Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally revived this past week, with the key indexes moving above key resistance.
It's not a definitive victory, though it's close. Leading stocks and other indicators point to a market rally that is healthier than the big-cap indexes alone indicate. While plenty of market challenges remain, investors should be adding exposure gradually and getting ready to take a deeper dive.
But, keep an eye on Treasury yields. The 10-year Treasury yield continued its ascent last week, closing in on 11-year highs with the August consumer price index on tap this week.
Tesla stock, Arista Networks, Enphase Energy, Neurocrine Biosciences and Pure Storage are in or near buy areas. Tesla and ANET stock arguably are around early entries, while Pure Storage clearly did so on Friday. ENPH stock initially tumbled Friday, but bounced back after holding above a trendline entry. NBIX stock also is holding just above a trendline.
NBIX stock is on IBD Leaderboard. PSTG stock is on SwingTrader. TSLA stock, Arista Networks, Enphase Energy and Pure Storage are on the IBD 50. ENPH stock and Arista also are on the IBD Big Cap 20.
In other news, Warren Buffett's Berkshire Hathaway disclosed Friday night that it has raised its Occidental Petroleum stake to 26.8% from 20.2%. OXY stock rose slightly Friday night.
The video embedded in the article analyzed the market rally's action this past week and analyzed Tesla, GlobalFoundries and PSTG stock.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
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 extended recent losses on Tuesday, but then rebounded for strong weekly gains.
The Dow Jones Industrial Average rose 2.7% in last week's stock market trading. The S&P 500 index popped 3.65%. The Nasdaq composite jumped 4.1%. The small-cap Russell 2000 rallied just over 4%.
The 10-year Treasury yield rose 13 basis points to 3.32%, the sixth weekly advance and close to June's 11-year high 3.48%.
U.S. crude oil futures hit their lowest levels since January during the week, but rebounded to finish down just 0.1% at $86.79 a barrel. Natural gas futures tumbled 9%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF bounced 2.6% last week, while the Innovator IBD Breakout Opportunities ETF gained 2.55%. The iShares Expanded Tech-Software Sector ETF leapt 5.6%. The VanEck Vectors Semiconductor ETF ran up 4.35%.
SPDR S&P Metals & Mining ETF shot up 6.1% last week. The Global X U.S. Infrastructure Development ETF leapt 5.1%. U.S. Global Jets ETF ascended 5.2%. SPDR S&P Homebuilders ETF rallied 4.5%, even with Treasury yields running higher. The Energy Select SPDR ETF eked out a 0.8% gain and the Financial Select SPDR ETF added 4.5%. The Health Care Select Sector SPDR Fund popped 4.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF shot up 9.9% last week and ARK Genomics ETF 8.85%. Tesla stock is a major holding across Ark Invest's ETFs.
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Stocks To Watch
Tesla stock surged 10.9% last week to 299.68, rebounding from its 50-day line to move back above the 200-day moving average. Volume was anemic, however. Investors could possibly buy TSLA stock around here or just above the 300 level, with 314.74 as a quasi-handle entry. The EV giant is still a long way from official buy points.
Tesla has bounced back from Covid restrictions and has greatly expanded production capacity. But rivals are ramping up as well, with Chinese EV makers in particular churning out new models in volume and greatly expanding their international presence. It's going to be an interesting several months in the EV space for sure.
Friday night, Tesla CEO Elon Musk filed an additional reason for scrapping the $44 billion Twitter takeover deal: a severance payment to whistleblower Peiter "Mudge" Zatko.
ANET stock popped 6.1% last week to 124.11, rebounding from the 10-week moving average and reclaiming the 200-day and 21-day lines, though on lackluster volume. Arista Networks stock has a 132.97 handle buy point from a double-bottom base, but investors could take an early entry around current levels. Arista earnings and sales growth have accelerated for the past three quarters.
ENPH stock soared 9.5% to 305.70. Shares reclaimed their 21-day line on Tuesday, arguably offering an early entry on a short consolidation following a post-earnings surge to new highs. On Wednesday, Enphase stock was definitely actionable, running up to new highs. On Friday, ENPH stock fell to 294.20 intraday on an analyst downgrade, but bounced off lows after never undercutting the trendline entry or hitting its 21-day line.
The relative strength line, aside from Friday's dip, has been surging to record highs, as Enphase stock races past the S&P 500.
NBIX stock rose 3.4% in the short week to 106.51, rebounding from the 10-week line. Shares cleared a trendline entry on Thursday, then held above that on Friday.
PSTG stock climbed 3.9% to 30.30 last week after testing its 50-day and 200-day lines. After an August breakout flopped, a new handle formed with a 31.62 buy point. But on Friday, shares broke the downtrend of that handle and moved above the 21-day line, offering an early entry.
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Market Rally Analysis
On Tuesday, the stock market rally appeared to be in its last moments. The major indexes were starting to lose sight of their 50-day line after tumbling back from the 200-day line in mid-August. The Nasdaq composite undercut late July lows, but notably it did not close below that area.
From there, the major averages rebounded.
On Friday, the S&P 500 and small-cap Russell 2000 reclaimed their 50-day moving averages at the open, joined in the afternoon by the Nasdaq. The Dow Jones briefly cleared its 50-day line, but closed just below that key level.
While the S&P 500 now has some space above the 50-day line, it's perhaps premature to say that the overall market rally has decisively cleared the key test.
One reason is that megacap stocks have been noticeable drags for the big-cap Dow, S&P 500 and Nasdaq composite, masking underlying bullish action.
NYSE advancers crushed decliners by 5-1, while Nasdaq winners trumped losers 5-to-2.
The S&P MidCap 400 reclaimed its 50-day line on Thursday, then pushed past the 21-day on Friday.
The Invesco S&P 500 Equal Weight ETF, which doesn't overweight megacaps such as Apple, Microsoft and Tesla, actually reclaimed its 50-day line on Wednesday, added to gains Thursday, then rallied above the 21-day line convincingly on Friday.
To be fair, megacaps did fine on Friday. Tesla stock posted a solid gain while Apple stock and Microsoft moved toward key levels.
Despite the ENPH stock retreat on Friday, solar stocks remain market leaders, along with pollution control and various medical names. But tech stocks such as ANET stock and Pure Storage are starting to come on as well.
Steel names are bouncing back, while there is scattered strength in retail and restaurants.
Oil and gas names steadied with underlying commodity prices after tumbling early in the week.
The market rally remains "under pressure."
It wouldn't take much to have the indexes tumble back below the 50-day line and revisit last week's lows. On the upside, the 200-day moving average is still a huge test up ahead.
In addition to the technical hurdles, Tuesday's August consumer price index looms large. The CPI inflation report likely won't stop the Federal Reserve from hiking rates by 75 basis points for a third straight meeting on Sept. 21. But a tame report could reinforce expectations for slowing rate increases later in the year.
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What To Do Now
The stock market rally has made real strides in the past three sessions. Investors probably should be adding some exposure by this point.
If the Nasdaq decisively clears the 50-day moving average, investors likely could get more aggressive, with a little room to run before the indexes reach the 200-day.
Build your watchlists. Cast a wide net overall, but definitely focus your attention on actionable or potentially actionable names.
While looking for opportunities, remain flexible. If the market rally falters again, be ready to shift to a more-defensive mindset and portfolio once again.
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.
