Dow Jones futures fell solidly Friday morning, along with S&P 500 futures and Nasdaq futures, as Bitcoin tumbled and the 10-year Treasury yield neared 3%.
The stock market rally may be finally be ready for a pullback after a few days of pausing. The major indexes edged higher Thursday. A modest retreat would be constructive. Investors should be cautious about adding significant exposure in the very near future.
BJ's Wholesale and Canadian Solar gapped out of bases on strong earnings, as both hail from areas of market strength. Exxon Mobil flashed a buy signal as oil and gas stocks continue to lead with energy prices rising. Vertex Pharmaceuticals is retreating, but is possibly setting up a new buying opportunity.
Meanwhile, Bed Bath & Beyond suffered a "reversion to the meme," crashing overnight as GameStop Chairman Ryan Cohen, a big BBBY stock investor, cashed out. BBBY stock had plunged Thursday after Cohen announced his plans to exit.
AMAT Earnings
Applied Materials earnings were better than expected in fiscal Q3, with the chip-equipment giant also guiding higher. AMAT stock edged higher early Friday. Shares of the Applied Materials rose 2.1% to 108.27 on Wednesday. Applied Materials stock is still significantly below its 200-day moving average.
Vertex stock is on IBD Leaderboard and the IBD Big Cap 20. XOM stock is on SwingTrader.
Dow Jones Futures Today
Dow Jones futures sank 0.8% vs. fair value. S&P 500 futures fell 1%. Nasdaq 100 futures declined 1.15%.
Bitcoin tumbled 9% vs. 24 hours earlier to well below $22,000, suddenly plunging early Friday morning. Ethereum and other major cryptocurrencies also sold off.
Crude oil futures and natural gas prices sank nearly 2%.
The 10-year Treasury yield climbed 9 basis points to 2.97%, the highest in a month and closing in on the 3% level.
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 traded in a narrow range for most of Thursday's session.
The Dow Jones Industrial Average rose less than 0.1% in Thursday's stock market trading. The S&P 500 index and Nasdaq composite climbed 0.2%. The small-cap Russell 2000 gained 0.7%.
U.S. crude oil prices rose 2.7% to $90.50 a barrel. Gasoline futures climbed 3.1%. Natural gas futures edged down 0.6%, but are right at 14-year highs.
The 10-year Treasury yield fell 1 basis point to 2.88%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF rose 1.4%, while the Innovator IBD Breakout Opportunities ETF climbed 0.5%. The iShares Expanded Tech-Software Sector ETF lost a fraction. The VanEck Vectors Semiconductor ETF advanced 1.4%, with AMAT stock a notable component.
SPDR S&P Metals & Mining ETF climbed 2.4% and the Global X U.S. Infrastructure Development ETF 0.7%. U.S. Global Jets ETF dipped 0.3%. SPDR S&P Homebuilders ETF edged up 0.4%. The Energy Select SPDR ETF rallied 2.7%, with XOM stock a massive holding. The Financial Select SPDR ETF nudged 0.1% higher%. The Health Care Select Sector SPDR Fund declined 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF fell 1.1% and ARK Genomics ETF 1.2%.
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Stocks Flashing Buy Signals
BJ's stock gapped up 7.2% to 74.09, clearing a 71.10 buy point, though off its 77.47 high set soon after the open. Investors could still buy the gap-up or use an intraday chart to see if BJ's stock can top the 75.50 area, around the bulk of Thursday's trading. BJ's Wholesale early Thursday reported its third straight quarter of accelerating earnings growth and a second quarter of faster revenue gains. The warehouse membership chain also guided higher.
Larger rival Costco Wholesale nudged up 0.8% to 560.96, comfortably in a buy zone from a cup-with-handle base, according to MarketSmith analysis.
CSIQ stock spiked 15% to 45.19, holding on to most of its intraday gains. Investors could buy Canadian Solar now or wait to see if it consolidates or pulls back modestly first.
Canadian Solar reported a 494% EPS gain with revenue running up 62%. The Energy-Solar group is rated No. 1 out of 197, with U.S.-based Enphase Energy leading the way.
Exxon stock rose 2.4% to 94.38, bouncing from its 50-day line and breaking a downtrend from the start of its consolidation in early June. The official buy point is 105.67. As a diversified energy giant with big exposure to crude oil, natural gas and refining, Exxon Mobil is well-positioned.
Vertex stock fell 1.65% to 294.29, pulling back for a third straight session in low, declining volume. But shares found support at the 21-day moving average. Investors could buy VRTX stock now or wait for a little strength.
BBBY Stock Crashes After Pump, Dump
BBBY stock tumbled 19.6% to 18.55 on Thursday, following a huge run in the past few weeks. Late Wednesday, Ryan Cohen, chairman of original meme stock GameStop, announced plans to sell his Bed Bath & Beyond holdings.
Early Friday, BBBY dived 42%, after Cohen disclosed Thursday night that he was finished selling out his stake.
Furthermore, Bed Bath & Beyond, which in the real world is a money-losing housewares firm with tumbling sales, reportedly has hired a bankruptcy law firm to help it address an unmanageable debt load, Bloomberg reported Thursday night, citing a source.
BBBY, up 132% for the week at Wednesday's high, is now down significantly for the week including the overnight plunge.
As recently as Monday night, Cohen disclosed big out-of-the-money BBBY stock options, helping to fuel sharp gains on Tuesday-Wednesday.
But, while GameStop's Cohen offered a pump-and-dump catalyst, Bed Bath & Beyond stock is following a familiar "reversion to the meme" script. Meme stocks often have a massive gain that gets widespread media attention, followed by one more big intraday gain that often fades or closes lower, with rapid declines following that.
While BBBY stock had surged earlier in August, Tuesday's 79% intraday gain — 29% at the close — in record volume got attention. On Wednesday, shares spiked 45% intraday to a five-month high, but faded for a 12% advance, near session lows.
As for other meme stocks, GME stock fell 6.4% after sliding 4% on Wednesday. AMC Entertainment tumbled 9.7%, below its 200-day line. AMC stock dived 14% on Wednesday.
GME stock and AMC fell significantly Friday morning.
Market Rally Analysis
What if the market rally declared a pullback, but the pullback failed to show up? The major indexes have backed off slightly since the S&P 500 nearly hit its 200-day line on Tuesday, but none of the major indexes has even touched the 10-day moving average.
The Dow Jones continues to hold the 200-day moving average, with the S&P 500 index and Russell 2000 just below that key level.
The market rally's resilience after a strong stretch is impressive. But more of a pullback would offer a chance for leading stocks to form handles or retreat to the 21-day lines. The major indexes themselves are only 3% or so above the 21-day line.
Individual stocks and sectors will vary. Energy stocks are coming on with rebounding prices, with Exxon Mobil and several others flashing buy signals in the past few days. Solar names look strong while heavy construction, steel and some transportation plays setting up.
Several chip names are coming on strong, along with some retailers like's BJ's Wholesale.
Biotechs such as VRTX stock are pulling back, which might offer some buying opportunities of their own.
The market rally could pause quietly for several days and then surge higher, but it could also go the other way. The Nasdaq trade tightly at end of last year, again in late March/early April, and in late May/early June. In every case, the tame action ended with sharp sell-offs.
Friday's retreat in Dow Jones futures could mean the start of a pullback, modest or major. But a sub-1% intraday decline, with the major indexes paring losses, would be more in keeping with a pause.
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What To Do Now
That's why investors shouldn't get too aggressive right now. There are some buying opportunities, and investors should consider them, but don't significantly add exposure with the market direction unclear in the very near term.
You can still consider taking some partial profits along the way, with stocks still prone to giving up much of recent gains amid sector rotation. That's also a way to manage your overall portfolio exposure.
The market pullback and various sectors moves are creating new setups, so don't let up on your watchlists.
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.
