Dow Jones futures tilted lower Monday morning, along with S&P 500 futures and Nasdaq futures, while crude oil futures rose. The stock market rally staged a dramatic character change last week, with the Dow Jones, S&P 500 and Nasdaq composite boasting their best weekly gains since 2020.
After selling off Monday, the major indexes roared higher over the next four days, reclaiming key resistance levels and staging follow-through days to confirm the new uptrend. Meanwhile, a growing number of actionable stocks are showing up.
Market conditions are easily the healthiest they've been in 2022. Of course, that's not saying much.
Get your stock shopping lists ready and make some stock purchases, but don't go on a buying frenzy.
Meanwhile, Russia's Ukraine invasion seems to be stalling. Boeing tumbled on a China crash while Warren Buffett did some shopping of his own.
Dow Jones Futures Today
Dow Jones futures fell 0.25% vs. fair value, with BA stock a drag. S&P 500 futures edged lower and Nasdaq 100 futures lost 0.1%.
Crude oil futures rose 4%.
The 10-year Treasury yield climbed 5 basis points to 2.2%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Monday News
A China Eastern Airlines flight of a Boeing 737-800 jet crashed with over 130 people on board. The country reportedly will ground all 737-800 jets. China had been poised to let Boeing 737 Max flights resume, the last major aviation market still to do so. Boeing stock plunged.
Warren Buffett's Berkshire Hathaway agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 a share. Alleghany stock closed at 676.75 on Friday.
Thoma Bravo will take software maker Anaplan private for $10.7 billion, or $66 a share. That's a 30.5% premium to PLAN stock's Friday close.
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Stocks To Watch
ANET stock, Juniper Networks, Nvidia, Broadcom and Palo Alto Networks are all trading right around buy points.
Arista Networks and JNPR stock are flashing early entries within solid consolidations. Nvidia stock is an aggressive entry as it breaks a long downtrend. PANW stock is back above an old buy point, though it's more complicated than that. AVGO stock is right below an early entry, though an aggressive trader could already be taking a position.
Microsoft stock and Google parent Alphabet are quickly moving into position once again. Meanwhile, Tesla stock has run up sharply, clearing some key levels. While Tesla doesn't have as obvious a buy signal as Nvidia stock, its strength is a positive sign for highly valued growth plays.
Tesla is expected to begin deliveries Tuesday from its Berlin-area factory, which will be celebrated with another event at the plant. Also on Tuesday, Nvidia holds an analyst day, along with a keynote address from CEO Jensen Huang at the chipmaker's annual GTC conference.
Tesla, Arista Networks, Nvidia and Microsoft stock are on IBD Leaderboard. ANET stock also is on SwingTrader. Google stock and Microsoft are on IBD Long-Term Leaders. Arista, Nvidia and AVGO stock are on the IBD 50. Broadcom was Friday's IBD Stock Of The Day. Juniper Networks was Thursday's Stock Of The Day.
The video embedded in this article discusses the big market week and analyzes Arista Networks, Broadcom and Google stock.
Russia's Ukraine Invasion
Russia is shifting to "Plan B," U.S. officials believe, reported the Wall Street Journal. The military may be seeking to gain territory in the south, creating a land bridge from Crimea and forcing Ukraine to accept the new borders and commit to some neutrality.
On Sunday, Russia issued an ultimatum to Mariupol to surrender by Monday morning, signaling that its leaders and fighters, described as "bandits," would face a "war tribunal." Ukraine rejected Russia's ultimatum.
Russia continues to shell holdout cities such as Mariupol and Kharkiv mercilessly, killing more and more civilians. It's gaining little new ground in its Ukraine invasion.
Ukraine's military and local militia have put up a fierce resistance, while continuing to attack supply chains, leaving the invaders low of fuel, food and ammo. Ukrainian forces appear to have regained some territory north of Kherson in recent days.
Russian troop and equipment losses have been very high, far more than Moscow is admitting.
Russia claimed Sunday it used hypersonic "Kinzhal" missiles to strike targets in western Ukraine. But there are doubts that any hypersonic missiles were used. The country could be running low on its store of precision guided missiles.
President Joe Biden will host a call Monday with the leaders of France, Germany, Italy and the U.K. on Monday. Biden is traveling to Europe for meetings this week with NATO, the European Union and the Group of Seven. He reportedly will travel to Warsaw on Friday to meet with Poland's president.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally sold off Monday, but the major indexes roared back for their best weekly gains since November 2020. The Dow Jones Industrial Average jumped 5.5% in last week's stock market trading. The S&P 500 index 6.2%. The Nasdaq composite surged 8.2%.
The small-cap Russell 2000 jumped 5.3%, its best weekly gain in more than a year.
The 10-year Treasury yield ran up 14 basis points to 2.15% last week. The 2-year yield has risen to 1.95%. The narrow yield spread signals some concern about economic growth.
U.S. crude oil futures fell more than 4% last week to $104.70 a barrel, but rebounded from well below $100 at one point.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF rallied 5.1% last week, while the Innovator IBD Breakout Opportunities ETF gained 1.8%. Those muted gains reflect energy and commodity holdings that have been big winners in 2022 but had muted weeks.
The iShares Expanded Tech-Software Sector ETF leapt 9.2%. MSFT stock is a major IGV component. The VanEck Vectors Semiconductor ETF surged 9.5%. Nvidia stock and Broadcom are big SMH holdings.
SPDR S&P Metals & Mining ETF edged up 0.4% last week. The Global X U.S. Infrastructure Development ETF climbed 5%. U.S. Global Jets ETF soared 13.2%. SPDR S&P Homebuilders ETF popped 7.3%. The Energy Select SPDR ETF fell 3.9%, but pared weekly losses. The Financial Select SPDR ETF gained 7.1%. The Health Care Select Sector SPDR Fund rallied 6.2%
Reflecting more-speculative story stocks, ARK Innovation ETF spiked 18.3% last week and ARK Genomics ETF 13.15%. Both had hit 22-month lows early in the week. Tesla stock remains the No. 1 holding across Ark Invest's ETFs.
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ANET Stock
ANET stock ran up 9.5% to 131.25 last week, and that's after tumbling 3.9% on Monday. On Wednesday, Arista Networks reclaimed its 50-day line and on Thursday just closed above a trendline entry. On Friday, ANET stock popped 4.2% in heavy volume, still in range from the trendline. Investors also could use 133.97 as an entry that has some double-bottom base characteristics. The official consolidation buy point is 148.67. The relative strength line is just below highs, signaling Arista stock's strong performance vs. the S&P 500.
JNPR Stock
Arista networking peer Juniper Networks climbed 1.9% on Friday to 35.31, just clearing a trendline entry. JNPR stock rose 6.55% for the week. Juniper stock has an official 36.13 entry, according to MarketSmith, though 35.66 offers another early buy point.
PANW Stock
Palo Alto stock, which broke out powerfully in late February but then pulled back into the base and its 50-day line on Monday, rebounded strongly over the next four sessions. On Friday, PANW stock rose 2.3% to 577.02, back above the old buy point of 572.77. That's technically no longer valid due to the sharp sell-off, but that's also about where a new short trendline entry falls.
AVGO Stock
Broadcom stock rose 5.7% last week to 610.92. The chipmaker has an official buy point of 677.86 but investors could use 614.74, just above the Feb. 10 high, as an early entry. Aggressive traders could start a position in AVGO stock now, after retaking the 50-day late last week.
Nvidia Stock
Nvidia stock is the outlier here, nowhere close to an official buy point and lacking even a consolidation. Shares erased Monday's losses to run up 19.7% last week to 264.53, reclaiming its 200-day and 50-day lines. Retaking the 50-day line coincided with breaking a trendline, offering an aggressive entry. While Nvidia stock is not extended from the 50-day line yet, it does face possible resistance at its Feb. 10 high of 269.25.
Microsoft, Google Stock Setting Up
Microsoft stock jumped 7.3% last week, while Google climbed 4.8%. Both have similar charts, retaking their 50-day lines on Friday. If they can retake their 200-day lines, that would offer an early entry for position traders or a chance to buy them as Long-Term Leaders. Both have work to do to reclaim all-time highs.
Tesla Stock
Much like Nvidia stock, Tesla fell on Monday but then rebounded powerfully for a 13.8% weekly gain, to 905.39. After reclaiming its 200-day and 21-day lines earlier, TSLA stock closed just above its 50-day line on Friday. Some might see that as an entry for Tesla stock, but it would highly risky.
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Market Rally Analysis
The stock market rally continues to build momentum after looking grim Monday. The Dow Jones and S&P 500 staged a follow-through day on Wednesday as investors embraced Fed chief Jerome Powell's economic optimism even as he begins a tightening cycle.
Investors also cheered signals from the Chinese government that it would soon end a major tech crackdown and assured that it will support overseas listings. The key Shenzhen province reopened further Monday after several days of lockdown. However, Shanghai schools are closing again while Shanghai Disneyland is closing indefinitely.
The Nasdaq, which undercut its Feb. 24 lows on Monday, had its own follow-through day Friday, with volume souped-up on a triple-witching options expiry.
Confirmed rallies don't always work, as the Jan. 31 FTD quickly fizzled in February.
But the major indexes are all above their 21-day moving averages, which had been a real resistance area in 2022. The Dow Jones and S&P 500 reclaimed their 50-day moving averages on Friday, with the Nasdaq racing up that key level. They are all above their early March highs.
Above its 50-day line, the S&P 500 is now just below its 200-day line. But the Nasdaq has some room before its next likely resistance area, its February highs.
All of that provides incremental confidence that the current market rally has legs, at least as a tradable rally.
The market rally could hit resistance around these areas, especially after running up so much in the past four sessions. That's OK, as long as the pullback is modest. As Dan Fitzpatrick of StockMarketMentor.com said on IBD Live Friday, it's important for the major indexes and leading stocks to pull back to higher lows and then continue to advance.
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Broad-Based Market Rally?
While this article highlighted tech names such as Nvidia, Google, Microsoft and Arista, it's not clear which stocks and sectors will lead the new market rally. There are encouraging signs that this could be a broad-based uptrend, something that hasn't happened consistently over the past year.
A lot of energy stocks continue to rebound from pullbacks. Steel and mining stocks are acting well. A few drugmakers and biotechs are in buy range. Health insurers, some "dry" shipping plays and building supply stocks are hovering around buy points. Some travel stocks are showing strength despite some ugly-looking charts.
Keep in mind this is still a headline-driven market. Russia-Ukraine headlines, and more, could quickly derail the market rally or specific sectors and stocks.
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What To Do Now
This is why we stay engaged with the market during corrections. The market looked terrible on Monday, with the Nasdaq signaling the start of a new leg down in its bear market. But in four days, everything has changed.
Not only is there a confirmed market rally, with the major indexes clearing some key levels in massive run-ups, but there is merchandise to buy. Stocks that were setting up are breaking out or clearing buy points. Others, like Tesla stock and Nvidia, are rising up from sick beds.
Investors hopefully have been slowly adding exposure in the past few days. If this market rally has legs, you'll have plenty of time to take advantage.
Caution is still in order. A few days could change everything yet again. The market rally could struggle, or some sectors may fall out of favor or fail to participate. Know your exit strategy before your entry.
Keep a broad watchlist for what could be a broad market uptrend. Have a "ready" list of stocks that are in or near buy points.
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.
