Dow Jones futures fell Tuesday morning, along with S&P 500 futures and Nasdaq futures after a long holiday weekend. Treasury yields and crude oil prices jumped.
The stock market rally became a confirmed uptrend as the major indexes snapped long weekly losing streaks.
Thursday's follow-through day on the Nasdaq was followed up with further strong gains on Friday. Investors should be taking part in this new market rally, but not jumping in.
DLTR stock, Atkore, Delta Air Lines, Onsemi and Microsoft are worth watching. Dollar Tree, Atkore, Onsemi and DAL stock arguably are flashing early entries, though they are definitely on the aggressive side. Investors may want to wait for proper buy points.
Microsoft stock is not actionable. It's a long way from being actionable. But it's a megacap growth stock that doesn't look horrible. In contrast, Tesla and Nvidia had bigger bounces than Microsoft last week. But both had fallen more than 50% from record highs.
ATKR stock is on the IBD Leaderboard watchlist and on the IBD 50. MSFT stock is on IBD Long-Term Leaders. ON stock was Friday's IBD Stock Of The Day.
The video embedded in this article highlighted a pivotal market week and analyzed DAL stock, Onsemi and Regeneron Pharmaceuticals.
Dow Jones Futures Today
Dow Jones futures fell 0.65% vs. fair value. S&P 500 futures sank 0.6%. Nasdaq 100 futures declined 0.3%.
U.S. stock exchanges were closed Monday in observance of Memorial Day. Other bourses around the world were open.
The 10-year Treasury yield jumped 8 basis points to 2.82%.
U.S. crude oil prices popped 3% to above $118 a barrel. The European Union agreed on a partial ban of Russian crude oil, which should cut 90% of Russian oil imports by year-end.
A China manufacturing index showed a slower decline in May, as Covid lockdowns started to ease. The official manufacturing index rose 2.2 points to 49.6, slightly below the break-even 50. Economists expected 49.3. The nonmanufacturing index shot up 6.9 points to 47.8, well above views for 46.2.
Shanghai will reopen more fully on June 1 and announced a slew of incentives to revive the economy after months of Covid shutdowns. That includes tax rebates, faster property project approvals. Shanghai also will be the latest regional government to offer new EV subsidies.
U.S.-listed Chinese stocks rose Tuesday morning, including EV and internet stocks.
President Biden will meet with Fed chief Jerome Powell on Tuesday to discuss the economy. On Monday, Fed Gov. Christopher Waller said he favors half-point rate hikes for the next "several" meetings.
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
Stock Market Rally
The stock market rally started off shaky with the Nasdaq setting a 52-week closing low on Tuesday. But the major indexes rebounded strongly the rest of the week, delivering strong weekly gains.
The Dow Jones Industrial Average jumped 6.2% in last week's stock market trading. The S&P 500 index leapt 6.6%. The Nasdaq composite popped 6.8%. The small-cap Russell 2000 ran up 6.55%.
The 10-year Treasury yield fell four basis points to 2.74%, just above the 50-day line.
U.S. crude oil futures climbed to $115.07 a barrel last week.
ETFs
Growth and sector funds reflected the broad-based market advance.
Among the best ETFs, the Innovator IBD 50 ETF leapt 9% last week, while the Innovator IBD Breakout Opportunities ETF climbed 4.9%. The iShares Expanded Tech-Software Sector ETF gained 6.1%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF up over 7%. Nvidia stock is a major SMH component with ON Holding also in the ETF.
SPDR S&P Metals & Mining ETF ran up nearly 10% last week. The Global X U.S. Infrastructure Development ETF popped 7.2%. U.S. Global Jets ETF ascended 7%, with Delta stock a major holding. SPDR S&P Homebuilders ETF jumped 6.9%. The Energy Select SPDR ETF surged 8.6% to fresh highs while the Financial Select SPDR ETF gained 8.3%. The Health Care Select Sector SPDR Fund rose 3.3%
Reflecting more-speculative story stocks, ARK Innovation ETF jumped 7.1% last week and ARK Genomics ETF a relatively modest 3%. Tesla stock is the No. 1 holding across Ark Invest's ETFs. Ark's Cathie Wood also has started buying NVDA stock again.
Five Best Chinese Stocks To Watch Now
Stocks Near Buy Points
Dollar Tree stock rocketed 29% last week to 165, more than erasing the prior week's 20% dive. DLTR stock sold off after Walmart and Target missed EPS views and guided lower. But the dollar store chain easily beat views and gave a solid outlook. If you put a giant thumb on the middle of the DLTR stock chart, it almost looks actionable, trading above the 50-day line and a trendline. But investors probably should wait for shares to settle down. Perhaps Friday's intraday high of 166.35 could serve as a new resistance area. The relative strength line is right at highs already, MarketSmith analysis shows.
ATKR stock gapped above a 112.34 buy point from a double-bottom base after earnings in early May, but then tumbled back with the market selling off. Shares knifed below their 50-day and 200-day lines on Tuesday, but they rebounded the rest of the week, finishing up 5.4% to 107.72 for the week. Arguably, Atkore stock is breaking a short downtrend, offering an early entry. But the three-day rally has come on light volume while the downtrend is steep. Investors may want to wait for a new base within a larger consolidation, with 115.88 as a possible buy point.
DAL stock took flight this past week, rising 9.3% to 42.23, with all of those gains and more coming in the last three days. On Thursday's follow-through day, Delta stock rebounded above the 50-day and 200-day lines, while also breaking a downward-sloping trendline from the April 21 short-term high of 46.27. Even with Friday's gain, investors could take an early position here. But 46.37 may serve as a better buy point, with the 45-46 area acting as resistance several times over the past year. United Airlines, Marriott International and some other travel stocks made similar moves last week.
Travel stocks rallied as JetBlue and Southwest Airlines gave bullish forecasts on second-quarter revenue, following upbeat guidance from United earlier in the month. However, Delta said it would cut flights this summer amid staffing issues.
Onsemi stock reclaimed its 200-day and 50-day lines late last week, clearing some short-term resistance as well. Investors who wanted to bet on a growth name could have bought ON stock here. The official buy point is 71.35. The RS line is already at a new high. As for fundamentals, Onsemi boasts five straight quarters of triple-digit earnings growth.
Microsoft Stock
Microsoft stock rebounded 8.2% to 273.24 last week after hitting an 11-month low in the prior week. MSFT stock is still below its 50-day and especially its 50-day line. A strong move above the 200-day line might offer an entry as a Long-Term Leader. But Microsoft stock is a long way from its Nov. 22 peak of 349.67. Its RS line is well off highs.
But, with the possible exception of Apple, Microsoft stock looks better than other megacap growth names. Microsoft earnings estimates are strong than Apple's. Also, its operations are less exposed to supply-chain woes and a weakening consumer than Apple could be.
If big-cap techs are going to have a sustained run, Microsoft will likely participate.
Tesla Stock
Tesla stock hit a 10-month low of 620.37 on Tuesday, just over 50% below its November peak of 1,243.49. But shares rebounded strongly, finishing with a 14.4% weekly gain to 759.63. Those advances came on higher volume, after a large number of big losses in huge trade over the past few weeks. Still, the Tesla stock chart needs a lot of repair, with a lot of overhead resistance. The 50-day line is just crossing below the 200-day line again.
Tesla Shanghai production reportedly is ramping up, with a return to full production sometime next month.
Shanghai EV subsidies, and the reopening of showrooms in Tesla's biggest market in China will help bolster demand.
Tesla Rival Seizes EV Crown, Takes On Model 3, And Flashes Buy Signal
Nvidia Stock
Nvidia beat views but guided low on Tuesday night, just after setting a 52-week closing low. But shares still rallied the next three days, finishing with a 12.7% weekly advance to 188.11. But after crashing 55% from late November, Nvidia stock has considerable work to do.
Market Rally Analysis
The stock market rally is in a confirmed uptrend, with Friday's follow-buying providing some encouragement.
The Nasdaq staged a follow-through day on Thursday with Nasdaq volume up from Wednesday despite being below average. The Nasdaq had another big price gain in higher volume on Friday.
The S&P 500 and Dow Jones delivered solid price gains on Thursday and Friday, but NYSE volume fell in both sessions. S&P 500 follow-through days require higher NYSE volume than in the prior session. However, given the plethora of Nasdaq big caps in the S&P 500, including Apple stock, Microsoft, Facebook parent Meta Platforms, Google parent Alphabet, Amazon.com, Tesla stock and Nvidia, arguably the S&P 500 has staged a FTD based on total volume.
But, ultimately, the market doesn't need a Dow or S&P 500 follow-through day at this point. One index confirming a rally attempt is all that's required.
The Dow Jones snapped an eight-week losing streak, while S&P 500 and Nasdaq ended seven-week declines — all decisively. It's nice to see a rally that appears on a weekly chart.
All the major indexes have moved above their 21-day moving averages. All are above their highs on May 17, when they staged follow-throughs before plunging the next day. The indexes are still below their 50-day and 200-day lines, however, with other resistance points along the way.
So while the market rally hasn't fallen apart immediately, it's not clear if this will be a tradable rally or something longer lasting.
One issue is that there aren't many stocks in good position. That's not surprising, given the market's sharp descent from late March.
Energy stocks continue to lead, though many are extended once again. Lithium plays are hot again, but already appear extended. Some drug and biotech names still look strong. Perhaps some retailers, like DLTR stock and Ulta Beauty, will settle down. Travel plays such as DAL stock are once again rebounding, but they've staged a number of short round trips in the past several months. ON stock may be setting up, but most growth names are still in the off position.
Time The Market With IBD's ETF Market Strategy
What To Do Now
Investors should take advantage of the current market rally, perhaps wading a little bit more into the pool after dipping a toe on Thursday's follow-through.
If you don't see individual stocks that you're confident in, a broad-market ETF can offer some exposure.
Keep your portfolio mostly in cash. And consider taking partial profits on relatively small gains, especially if the major indexes approach key resistance levels such as the 50-day moving average.
The more aggressive you are in adding exposure, the faster you have to be in scaling out if the market deteriorates.
If the market rally continues to gain strength, you will have opportunities to reap big gains. But if the uptrend stalls out, staying light and nimble will pay off.
Build up your watchlists over the long weekend. Look for stocks that are actionable, but keep a broader list of quality names that are holding up relatively well but need some time to set up.
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.
