Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market rallied moderately over the past week, with some substantial gains and reversals. Inflation is cooling but recession fears are rising.
No more buying opportunities. Some stocks flashed buy signals and then fell quickly. Investors should be cautious about adding exposure in the current environment. Amid market volatility, Apple (AAPL), Lululemon Athletica (Lulu) and Regeneron Pharmaceuticals (the rain) have pseudo-tight forms.
Earnings season is heating up. Tesla (D.S.L.A), ASML (ASML), Netflix (NFLX) and DHI shares are all near buy points. ASML and TR Horton (DHI) provided insight into the respective groups.
Meanwhile, Western Alliance Bank (Tail) There are many bank and financial reports in the coming week. How about this Phoenix-based bank? WAL stock has been in a lot of trouble in recent weeks.
LULU has stock IBD Leaderboard Watch list and IBD 50.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 PM ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they examine stocks that could be in for a stock market rally on IBD Live
Stock market rally
Despite the volatile day-to-day action, the stock market bullish had modest gains for the week.
The Dow Jones Industrial Average rose 1.2% in last week’s stock market trading. The S&P 500 index rose 0.8%. The Nasdaq composite rose 0.3%. The small-cap Russell 2000 advanced 1.5% on the week.
The 10-year Treasury yield rose 14 basis points to 3.52%.
U.S. crude futures rose 2.3% last week to $82.52 a barrel.
Among growth ETFs, the innovator IBD 50 ETF (FFTY) gained 2.65% last week, while the Innovator IBD Breakout Opportunities ETF (Bot) advanced 1.9%. iShares Expanded Technology-Software Sector ETF (IGV) received 0.5%. VanEck Vectors Semiconductor ETF (SMH) fell 0.1% after falling 4.1% in the previous week. ASML stock is a major SMH holding.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) rose 0.6% last week and the ARK Genomics ETF (ARKG) received 2%. Tesla stock is the number one holding in Arc Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) advanced 2% last week. Global X US Infrastructure Development ETF (sidewalk2.7% up. US Global Jets ETF (JETS) fell 1.1%. SPDR S&P Homebuilders ETF (XHBUp 4.1%. Energy Select SPDR ETF (XLE) increased by 2.65%. Health Care Select Sector SPDR Fund (XLV0.8% added.
Fund Selection SPDR ETF (45) recovered 2.8%. But the SPDR S&P Regional Bank ETF (CreateDown 0.75%. WAL stock is among many KRE stocks.
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Apple Stock, Lululemon
Apple stock, Lululemon and Regeneron all made tight patterns, but in different circumstances.
Apple shares rose 0.3% last week to 165.21, rebounding from a 21-day streak on Thursday. Shares fell 0.15% in the previous week. With two straight weekly closes of 1%-1.5% in the previous week, that qualifies as a tight three weeks. AAPL stock’s buy point is 166.94. This will extend slightly from the flat base that was cleared a month ago, but could give existing holders a place to add some equity.
LULU stock rose 1.1% to 368.25, forming a three-week tight end with a 371.36 buy point. The yoga apparel retailer is holding fast after an earnings gap. Lululemon’s 3-Week Tide is in a cup base. In fact, in the daily schedule, the tight structure acts as a handle. So investors can use a breakout as a place to initiate a position. Ideally, LULU stock will provide more shakes first.
REGN stock rose 0.1% to 829.33, now boasting a four-week-tightening pattern with an entry at 837.65. The biotech company is still in buy range on a flat base breakout from 800.58. Investors can use the move past the tight entry as a place to start or add to a Regeneron stock position.
Tesla earnings for the first quarter are due Wednesday evening. Thanks to big price cuts and new US EV arrivals, the electric vehicle giant posted record Q1 deliveries earlier this month. However, deliveries fell short of expectations, with production again significantly outstripping sales.
Now investors will see how much this has affected Tesla’s valuable profit margins, which had already begun to slide last year.
On Friday, Tesla cut prices in Europe, Singapore and Israel, although the European cuts largely absorbed early March discounts. A week ago, Tesla cut US prices for all its vehicles. This points to further margin pressure in the second quarter.
Tesla shares were down 6 cents last week at 185, down 10.8% the previous week. The stock hit resistance at the 21-day and 50-day lines. TSLA stock has a cup-with-handle base formed below its 200-day moving average, which isn’t huge. So while Tesla has a buy point at 207.89, investors can wait for a decisive move above the 200-day, which is now below 213.
Another possibility is that if Tesla shares break above the 50-day moving average, the 200-day offers an early entry with a short position.
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Netflix earnings are due Tuesday night. After a difficult 2022, profits are expected to rebound. Subscription gains are often more important than revenue for Netflix. The results will also be important for streaming competitors like Disney (DIS), as well as year (year)
After doubling from July to early February, Netflix stock made a handle base with a new cup with a 349.90 buy point. The handle is built with low volume and support on the 50-day line. NFLX stock was down 0.2% for the week at 338.63.
ASML stock will report with bears early Wednesday morning Lam Research (LRCX) payable after closing. ASML revenue also rebounds in 2023 after a tough 2022. After nearly doubling from October to early February, ASML stock has formed a cup-with-handle base, according to MarketSmith analysis. Shares rose 1.4% last week to 666.20, rebounding from the 50-day line. Buy point is 683.28.
DR Hardon Revenue
DR Horton earnings are due early Thursday, kicking off results for homebuilders, many of which are in or near buy zones. The homebuilding giant is expected to report a big EPS decline, as have other rivals. Guidance will be key. DHI shares rose 2.7% to 98.25. On Tuesday, shares recovered a 99.50 cup-with-handle buy point, but then fell.
Western Alliance Bancorp Earnings
Western Alliance reports Tuesday night. The California-based bank already provided some key Q1 metrics, including deposits and unrealized losses. But investors will want to hear about current conditions. WAL stock rose 2.9% last week to 31.66, but is still down sharply in 2023. As Warren Buffett said Wednesday, bank deposits are safe, but it’s far from clear that bank stocks will be.
Charles Schwab (Black), Bank of America (BAC), Goldman Sachs (GS) and several super regional banks reported this week.
Overall, they provide a good picture of deposit and credit trends.
Market rally analysis
The stock market rally did not have large weekly moves, but large daily and intraday swings. Major indices staged big rallies on Thursday.
In fact, the Nasdaq Composite fell every day but Thursday, still posting weekly gains. The S&P 500 and Dow Jones hit two-month highs on Friday before pulling back, with the Dow rising for a fourth straight week.
The major indices are not far from the 2023 highs, but they are also not far from undercutting their 50-day lines.
Meanwhile, the Invesco S&P 500 Equal Weight ETF (RSP), which isn’t as heavily weighted to megacaps as Apple or Tesla stock, rallied from the 200-day line but hit resistance at the 50-day multiple times.
Over the past week, markets have become increasingly concerned about recession risks, particularly on Wednesday’s news that central bank staff again forecast a “mild recession” at the March policy meeting. But despite those concerns and generally improving inflation data, the odds of a May rate hike actually increased to 80% on Friday.
Recession and Fed rate hikes are not a great combination for stocks. So last week the market bullish showed resilience. And, despite the volatility, the Nasdaq and S&P 500 have formed 3 weeks of tight patterns, their recent ranges, as has LULU stock.
Market breadth has improved somewhat over the past two weeks. But many stocks are not flashing buy signals. And the market’s negative reversals saw some stocks that seemed to perform quickly fade or reverse.
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What to do now
How should investors be exposed? It depends on the stocks you own. Some stocks flashed buy signals in the past few weeks, while others were mixed or reversed.
Volatile market changes have made adding stocks tricky lately. So it’s a good thing that buying opportunities were relatively low in Thursday’s big rally.
The macroeconomic picture remains in flux, while the earnings season picks up over the next few weeks. So there is likely to be more volatility in the cards.
If the market shows some strength, and stocks flash buy signals, gradually add exposure. Be prepared to take partial profits and exit losers. Remember: If you’re adding exposure quickly, you need to be ready to scale quickly.
An even better strategy is to find early entries and buy near those buy points. So turn on the screens over the weekend and make your watch lists.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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