Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. That follows a wild week for the stock market rally, in which the Nasdaq held near highs while the Dow Jones and S&P 500 index broke key support.
XAmazon.com (AMZN) is in focus with Amazon Prime Day beginning Monday. For investors, this could soon be a prime time to buy Amazon stock.
Snapchat parent Snap (SNAP), PayPal (PYPL), Vale (VALE) and Intuitive Surgical (ISRG) are also near buy points. PYPL stock is in a buy zone now, while Snap, Vale and ISRG stock are closing in on entries.
PayPal stock is on IBD Leaderboard and IBD Long-Term Leaders. Snap stock is on the IBD 50.
Investors also could consider buying an ETF such as iShares Expanded Tech-Software Sector ETF (IGV) or ARK Innovation ETF (ARKK).
The stock market rally is in flux, with some worrisome signals to finish the week. Yes, the Nasdaq held up relatively well. But the Dow Jones, S&P 500 and small-cap Russell 2000 fell significantly, closing below their 50-day moving averages as many real economy sectors broke down.
Meanwhile, Bitcoin remains active this weekend. After testing recent highs earlier in the week, Bitcoin and other cryptocurrencies have been retreating, amid concerns about DeFi coins (decentralized finance system for coins based on blockchain).
Dow Jones Futures Today
Dow Jones futures will open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Coronavirus News
Coronavirus cases worldwide reached 179.15 million. Covid-19 deaths topped 3.87 million.
Coronavirus cases in the U.S. have hit 34.40 million, with deaths above 617,000.
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Stock Market Rally Last Week
The stock market rally generally retreated, with techs holding up while many other sectors suffered sharp losses.
The Dow Jones Industrial Average fell 3.45% in last week's stock market trading. The S&P 500 index slumped 1.9%. The Nasdaq composite gave up 0.3%, while the Nasdaq 100 actually climbed 0.4%. The Russell 2000 slumped 4.25%.
Top ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) retreated 3.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) skidded 3.6%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.2%. The VanEck Vectors Semiconductor ETF (SMH) slid 1.8%.
SPDR S&P Metals & Mining ETF (XME) plunged 12.3% and Global X U.S. Infrastructure Development ETF (PAVE) 6.2%, both decisively breaking their 50-day and 10-week lines. U.S. Global Jets ETF (JETS) descended 4.2%. SPDR S&P Homebuilders ETF (XHB) gave up 3.5%, continuing a downward trend over the last several weeks.
The Financial Select Sector SPDR ETF (XLF) sank 6.2% for the week, tumbling below its 50-day line on Thursday-Friday. The 10-year Treasury yield fell to fresh three-month lows reversing sharply to end the week after spiking Wednesday. Meanwhile, two-year Treasury yields rose substantially. The end result is a big squeeze on banks' lending margins.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rallied 2.4% and ARK Genomics ETF (ARKG) dipped 0.4%. ARKK reclaimed its 50-day and 200-days last week, joining ARKG.
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Investors could consider buying an ETF like IGV, ARKK or ARKG.
Software is the hottest market sector right now, but many of the recent winners are extended from new buy points. IGV is a way to play this sector for now. Adobe (ADBE) and Microsoft (MSFT) are major IGV components, and Adobe stock has been strong while MSFT is just below a buy point.
ARKK and ARKG are ways to buy beaten-down former leader growth leaders that are rebounding from steep losses, without trying to guess which one will mount a comeback.
Of course, IGV and ARK ETFs have come up a lot over the past few weeks. These groups could keep running, but a pause or pullback would be normal. Further, if the market rolls over or shifts away from techs once again, these ETFs could suffer significant losses.
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Bitcoin Price
Bitcoin is trading nearly $36,000, rebounding from Sunday morning lows of $33,380 after retreating Friday. Earlier in the week, the Bitcoin price nearly hit $41,000, threatening to break out of a $30,000-$41,000 range over the past several weeks.
Bitcoin peaked at $64,829.14 in mid-April, with heavy selling beginning in early May.
Meanwhile, Dogecoin is trading at its lowest point since late April, while Ethereum is back to early April levels.
A stronger dollar is weighing on Bitcoin and other cryptocurrencies.
But so are big, sometimes catastrophic losses this past week in tokens from decentralized-finance applications. One DeFi coin, Titanium, went from $60 to $0 in 24 hours. DeFi coins have been plagued by frauds and hacks.
Meanwhile, concerns are growing regarding stablecoins. Stablecoins are supposed to have a stable value vs. a fixed instrument, usually the U.S. dollar. But the holdings for many stablecoins are somewhat murky, to say the least. Still, many cryptocurrency transactions involve stablecoins.
That's putting some pressure on more-established digital assets such as Bitcoin.
Meanwhile, Bitcoin miners reportedly were shut down in a hydroelectric-rich area of Sichuan province in China, the latest Chinese crackdown on cryptocurrencies.
Amazon Stock
Amazon stock rose 4.2% last week to 3,486.90. That's just below a 3,554.10 buy point from a cup base starting at the end of April, according to MarketSmith analysis. AMZN stock really has been consolidating since at least early September.
The relative strength line for Amazon stock is at consolidation highs, but still off its 2021 peak and last year's all-time highs. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
Amazon Prime Day starts on Monday. The e-commerce giant doesn't release sales figures, but it's a major shopping day for Amazon and other retailers. It's also a time for Amazon to gain new Prime members.
Snap Stock
Snap stock tried to break out from a small handle with a 63.94 buy point earlier this month, but that soon fizzled as shares neared the April 14 short-term high of 65.86. After finding support at the 50-day line, Snap stock rebounded late in the week.
Technically, Snap has a new handle on a daily chart with a 65.76 buy point, just above the June 14 high. This is a case where drawing a flat line across short-term resistance from mid-April and this past week makes the most sense, suggesting a 65.96 entry.
PayPal Stock
PayPal stock rose 4.4% to 283.38 last week, clearing a 277.96 early entry. Volume was strong on Thursday and especially Friday, a sign of institutional buying at a key level. The official buy point for PYPL stock is 309.24.
The RS line for PayPal stock is off consolidation peaks, not a surprise given that PayPal stock also is off highs. But the RS line is at a three-month high, above the mid-April peak.
PayPal on Friday confirmed it is raising merchant fees on its proprietary products, while cutting fees on some Visa (V) and Mastercard (MA) transactions.
PayPal stock was Friday's IBD Stock Of The Day.
Intuitive Surgical Stock
Intuitive Surgical stock climbed 1.7% last week to 878.86, moving toward an 893.89 buy point from a cup base that is part of a base-on-base pattern. The RS line for ISRG stock is near consolidation highs.
A variety of medical products/systems makers are back in favor. Surgeries are picking up with the coronavirus pandemic fading. Intuitive Surgical earnings and revenue are reviving and should continue to improve this year.
Vale Stock
Vale stock fell 4% last week to 21.51, but it did rise 2% on Friday, rebounding somewhat from its 50-day and 10-week lines. The diversified miner has a 23.12 flat-base buy point.
However, unlike many mining rivals, Vale stock did not break down last week. If metals prices rebound and the mining sector comes back into favor, Vale stock may be among the first to flash buy signals. Of course, if metals prices keep slumping, Vale stock likely would succumb.
Technically, investors could use Friday's bounce from the 50-day line to start a position or add some shares. But that would be especially aggressive given the rotation out of mining and commodity-related stocks.
A safer play is watching Vale stock for now.
Market Rally Analysis
The stock market rally had thrills and spills last week. But the action didn't really get going until Wednesday afternoon, when the Federal Reserve signaled it now expects two rate hikes in 2023.
On Wednesday, the major indexes retreated, with the Dow undercutting its 50-day line while the Nasdaq pared losses.
On Thursday, the Nasdaq rose solidly, with the Nasdaq 100 hitting a record high. The 10-year Treasury yield, which spiked Wednesday, tumbled Thursday, lifting techs and crushing financials. Many non-tech sectors retreated or continued to sell off.
On Friday, the S&P 500 and Russell 2000 also fell below their 50-day averages, while the Dow fell to its lowest point since April 1. The Nasdaq lost ground as chip-gear makers slumped, though software held up.
Yes, it's nice to see (some) techs and medical product makers step up, but the abrupt sector rotation over the past week or two has been hard to navigate. A lot of recent breakouts fizzled last week, while many real economy names flashed decisive sell signals.
Ironically, the Nasdaq entered a Power Trend on Thursday, typically a bullish signal. But normally when the Nasdaq is in a Power Trend, the broader market is trending higher. It's hard to see the Nasdaq powering higher with the Dow Jones, S&P 500 and Russell 2000 all below their 50-day lines.
And, ultimately, the Nasdaq did fall Friday and for the week. Even in the Nasdaq, the strength is relatively narrow.
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What To Do Now
If you're in the right stocks, such as DocuSign (DOCU) or Nvidia (NVDA), then last week was a neutral or winning affair. But if you were in other sectors, last week was challenging at best.
Nvidia and some software names are leading the way right now, but many are extended and need at least a short break before offering new entries. Buying extended stocks is extremely dangerous in the current market environment.
Amazon stock, PayPal, Snap and some others such as Microsoft (MSFT) are trading around buy points, but there aren't a lot of great setups right now.
Hopefully, investors have substantially reduced their exposure to real economy names over the past couple of weeks, and have grabbed some tech leaders. But it doesn't appear to be a time to be increasing net exposure. Reducing exposure is perfectly justified and perhaps warranted, especially if you're out of sync with the market.
Take a hard look at your portfolios over the weekend. Are you properly positioned after the latest market rotation?
Your watchlist may need a substantial overhaul. Then pay close attention for new buying opportunities and sell signals. In 2021, you need to be in the right stocks and buying as early as possible, while being quick to scale out of positions.
Be prepared, stay alert and be decisive.
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.
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