Why Market Rally Could Use a Vacation; Tesla returns, 5 shares close to buy points
Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, heading into the Thanksgiving Day holiday.
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The share rise was positive for a second session in a row. Fed officials see slower rate hikes coming “soon,” according to the Fed’s November meeting minutes released Wednesday afternoon.
The Nasdaq led, boosted by a rebound Tesla (TSLA). The major indexes are all up solidly so far this holiday-shortened week. But a longer holiday for the market rally could be constructive.
Investors should be cautious about adding exposure given key technical resistance and notable financial reports ahead.
But, Dexcom (DXCM), UnitedHealth (UNH), Neurocrine Life Sciences (NBIX), Medpace Holdings (MEDP) and Shockwave Medical (SWAV) are five health systems that show interesting action.
DXCM shares and Neurocrine Biosciences are on the IBD Leaderboard, with MEDP shares on the Leaderboard watchlist. The NBIX stock and Medpace are on the IBD 50.
Dow Jones Futures today
Dow Jones futures rose 0.15% against fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures rose 0.3%.
The 10-year government yield fell 2 basis points to 3.69%.
US stock markets will be closed on Thursday for the Thanksgiving holiday. On Friday, US stock exchanges will close early at 1 p.m. ET. But other exchanges around the world will be open normally on Thursday and Friday.
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 had some wobbles on Wednesday, but extended gains, led by technologies.
Initial jobless claims rose to a three-month high, while continued claims hit an eight-month best. S&P Global’s purchasing managers’ indices for US manufacturing and services both signaled declines.
The Fed minutes reinforced expectations for a 50 basis point interest rate hike at the December 14 meeting. Markets still favor another half-point move in February, but there is a decent chance of a quarter-point move.
The Dow Jones Industrial Average rose 0.3% in Wednesday’s trading. The S&P 500 climbed 0.6%, led by TSLA shares. The Nasdaq composite rose 1 percent. The small-cap Russell 2000 rose 0.1%.
US crude oil prices fell 3.7% to $77.94 a barrel. Natural gas futures rose 7.2 percent.
The 10-year government yield fell 5 basis points to 3.71%. The two-year Treasury yield, more closely linked to the prospect of a Fed rate hike, fell below 4.5%.
The US dollar fell significantly for a second session in a row, back near recent lows.
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ETFs
The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.5%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.9%.
The SPDR S&P Metals & Mining ETF (XME) rose 0.3%. The US Global Jets ETF (JETS) rose 0.1%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.5%. The Energy Select SPDR ETF (XLE) fell 1.1%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.4%. Dow Jones giant UNH’s stock is the top holding in XLV.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 2.9% and ARK Genomics ETF ( ARKG ) 0.9%. TSLA stock is a large holding across Ark Invest’s ETFs
Tesla shares jumped 7.8% to 183.20 on Wednesday, rebounding from Tuesday’s bear market slump when Citigroup upgraded the EV giant from a sell to a hold. TSLA stock is still down 19.5% so far this month and has roughly halved in 2022.
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Stocks to watch
Dexcom shares rose 1.7% to 112.92, finding support at the 21-day moving average. DXCM stock has been on hiatus this month after rallying on earnings on October 28. Dexcom stock arguably has a long handle with a 123.46 buy point from a seven-month consolidation. Investors could buy DXCM shares from an early entry outside the 21-day line, perhaps using Tuesday’s high of 113.88 as a specific buy point.
Medpace shares fell 1.3% to 218.81 on Wednesday. Shares have consolidated near record highs since the Oct. 25 soar, up 38% after earnings. Since then, the MEDP share has forged a messy handle on a deep, years-long trough. While shares have had some big intraday swings, MEDP stock is currently on track to build a three-week tight pattern by Friday’s close. Investors can use the November 15 close of 226.57 as an early entry, above most of recent trading.
NBIX shares fell 1.5% to 118.97. Shares are consolidating near multi-year highs, extended from a breakout in October. Despite a plunge to the 50-day line last week, Neurocrine stock is in a three-week tight pattern that’s on track for a fourth week. Technically, it has a buy point at 126.09, although investors may want to wait for some quieter action.
Shockwave shares fell 4.7% to 264.06 on Wednesday, back above the 21-day line but hitting resistance at the 50-day line. After a failed breakout in late October and heavy selling that continued through earnings, SWAV stock has retreated over the past week. A new base will take more time, but aggressive investors can use a strong move above the 50-day as an early entry.
UNH stock climbed 1.3% to 529.71, rebounding above its 50-day and 21-day lines after undercutting its 200-day line last week. UnitedHealth stock used to be a long-term IBD leader and still shares many characteristics. Investors can use a bounce off the 50-day line as either an early entry or a long-term leader entry. UNH stock must forge a new base after a breakout from a cup-with-handle base quickly failed last month.
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Market rally analysis
The stock market rally contributed to Tuesday’s rise. The S&P 500 just topped its Nov. 15 intraday high and closed within 1% of its 200-day line.
The Russell 2000 came all the way up to its 200-day line.
The Nasdaq extended Tuesday’s decline from its 21-day moving average, although it remains below a short-term high of Nov. 15 and well below its 200-day.
The Dow Jones came within 20 points of its August 16 intraday high.
The S&P 500’s decisive move above its 200-day line — which roughly coincides with a year-long trend line of falling tops — is a big test of the market’s rally.
A range of economic data can swing Fed interest rate expectations and thus the stock market. On Wednesday, November 30, the October JOLTS report will show job vacancies, with Fed Chair Jerome Powell speaking later in the day. On Thursday, the PCE price index, the Fed’s favorite inflation gauge, is released, along with jobless claims and the ISM manufacturing index. The work report for November is due on Friday 2. November.
Ideally, the market would move sideways for a few days, allowing at least the 21-day line to catch up, heading into the financial reports.
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What to do now
The market rally has shown some nice gains this week, with several stocks flashing buy signals in recent days. Investors could have added a little more exposure as a result.
But they may want to be wary of making significant new purchases with the S&P 500 below its 200-day line and so much Fed-critical economics coming next week.
Also consider taking some partial profits in fast-rising stocks. Shares have made short-term progress amid a choppy uptrend and sector rotation.
Still, investors should work hard on their investment shopping lists, looking for setups and actionable names across a range of sectors.
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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