Dow Jones futures rose modestly Thursday morning, along with S&P 500 futures and Nasdaq futures. Software makers UiPath and SentinelOne reported, along with homebuilder Lennar.
The stock market rally had a constructive Wednesday. The Nasdaq fell but finished off lows and held the bulk of Tuesday's gains, much like AI rally leader Nvidia. Many other big techs had quiet sessions after Tuesday's strong moves.
Laggard Tesla, however, broke lower, extending its long run of underperformance amid negative headlines.
Market breadth was solid.
While AI stocks have clearly led the market rally, a number of stocks in the commodity, travel and medical product spaces are in buy areas now.
Freeport-McMoRan, PBF Energy and Royal Caribbean cleared a buy point. Shockwave Medical and Dexcom remain in buy areas.
However, bullish sentiment has reached excessive levels, suggesting a pullback is likely in the coming days. The market rally has refused to take extended breaks, staging "cat nap" pullbacks for a day or two before quickly revving higher again and looking extended again.
Nvidia and Dexcom stock are on IBD Leaderboard. Nvidia, SentinelOne and Royal Caribbean stock are on the IBD 50. Nvidia stock is on the IBD Big Cap 20.
Dexcom was Wednesday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were 0.4% above fair value. S&P 500 futures climbed 0.35% and Nasdaq 100 futures rose 0.4%.
Crude oil futures edged higher.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Earnings
Lennar earnings topped while revenue fell short. LEN stock fell modestly before Thursday's open. Shares dipped 0.3% Wednesday to 165.50 after hitting a record high intraday. Lennar stock slightly extended from a flat base with a 156.01 buy point, according to MarketSmith analysis.
UiPath earnings topped with the automation software maker guiding lower on Q1 revenue but up for fiscal 2025. PATH stock rose solidly early Thursday after volatile overnight action. Shares dipped 0.85% to 24.43 on Wednesday, but held onto the recent move above the 50-day following a failed recent breakout. A move above Wednesday's high of 25.33 would offer an early entry.
SentinelOne narrowly beat fiscal Q4 views, but guided slightly lower on fiscal 2025 revenue. Shares tumbled overnight. SentinelOne stock fell 1 cent to 27.94 on Wednesday, briefly testing a downward-sloping trendline. That offered an early entry in an emerging base, but the imminent earnings report made that risky.
Stock Market Rally
The stock market rally had a mixed session, with the S&P 500 and Nasdaq falling modestly, ceding only a portion of Tuesday's gains.
The Dow Jones Industrial Average rose 0.1% in Wednesday's stock market trading. Meanwhile, the S&P 500 index dipped 0.2%. The Nasdaq composite declined 0.5%, but it was an inside day to Tuesday's 1.5% pop. Nvidia fell 1.1% but was off lows in an inside day to Tuesday's 7.2% jump.
The small-cap Russell 2000 edged up 0.3%. Breadth was modestly positive, though decliners narrowly led on the Nasdaq.
While Nvidia and many AI hardware plays are clearly extended, there are some software, commodity, medical product, financial, energy and travel names that are actionable or setting up.
U.S. crude oil prices popped 2.8% to $79.72 a barrel. Gasoline futures gained 2.9% — 5.3% this week — to their highest close in nearly six months.
Copper futures jumped 3.25% to $4.0525 a pound, the highest close since April 2023. It was the biggest percentage gain since late 2022.
The 10-year Treasury yield rose 3.5 basis points to 4.19%.
Bullish Sentiment Excessive
The Investors Intelligence bulls-bears sentiment gauge is reaching euphoric levels. Some 60.9% of investment advisors are bullish, above the 60% level seen as excessive. That suggests a pullback, perhaps a more serious one, is coming. But it doesn't have to happen right away. That's the highest point since mid-2021. Just 14.5% are bearish, also the lowest since 2021.
A modest pause or pullback over several days or even weeks would likely cool sentiment, let more bases form and give the market room for a longer run. But that hasn't been the market's pattern.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF fell 0.7%. The VanEck Vectors Semiconductor ETF slumped 2%. Nvidia stock is the No. 1 holding in SMH.
Reflecting more-speculative story stocks, ARK Innovation ETF edged up 0.2% and ARK Genomics ETF rose 0.3%. Tesla stock is a major holding across Ark Invest's ETFs. UiPath also is a big Cathie Wood stock.
SPDR S&P Metals & Mining ETF edged higher, with FCX stock in the ETF. U.S. Global Jets ETF ascended 0.7%. SPDR S&P Homebuilders ETF stepped up 1.5%, with Lennar stock a key holding. The Energy Select SPDR ETF rallied 1.6% and the Health Care Select Sector SPDR Fund fell 0.4%.
The Industrial Select Sector SPDR Fund gained 0.3%. And the Financial Select SPDR ETF climbed 0.7%.
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Stocks In Buy Areas
Freeport-McMoRan stock gapped up 7.6% to 43.41, Wednesday's top S&P 500 performer. The copper and gold miner broke above a double-bottom base buy point of 40.99, closing out of range. However, on a weekly chart, FCX stock just topped a 43.42 cup-with-handle buy point.
Southern Copper and more-diversified Teck Resources also cleared bases Wednesday.
PBF Energy stock leapt 9% to 54.96, clearing a 54.52 cup-with-handle buy point. PBF stock is 16% above its 50-day line. Refining peer Phillips 66 decisively cleared a short consolidation Wednesday, while several oil and gas machinery and services firms have been actionable.
Shockwave Medical stock climbed 1.8% to 269.37, testing the top of a short consolidation following an earnings gap from the 200-day line. SWAV stock already was actionable from breaking a downtrend in this recent action, which could be viewed as a handle to a huge base.
Dexcom stock fell 2.7% to 131.68, falling just below a 132.03 buy point from a flat base within a much larger consolidation.
Royal Caribbean stock climbed 1.8% to 132.11, clearing a 130.97 buy point from a messy flat base. Meanwhile, rival cruise line operator Carnival cleared an aggressive entry while hotel giant Marriott Worldwide is trying to clear a tight pattern.
Tesla Stock
Tesla stock skidded 4.5% to 169.50, hitting the lowest levels since last May. Shares have tumbled nearly 32% in 2024, the worst performer on the S&P 500 index. The relative strength line is at a 14-month low, reflecting Tesla's severe underperformance vs. the S&P 500 index in recent months. The RS line is the blue line in the charts provided.
Before Wednesday's open, Wells Fargo downgraded Tesla to underweight and cut its price target to 125 from 200. The analyst joined a recent rush to slash first-quarter delivery targets. He now sees 2024 earnings per share nearly a third below consensus. And he expects deliveries to fall short. Wells Fargo also said a yet-unveiled cheap EV may be not be a boon for Tesla, citing "likely tough" economics.
Late Wednesday, UBS cut its Tesla price target to 165 from 225, also slashing its first-quarter delivery targets. TSLA stock fell slightly Thursday morning.
Fisker plunged more than 40% in premarket trade on a report that the U.S. EV startup and would-be Tesla rival is preparing for a possible bankruptcy filing.
What To Do Now
Depending on your level of exposure, you could make incremental buys.
The market rally isn't extended right now, though it could be with one good day. Meanwhile, bullish sentiment at extreme levels should give investors pause.
There's nothing wrong with largely standing pat in the current environment.
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