Dow Jones futures rose modestly early Thursday, along with S&P 500 futures and Nasdaq futures. Micron Technology reported earnings late.
The stock market rally had a narrowly mixed Wednesday after Tuesday's bullish gains. The Nasdaq composite rose slightly, but pared intraday gains.
A slew of software stocks flashed buy signals, including HubSpot, MongoDB, Datadog, Snowflake, Palantir Technologies, Dynatrace, Confluent, Samsara, Monday.com and Shopify. But several closed well off session highs.
Nvidia and Advanced Micro Devices showed some resilience following a report that the Biden administration was mulling tighter chip export curbs to China.
The market rally could be caught in a Catch-22 situation, raising the risks for new buys in the short run. So investors should be careful with making and handling new buys.
Micron Earnings
Micron reported a fiscal Q3 loss and revenue decline that were slightly better than expected. The memory chip giant guided analysts to a wider Q4 loss but in line on revenue. It cited recent China curbs on Micron chips as a "significant headwind that is impacting our outlook and slowing our recovery." Still, Micron sees a bottom in memory chips.
MU stock climbed 2% in premarket trade. Shares edged up 0.4% to 67.07 on Wednesday, again rebounding from around the 50-day line.
Worthington Industries earnings easily beat while revenue came up short. WOR stock popped 5% in overnight action, signaling a breakout. Worthington stock rose 1.4% to 63.37 on Wednesday, trading right on the 63.37 cup-with-handle buy point.
MongoDB, Nvidia, Shopify, Dynatrace and HUBS stock are on IBD Leaderboard. CFLT stock and Dynatrace are on SwingTrader. MongoDB, HubSpot, Dynatrace, Monday.com, Datadog and IOT stock are on the IBD 50. Datadog and MDB stock are on the IBD Big Cap 20. HubSpot was Wednesday's IBD Stock Of The Day.
Bank Stress Tests
As expected, the Federal Reserve late Wednesday said all 23 major financials passed annual stress tests, with capital levels sufficient for a hypothetical severe recession. That follows a bank crisis earlier this spring, but that was concentrated in regional banks. Still, shares of JPMorgan Chase, Bank of America and most of the other big banks rose slightly overnight.
Dow Jones Futures Today
Dow Jones futures were 0.3% above fair value. S&P 500 futures advanced 0.3%. Nasdaq 100 futures rose 0.4%.
The 10-year Treasury yield rose 4 basis points to 3.75%.
Copper prices fell more than 1%, continuing a sharp slide.
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 had a mixed session. The Dow Jones Industrial Average fell 0.2% in Wednesday's stock market trading. The S&P 500 index lost a fraction. The Nasdaq composite climbed 0.3%. The small-cap Russell 2000 gained 0.5
U.S. crude oil prices rose 2.75% to $69.56 a barrel. Copper futures fell 1.6%, with a 4.9% slide in a five-session losing streak.
The 10-year Treasury yield fell 6 basis points to 3.71%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF gained 1.9% to the highest in nearly seven months.
The iShares Expanded Tech-Software Sector ETF advanced 0.5%, with PLTR stock, HubSpot, Datadog, Dynatrace and Confluent all in IGV.
The VanEck Vectors Semiconductor ETF slipped 0.9%. Nvidia stock, Micron and AMD are major SMH holdings.
Reflecting more-speculative story stocks, ARK Innovation ETF gained 2% and ARK Genomics ETF popped 2.9%. SHOP stock is a top-10 ARK holding.
SPDR S&P Metals & Mining ETF declined 0.3%. U.S. Global Jets ETF ascended 0.8%. SPDR S&P Homebuilders ETF slipped 0.4%. The Energy Select SPDR ETF rebounded 1% and the Health Care Select Sector SPDR Fund shed 0.3%.
The Industrial Select Sector SPDR Fund closed flat.
The Financial Select SPDR ETF edged down 0.2%. The SPDR S&P Regional Banking ETF fell 0.5%,
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Stocks In Buy Zones
HUBS stock rose 1.7% to 524.68, bouncing from the 21-day line, breaking a short downtrend and getting above the bulk of a four-weeks-tight pattern. Investors could have used the June 23 high of 522.20 as early entry. The official tight buy point is 535.12.
MDB stock popped 2.5% to a 52-week closing high of 398.02 in huge volume. But shares retreated from an intraday high of 414.48 and settled below a 398.89 buy point from a three-weeks-tight or a high tight flag. MongoDB had already flashed an early entry in recent days.
DDOG stock climbed 2.6% to 98.15, breaking the downtrend of a handle in a deep cup base. The official buy point is 103.80, but this early entry might be the safer bet.
SNOW stock rose 3.9% to 183.86 in strong volume, but came well off intraday highs of 191.94. Snowflake stock is actionable from breaking the downtrend of a new handle in a long consolidation, but failed to close above a prior buy point of 185.
PLTR stock jumped 4.6% to 15.28, rallying from the 21-day line after just regaining that level on Tuesday. But both gains came on below-average volume for Palantir.
DT stock advanced 1.4% to 51.20, rebounding from the 21-day line within a three-weeks-tight forged just above a buy zone. But shares closed in the bottom half of its range.
CFLT stock leapt 5.4% to 35.54, bounding from its 21-day after consolidating for a few weeks modestly above a prior base.
IOT stock popped 5% to 27.03 reclaiming the 21-day and breaking a short downtrend. It hit resistance at the 10-day.
MNDY stock rose 2.7% to 172.72, back above a 171.89 buy point, according to MarketSmith analysis. It's already right at the cusp of breaking a short downtrend.
SHOP stock ended 1.3% higher to 64.62, bouncing further from the 21-day line and breaking a short downtrend. Volume was light and shares backed off an intraday move back above a 65.54 buy point. Shopify stock has consolidated after an earnings gap-up in early May.
Nvidia Stock
The Biden administration is mulling new restrictions on exports of artificial intelligence chips, The Wall Street Journal reported Tuesday night.
The Commerce Department could halt AI chip shipments by Nvidia and others to China and other countries of concern without first obtaining a license. Late last year, the U.S. imposed significant export bans on China, but Nvidia tweaked some of the affected chips to sidestep the restrictions. Those chips may now be targeted.
Nvidia stock fell 1.8% to 411.17, near the middle of its range and above the 21-day line. It was an inside day to Tuesday, which was an inside day to Monday. A move above Tuesday's of 419.40 would break a short downtrend while still not being extended from the 21-day, providing a chance to add a few shares or perhaps start a small position. The 10-day line would be another possible opportunity.
AMD stock dipped 0.2% to 110.19, bouncing intraday from the 10-week line after sharp losses in the past couple of weeks.
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Market Rally Analysis
The Nasdaq continued Tuesday's bounce from the 21-day moving average, though it closed off intraday highs. It's trying to break the downtrend of the recent pullback.
The S&P 500 and Dow Jones which broke their downtrends on Tuesday, fell slightly.
The Russell 2000 opened lower but then improved for modest gains, though it hit resistance at the 10-day line
The Invesco S&P 500 Equal Weight ETF dipped 0.2% and the First Trust Nasdaq 100 Equal Weighted Index ETF climbed 0.2%, after both broke their downtrends Tuesday as they bounced from 21-day lines. Both are significantly outperforming RSP and QQQ so far this week.
Market breadth was slightly positive, with advancers beating decliners.
Leading stocks had a strong session. Software had a slew of buy signals, even beyond Palantir, Snowflake, MongoDB, Shopify and the names cited here.
Nvidia stock and other chip plays showed resilience.
Chipotle Mexican Grill, Extreme Networks, TransMedics, Trade Desk, Carpenter Technology and Super Micro cleared various buy points.
Leading stocks appear eager to run higher with even a modest advance in the major indexes, but how much room do they have?
At least for the moment, the market rally — and leading stocks — are in a Catch-22 situation. If the recent pullback reasserts itself, that would threaten the bullish stock moves of the past few days. But if the market trends higher, the odds of another imminent pullback would quickly rise. That wouldn't be great for new buys either.
The Nasdaq is now 6.6% above the 50-day moving average. The Nasdaq 100 is 7.5% above the 50-day, after briefly topping 8% intraday. It wouldn't take much for those to get back to extreme levels of 10% or more.
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What To Do Now
A number of stocks are flashing buy signals, offering opportunities for investors to add some exposure.
The market rally is trying to reassert itself. But if the Nasdaq quickly gets significantly extended, another pullback could come soon. So that could be a near-term ceiling for the market.
Such back-and-forth action likely wouldn't be a real concern for existing positions with hefty gains, but could be tricky for new buys. Investors may want to take quick partial profits.
It's important to run your screens and keep your watchlists fresh. Have a broad list of strong stocks from across leading sectors, while putting extra attention on a smaller number of actionable or nearly actionable stocks that you are most interested.
Having these lists and using alerts can help you jump on leading stocks close to entries. That can help limit the risks of reversals from highs, as Wednesday's action showed.
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.
