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Stock market rally shows character change with Tesla, Apple in focus; Here’s what to do now




The stock market rally showed increasing momentum over the past week, with the major averages all making big moves. Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.




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The market rally leadership remains narrow, concentrated in artificial intelligence as well as chips and software. Many of these warehouses have been expanded. However, if market breadth continues to improve, a wider range of buying opportunities will develop.

Already, Tesla (TSLA) broke out on Friday. DexCom (DXCM), Lennar (LEN) and JPMorgan Chase (JPM) flashed early entries late in the week. Marriott International (MAR) can no doubt also be traded.

All reflect possible leadership areas. The Tesla share joins EV rivals such as BID (BYDDF) in clearing purchase points. DXCM stock is one of several medical products trying to push higher. The LEN share is among a number of housebuilders that are recovering. The JPM share stands out among the financial sector, but the sector is on the way up again. The MAR share is among a travel sector that has revived broadly.

Investors should look to add exposure amid the promising bullish shift. But be ready to go back.

Meanwhile, apple ( AAPL ) is expected to show off its mixed-reality headset on Monday, its first new hardware product since the Apple Watch in 2015. The headset will face off against rivals such as Meta Quest from Meta platforms (META). Apple stock is on track to clear its highs in January 2022 and is approaching a market value of $3 trillion.

Tesla stock joined the IBD Leaderboard on Friday, joining the Meta stock. The LEN share joined SwingTrader on Friday. Lennar was Friday’s IBD Stock Of The Day.

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 share rise showed strong, broad gains, especially late in the week.

The Dow Jones Industrial Average rose 2% in last week’s trading. The S&P 500 index rose 1.8 percent. The Nasdaq composite rose 2%. The small-cap Russell 2000 jumped 3.3%.

The 10-year Treasury yield fell 13 basis points to 3.69% for the week, but rose 8 basis points on Friday.

US crude oil futures fell 1.3% to $71.74 a barrel last week, even with Friday’s 2.3% pullback.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 3.6% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) gained 1.7%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 2.1%. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.8%.

Reflecting more speculative history stocks, the ARK Innovation ETF ( ARKK ) rose 6.45% last week and the ARK Genomics ETF ( ARKG ) rose 4.9%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.

The SPDR S&P Metals & Mining ETF (XME) rose 4.2% last week. The Global X US Infrastructure Development ETF (PAVE) rose just over 3%. The US Global Jets ETF (JETS) rose 3.1%. The SPDR S&P Homebuilders ETF (XHB) rose 3.5%. The Energy Select SPDR ETF (XLE) rose 1.4%. The Health Care Select Sector SPDR Fund ( XLV ) rose 2.2%. The DXCM stock is in XLV.

The Financial Select SPDR ETF ( XLF ) rose 2.15% in an external upside week. The JPM share is an important XLF component.

The SPDR S&P Regional Banking ETF (KRE) rose 4.8%.


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Apple Mixed Reality Headset

Apple will showcase its latest hardware and software innovations in a keynote presentation on Monday at 10 a.m. PT at its annual Worldwide Developers Conference. It describes the latest operating systems for iPhone, iPad, Mac, Apple TV and Apple Watch. But the buzz is about a mixed reality headset, possibly called Reality Pro. It will be the first new hardware product since the Apple Watch debuted in 2015. The expected $3,000 price tag may deter buyers. Meta platforms (META) recently unveiled its latest Meta Quest headset.

Apple shares rose 3.15% last week to 180.95. That is just below the January 2022 peak of 182.94.

Tesla shares

Tesla shares jumped 10.8% to 213.97 for the week, including a 3.1% jump on Friday. Shares cleared their 200-day moving average on Tuesday. On Friday, TSLA stock passed a buy point at 207.89 from what is either a cup or double bottom. The EV giant has advanced on above-average volume for five straight sessions, after a few such days over the previous three months.

Meanwhile, BYD shares rose 5.6% to 31.50 during the week. Friday’s 2.3% gain pushed the China EV and battery giant back above a 31.17 cup-with-handle buy point initially cleared on May 10. On Thursday, BYD reported record deliveries in May, surpassing its peak in late 2022.

Tesla now says the base Model 3 will get the full $7,500 tax credit in the U.S., along with all other Model 3 and Model Y vehicles, according to reports late Friday. It’s not clear how, but perhaps Tesla is now using 2170 cells made at the Nevada site versus the China-made LFP batteries.

Other stocks near buy points

DXCM jumped 6.5% to 122.57 last week. On Thursday, DexCom retook its 50-day line, then rallied on Friday in above-average volume. Early entry is offered. The continuous glucose monitor maker has a buy point above 126.44 in a new flat base, right next to two other consolidations, according to MarketSmith analysis. Several other manufacturers of medical products and systems are worth looking at, including Shockwave Medical (SWAV) and Intuitive surgical (ISRG).

LEN shares rose 3.6% to 112 on Friday, turning back above the 50-day line, making an aggressive entry into a consolidation in the making. On Wednesday, Lennar stock fell to test an earlier buy point. Several other housebuilders rose on Friday, but the LEN share saw strong volume.

JPM shares fell 3% to 140.47, closing right on a downtrend in a new flat base alongside an earlier consolidation. It is also not extended from the 50-day line. JPMorgan looks much healthier than other banks, but bank stocks made positive moves on Friday.

MAR stock rose 3.55% to 177.22 on Friday after reclaiming its 50-day line on Thursday. Arguably, Marriott offers an early entry from a growing flat base. Royal Caribbean (RCL) is cruising higher, but most other travel stocks are like Marriott, trying to take off after fits and starts.

Market rally analysis

The share rally showed further strength this week, with some hopeful signs that breadth and leadership are improving.

The Nasdaq continued to advance, hitting a 13-month high on Friday. But this past week was about more than AI games.

The S&P 500 definitely cleared the 2023 series and is approaching August 2022 highs.

The Dow Jones, which tested its 200-day line for much of the week, vaulted above its 50-day line on Friday. The Russell 2000, which broke below its 50-day line on Wednesday, rose to its best levels since early March, clearing the 200-day line for the first time since then.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 1.4% for the week to a 52-week high.

The Invesco S&P 500 Equal Weight ETF ( RSP ) rose 1.9% for the week. Friday’s 2.2% gain pushed the RSP clear above its 50-day and 200-day lines, breaking a downtrend dating back to early February.

Progress lost on Thursday and Friday. On Friday, winners led by more than 5-to-1 on the NYSE and nearly 3-to-1 on the Nasdaq. Nevertheless, the long-term trend has been weak. And a descending A/D line is critical.

The Nasdaq and Nasdaq 100 have been extended, with the latter now 9.5% above the 50-day mark. Ideally, big-cap tech, especially AI games, would slow down or pause while other sectors step up. That was generally the pattern on Friday, with the Dow Jones, Russell 2000 and RSP easily outpacing the Nasdaq 100’s 0.75% gain.

That creates some buying opportunities, such as Tesla, Lennar, DexCom and JPMorgan.

Of course, a couple of strong days does not guarantee that a broad market advance is underway. From a macro perspective, the debt ceiling is no longer a concern. The Fed, which appeared headed for a June 14 rate hike just days ago, now appears to be taking a break. When earnings season (finally) ends, the news cycle may be in a relatively quiet stretch.


Time the market with IBD’s ETF market strategy


What to do now

With the market rally gathering momentum and beginning to expand, investors need to take notice. Yes, this could be another fake head. The narrow advance may resume, or worse, the overall market rally may buckle or collapse.

But right now the market is sending bullish signals. If you wait until a strong bull market has undeniably taken hold, all the leading stocks will be well extended.

Investors should be looking to add exposure, especially if they have been mostly in cash. But do it gradually to minimize the impact of sudden market reversals.

It is important to be flexible. And, just as you don’t want to be locked into a bearish mindset, don’t be a blind bull if the broader market or your positions falter.

This is an important time to build your watchlists. Have a select group of stocks that you focus on, but be sure to cast a wide net to keep track of a wide range of potential leaders.

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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