.
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 rally opened solidly higher, with the major indices contributing to gains in the late afternoon.
The Dow Jones Industrial Average rose 1% in Wednesday’s trading. The S&P 500 rose 1.4%, with Micron shares among the top performers. The Nasdaq composite rose 1.8 percent. The small-cap Russell 2000 advanced 1.1%.
US crude oil prices fell 0.3% to $72.97 a barrel.
The 10-year government yield was essentially flat at 3.565%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) climbed 1.7%, with MSFT stock a major holding and Workday also a component. The VanEck Vectors Semiconductor ETF (SMH) rose 1.7%, with MU shares and STMicro both SMH components.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, rising 3.8% and ARK Genomics ETF ( ARKG ) 3.2%.
The SPDR S&P Metals & Mining ETF (XME) rose 1%, while the US Global Jets ETF (JETS) rose 2.15%. The SPDR S&P Homebuilders ETF (XHB) rose 0.8%. The Energy Select SPDR ETF (XLE) rose 1.5% and the Health Care Select Sector SPDR Fund (XLV) rose 0.3%
The Financial Select SPDR ETF ( XLF ) rose 1.5%, with JPM shares and Bank of America both significant holdings. The SPDR S&P Regional Banking ETF (KRE) rose 1.1%. FRC shares, a KRE component, rose 5.6% on Wednesday and 15.4% so far this week. It is still down 88% in March.
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Market rally analysis
A day after the major indexes had important support, the stock market rally gained momentum, clearing some notable levels.
The Nasdaq Composite led the way, with a strong bounce after approaching the 50-day line at Tuesday’s low. The 12,000 level looms as the next challenge, with the February 2nd market rally peak not far above it.
The S&P 500 moved back above the 4,000 level and 50-day moving average, as well as breaking a downtrend line.
The Dow Jones closed above its 21-day line for the first time since March 6, but remains below the 200-day. The Russell 2000 is bouncing off Friday’s 2023 lows, but has some distance to the 50-day and 200-day lines.
Nasdaq volume was higher than Tuesday. NYSE volume appeared to be slightly up. Exchange volume was below normal.
Advances led declines decisively on the NYSE and Nasdaq, with the breadth picking up slightly this week. However, the market leadership is still relatively narrow.
Chip stocks were big winners on Wednesday, after retreating on Tuesday ahead of Micron’s earnings report. In addition to MU shares, Mobileye, Rambus and STM chip plays are flashing buy signals. Several others showed bullish action.
Microsoft and WDAY shares are among a number of software names in buying zones, while SKY shares are one of several housebuilders stepping up. Investors are betting on bets like Wynn Resorts and DKNG shares.
FOUR stocks are among a few payment stocks that work well, including Flywire (FLY). Free market (MELI), which has a similar chart action to Shift4, is an e-commerce giant with a thriving payments business.
While bank fears are on the back burner, Treasury yields are not rising. The latest banking problems, even if the worst is over, are likely to lead to less lending and generally tighter financial conditions, slowing the economy and reducing the need for Fed rate hikes. Right now, the markets are leaning towards a Fed rate cut in early May. Friday’s PCE inflation report, the Fed’s favorite price gauge, could change that dynamic.
Time the market with IBD’s ETF market strategy
What to do now
The stock market is gaining some steam as the banking crisis appears to have peaked while Fed rate hikes are over, or nearly so. The major indexes have shown a mix of resilience and strength this week, while a number of stocks are flashing buy signals.
So it’s a good idea to start adding some exposure – gradually. If the market has real legs, it won’t take long to gradually build up to being 100% invested. If the market soon reverses lower or drops out, it will be much easier mechanically and psychologically to exit if you are not fully committed.
But it is important to be ready by updating the watch lists and staying 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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