by The stock market rally had another big week, with the Nasdaq rising in the top news from the latest Fed outlook to the jobs report and massive gains from Apple (AAPL), Metaplatforms (META) and more. Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures.
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On Friday, Tesla CEO Elon Musk was found not liable in a class-shareholder lawsuit over his 2018 “finance-secured” tweets in August 2018, when he said he was considering taking Tesla private. Musk also tweeted that “investor support” for a deal at $420 a share has been “confirmed.” The financing was not, in fact, “secured”, but Musk’s lawyer argued in federal court in San Francisco that he “didn’t think at the time”. TSLA shares were up slightly after hours on Friday.
Don’t be surprised to see a pullback in the market after last few weeks’ big gains, con Tesla (TSLA) and Apple stock up once again. Friday may have been the start of a pullback, with Amazon.com (AMZN) fell on its weak earnings and outlook. But with the uptrend showing more signs that it’s more of a bear market rally, investors can continue to gradually increase exposure over time.
Giant Dow Jones Microsoft (MSFT), lithium and fertilizer giant SQM (SQM), manufacturer of auto parts Auto level (ALV), Pure archiving (PSTG) and Freeport-McMoRan (FCX) are stocks close to buy points.
Microsoft stock, Autoliv and FCX already have earnings out of the way, while SQM and PSTG stock aren’t due for several weeks. MSFT shares are on IBD long-term leaders.
Onsemi (ON), formerly ON Semiconductor, reports early Monday. The EV-focused chipmaker soared 9.8% last week, breaching a cup base to hit a new high. But the ON stock is now extended.
The video embedded in this article looked at and analyzed the strong market action Regeneron pharmaceutical products (REGN), Microsoft shares and ALV.
Dow Jones Futures today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rebound
The stock market rally rocked a weak Monday to a generally strong week.
The Dow Jones Industrial Average fell 0.2% in the stock market last week. The S&P 500 index rose 1.6%. The Nasdaq composite jumped 3.3%. The small-cap Russell 2000 was up 3.9%.
Apple shares, a component of the Dow Jones, S&P 500 and Nasdaq, jumped 5.9% for the week, breaking above the 200-day line. Shares traded higher on Friday despite Apple’s weak earnings and revenue.
AMZN stock tumbled 8.4% on Friday, returning below its 200-day moving average, though it finished up 1.1% for the week. On Thursday, Amazon reported a 98% EPS decline for the fourth quarter. While revenue edged slightly, Amazon drove Q1 revenue low, with high-margin Amazon Web Services as the main reason.
The 10-year Treasury yield rose 1 basis point to 3.53% for the week, with the yield climbing 13 basis points on Friday’s hot jobs report. The yield dropped to 3.33% on Thursday intraday, the lowest since September 13th.
U.S. crude oil futures tumbled 7.9% to $73.39 a barrel last week, with gasoline down 10.5% and natural gas down 12.9%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.25% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 1.9%. The iShares Expanded Tech-Software Sector (IGV) ETF was up 2.4%, with Microsoft stock a major holding. VanEck Vector Semiconductor (SMH) ETF jumped just over 4%, with ON stock a modest holding.
Reflecting more speculative story headlines, ARK Innovation ETFs (ARKK) jumped 6.1% last week and ARK Genomics ETFs (ARKG) jumped 3.7%, continuing their strong performance into early 2023. Tesla stock is a major holding among Ark Invest’s ETFs. Tesla shares jumped 6.8% to 189.98 for the week, up 87% from its January 6 bear market low.
The SPDR S&P Metals & Mining (XME) ETF advanced 1.45% last week. The Global X US Infrastructure Development ETF (PAVE) is up 4%, edging out a 13-month consolidation to hit a record high. The US Global Jets ETF (JETS) was up 2.2%. SPDR S&P Homebuilders ETF (XHB) is up just over 6%. The Energy Select SPDR ETF (XLE) tumbled 5.7%, wiping out several weeks of meager gains. The SPDR Financial Select ETF (XLF) was up 1%. The Health Care Select Sector SPDR Fund (XLV) slipped 0.1%, its sixth consecutive modest weekly drop.
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Actions near purchase points
Autoliv shares fell 2.7% last week to 90.27, consolidating after rising 9% on Jan. 27 following strong gains. ALV shares are in the buy range from a fund base of 89.98. But investors may see the recent break as a handle on a basis going back to November 2021. The buy point of the cup with handle is 93.88. Many other auto parts stocks are showing strength in 2023.
Pure Storage stock jumped 5.7% for the week to 29.91, up sharply from the key moving averages. PSTG stock has a double low buy point of 31.33, but is already usable after clearing a downward sloping trendline in that base on Wednesday. Volume has been strong as Pure Storage has rallied over the last couple of weeks. The relative strength line is lackluster at best, reflecting the lateral action over the past year. But while the PSTG stock hasn’t rebounded as fast as some growth games, it hasn’t plummeted in 2022 either.
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FCX stock fell 3.7% to 43.16 last week, closing just below the 21-day line as copper prices retreated. FCX stock has a tight three-week pattern with a buy point of 46.83. Investors could also use it as a handle or alternative handle on a 10-month basis.
Microsoft shares jumped 4.1% to 258.35 last week, despite falling 2.4% on Friday. The stock has broken through a low base that has formed below the 200 day line. But Thursday’s breakout erased the 200-day line and a year-long trend line. Investors could view the move as a venue to step into MSFT stock as a long-term leader.
SQM stock has retaken key moving averages and is trading on a double-bottom basis with a buy point of 112.45, according to analysis from MarketSmith. Shares rose 2.6% to 97.09 last week. It’s possible that SQM shares could carve out a handle or some form of early entry. SQM stock likely won’t be reported until March, but lithium is even Albemarle (ALB) e livent (LTHM) posts earnings in less than two weeks. Albemarle has already reported strong preliminary Q4 results and provided a generally bullish outlook.
SQM and Albemarle stocks are notable holdings in the Global X Lithium & Battery Tech ETF (LIT). Tesla shares and China EV and battery giant BYD (BYDDF) are also significant holdings, along with China and other Asian battery makers. The LIT ETF is finding support at its 200-day line, just below a double-bottom basis.
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Analysis of market rallies
The stock market rally has had another impressive week. After Monday’s slide, the Nasdaq, the S&P 500 and the Russell 2000 all posted strong weekly gains, well above their 200-day lines and end-2022 highs.
The Dow is lagging, but has found support and is not far off its recent highs.
Some leading sectors or groups faltered, but generally the major stocks exploded, issued buy signals, established or simply extended recent big gains.
All of this is happening amidst economic data and earnings reports that are often mixed at best.
The late August highs are the next test for the market rally, with the Russell 2000 almost there and the S&P 500 not far off.
However, there is mounting evidence that the uptrend in the market has real legs and is not just another bear market rally.
Perhaps the biggest complaint about the current market rally is that it is too strong. The Nasdaq is up for five consecutive weeks. Perhaps Friday’s pullback was the start of a much-needed break or pullback for the major indexes. This would allow the shares to forge handles or return to key support levels. Many interesting titles feel remarkably expansive.
One question is whether Tesla, Roku (ROKU) and other ARK-type speculative growth names continue to rise or level off.
The US dollar hit its lowest levels in several months on Wednesday after the Fed meeting but then roared back Thursday-Friday for a solid weekly gain. The strong downward trend of the dollar in recent months has been a major factor in the recovery of stock market fortunes. Following Friday’s jobs report, markets are now heading for two more Fed rate hikes by a quarter point.
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what to do now
With the market rallying for several weeks now, most of the breakouts and buying opportunities have worked. So investors should have taken advantage of that.
But do it carefully. Add exposure gradually so you don’t get surprised by a pullback. It’s possible that new buys will sell out briefly if the market stalls, but that could pave the way for a lot more revenue.
Don’t focus too much on one particular title or industry. Cut your losses.
Spend time working on your watchlists this weekend, making sure you’re looking at quality stocks from a variety of industries. Identify your main goals and do some more analysis on these potential purchases.
After a brutal 2022, the new year is off to a great start. So stay engaged and ready to act.
Read The Big Picture daily to stay abreast of market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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