Dow Jones futures fell slightly Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally had another strong week, moving up to a major test.
A market pause wouldn’t be a surprise, and could be healthy, after strong price gains in generally light volume over the past several weeks. Investors should be cautious about adding more exposure.
Diversified oil giant Exxon Mobil (XOM) is setting up near possible entries, as energy stocks take the lead once again. Costco Wholesale (COST) has a cup-with-handle base, though several key rivals are reporting this coming week. UnitedHealth (UNH) has traded tightly within a buy zone, creating another entry. Apple (AAPL) is moving close a breakout as AAPL stock is outperforming other megacaps. Microsoft (MSFT) is closing in on its 200-day line, which could offer a chance to start a position.
China EV startup Li Auto (LI) reports earnings before Monday’s open. LI stock has been among the better EV stocks, outperforming giants BYD (BYDDF) and Tesla (TSLA), but needs to get above its 50-day line. BYD stock is below its 50-day line while Tesla is just below its 200-day.
The video embedded in this article discussed the weekly market action in depth, while also analyzing Exxon Mobil, UnitedHealth and Apple stock.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures and Nasdaq 100 futures declined 0.2%.
Stock Market Rally
The stock market rally closed at weekly highs despite some reversals during the week.
The Dow Jones Industrial Average rose 2.9% in last week’s stock market trading. The S&P 500 index popped 3.25%. The Nasdaq composite ran up 3.1%. The small-cap Russell 2000 leapt 4.9%.
The 10-year Treasury yield rose 1 basis point to 2.85%, but with some big moves during the week.
U.S. crude oil futures rose 3.5% to $92.09 a barrel last week, despite Friday’s pullback. Gasoline futures leapt 6.7%. Natural gas prices jumped 8.7% for the week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 2.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rallied 3.1%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 3%, with MSFT the top IGV holding. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.7%, rebounding from steep losses following the Nvidia (NVDA) and Micron (MU) warnings.
SPDR S&P Metals & Mining ETF (XME) jumped 8.3% last week. The Global X U.S. Infrastructure Development ETF (PAVE) popped 4.6%. U.S. Global Jets ETF (JETS) ascended 3.5%. SPDR S&P Homebuilders ETF (XHB) rallied 4%, its eighth straight weekly gain. The Energy Select SPDR ETF (XLE) jumped 7.4%, with XOM stock a huge weight in XLE. The Financial Select SPDR ETF (XLF) bounced 5.4%. The Health Care Select Sector SPDR Fund (XLV) climbed 1.65%, with UNH stock a huge holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 3.25% last week and ARK Genomics ETF (ARKG) 3.8%. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD stock.
Stocks Near Buy Points
XOM stock rallied 6.3% to 93.99 last week, moving back above the 50-day line. Shares of the energy giant are closing on a trendline from the early June peak. The official buy point is 105.67, but that would be significantly above the 50-day line. Volume was light last week and has not been great over the past month as Exxon stock rebounded. Earnings growth continues to boom.
COST stock edged down 0.6% last week to 537.21. Shares are drifting lower in a handle with a 552.81 buy point, according to MarketSmith analysis.
Keep in mind that smaller rival BJ’s Wholesale (BJ) reports this coming Thursday. Walmart (WMT), which owns the Sam’s Club warehouse chain, is due out Tuesday morning, with Target (TGT) reporting Wednesday.
UNH stock rose 1.6% to 543.70. The health insurer giant is still in range of a 518.80 cup-with-handle buy point, while still below the April 14 high. UnitedHealth stock didn’t quite forge a three-weeks-tight pattern, just exceeding the weekly move limit. But investors could still use 545.84 as an alternate buy point.
Apple stock advanced 4.1% to 172.12 last week. It was the sixth straight weekly gain, but all have come on light volume. On the upside, the relative strength line has hit several new highs, reflecting AAPL stock’s outperformance vs. the S&P 500. Apple stock is moving toward a 179.71 double-bottom buy point. Technically, shares are just below a trendline entry. Ideally, AAPL stock would forge a handle.
MSFT stock climbed 3.2% to 291.91, but unlike Apple is still below its 200-day moving average. A big move above the 200-day line could offer a chance to enter MSFT stock as a Long-Term Leader. The RS line is not far from 2022 high, even with MSFT stock is significantly below its late November record high of 349.67.
Li Auto Earnings
Wall Street expects a net loss of 2 cents per share on $1.4 billion in sales in the second quarter, according to FactSet. That’s vs. a year-earlier loss of 1 cent on $780.4 million.
Li Auto has been profitable for the past three quarters, but Covid shutdowns took their toll on production and deliveries in Q2. Li Auto currently has just one model, the Li One hybrid SUV.
But it’s begun sales of the premium L9 hybrid SUV, with deliveries set to start later this month. Preorders have been strong, with Li Auto predicting L9 deliveries of 10,000 or more in September.
There are some local media reports that Li Auto will soon unveil an L8 hybrid SUV, a scaled-down L9, which could replace the Li One.
LI stock fell 3.4% to 32.49 last week, creating more space vs. its 50-day line and extending a downtrend that began in late June, That followed a huge run from early May. Shares did close in the upper half of its weekly range. Li Auto stock would have a new base with a 41.59 buy point, if it starts building the right side. A strong move above the rising 50-day could offer an early entry, but it’s rather steep.
Tesla And BYD Stock
Tesla stock bounced 4.1% to 900.09 last week. That’s coming back above its 200-day moving average, reclaiming its 40-week line on Friday. Breaking above its 200-day line and the Aug. 4 high of 940.82 would offer an aggressive entry for TSLA stock. The official buy point is 1,208.10.
BYD stock dipped 0.2% last week to 36.69, trading tightly but below the 50-day line. The China EV and battery giant has a base with a 43.71 buy point. A decisive move above the 50-day would offer an early entry.
BYD is supplying Blade batteries to Tesla Berlin, according to some reports. Blade-powered Model Ys should start rolling off the production line in a few weeks. Meanwhile, BYD will begin deliveries of the Seal sedan, a much-cheaper rival to the Model 3, in the next few weeks. BYD also begin Atto 3 deliveries in Australia in a few days, entering a new market as part of a huge international expansion.
Market Rally Analysis
The stock market rally had a couple of unsightly intraday reversals, on Monday and Thursday, but ultimately had solid gains on the major indexes.
The Dow Jones, S&P 500 and Russell 2000 have decisively cleared their early June highs, joining the Nasdaq. The Russell 2000 is just above its 200-day line, with the S&P 500 and Dow Jones close behind. The Nasdaq has a little more work to get to that long-term level as it gets to the 13,000 level.
Getting above the 200-day line would be evidence that the current uptrend is more than a substantial bear market rally. A pause or pullback wouldn’t be a surprise after a strong advance for the major indexes, largely on lackluster volume. Friday’s bounce came on very light volume.
A pause or modest pullback over several days or a few weeks could be constructive, but the market is going to do what it’s going to do.
Energy stocks continue to look strong, but will rise or fall with underlying oil and natural gas prices.
A wide range of medicals are doing well. Chipmakers, lithium plays, some steel plays, transports and more are showing positive action.
What To Do Now
As Scott Bennett of Invest with Rules told IBD Live on Friday, investors don’t need to put on the brakes, but they may want to ease off the gas.
Be cautious about adding exposure in the very short term, with the market rally perhaps stretched and facing yet another key resistance area. Taking partial profits is still a sound strategy, and a way to keep exposure from ramping up from new buys.
Still, some quality stocks continue to flash buy signals or set up. Investors should be taking part in this market, and looking for new opportunities. So keep building those watchlists.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MIGHT ALSO LIKE:
Read More: Dow Jones Futures Fall: Market Rally Runs Up To Key Test; Tesla Rival On Tap