News of a basic bipartisan deal on raising the ceiling on U.S. debt initially gave the stock market a boost on Monday. However, following strong gains in recent weeks by technology stocks, the advance lacked oomph and key indexes either lost much of their gains or cooled outright.
Given that volume rose on both main exchanges, IBD notes that Tuesday's action likely served as a stalling day, a rare form of distribution. Read today's Big Picture for a full analysis.
The U.S. government is reportedly set to run out of money to pay interest on current Treasury bonds on June 5. Therefore, Congress is acting quickly to get enough votes to pass measures to raise the limit on existing government debt and have legislation signed by President Joe Biden.
Meanwhile, futures traders still see a 65% chance that the Federal Reserve will raise interest rates for the fourth time this year to a 5.25%-5.5% target zone at its June 13-14 meeting. On Tuesday, the yield on the benchmark U.S. Treasury 10-year bond slipped 11 basis points to 3.70%.
While the Nasdaq closed the session with a modest gain of 0.3%, the composite index rose as much as 1.4% during morning trading.
At 13,017, the tech-enriched index closed above the 13,000 round number for the first time since Aug. 16.
Invesco QQQ Trust, tracking the 100 largest nonfinancial companies on the Nasdaq, did a little better. The popular exchange traded fund advanced 0.7%. QQQ is also up more than 9% since the start of the second quarter.
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Meanwhile, the S&P 500 traded near break-even by day's end and is holding on to decent year-to-date gains. The Russell 2000 fell 0.3%.
The Dow Jones Industrial Average fell less than 0.2% on Tuesday following the three-day Memorial Day holiday weekend.
Stock Market Today
Looking at the top industry groups of the day, a handful claimed gains of 2% or more. They include computer hardware and peripherals, shoe manufacturing, computer networking, alcoholic beverages, database software and automakers.
Helping lead the upside were select enterprise software firms including Palantir Technologies. The large cap surged nearly 8% in heavy volume following last week's 16.6% climb. A daily chart hints that some holders sold into strength as the stock briefly hit 15, another round number and a psychologically important price level.
The data analytics platform innovator is aiming at a fourth straight weekly gain.
Palantir is now sharply extended beyond the 5% buy zone after clearing a nearly three-month consolidation pattern with a 10.41 proper buy point. A trendline drawn within the base triggered an early entry near 8.50.
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Palantir Chart Analysis
The Denver-based company has a stock market value of $31.5 billion, a float of 1.87 billion shares, and 2.12 billion shares outstanding. Shares rocketed after Palantir announced its first-ever quarterly profit on a GAAP (generally accepted accounting principles) basis. Adjusted first-quarter profit jumped 150% to 5 cents a share on an 18% boost in revenue to $525 million, a quarterly best.
In the prior seven quarters, Palantir's top line rose 49%, 36%, 34%, 31%, 26%, 22% and 17% vs. year-ago levels.
Where is the next entry for Palantir stock? That will depend largely on how it behaves over the next few months.
With the gigantic gain seen since early May, surely PLTR will need to take a break as some traders take profits. So, watch for the stock to possibly test the 20 level, then pull back softly. If a proper handle forms, then a new but riskier buy point will emerge.
Palantir could also present a follow-on entry point in the form of a test of the 10-week moving average or a three-weeks-tight, a secondary chart pattern discovered by IBD founder Bill O'Neil.
PLTR: 99 Out Of 99 Score
According to IBD Stock Checkup, PLTR gets a pristine 99 Composite Rating on a scale of 1 to 99. The IBD Composite Rating is proprietary and combines fundamental, technical and institutional ownership quality metrics.
Elsewhere, leading issues within the IBD 50 included China-based EV and hybrid vehicle innovator Li Auto, cloud-based database platform company Confluent, and cybersecurity giant Okta, a leader in identity verification software.
Confluent is nearly past the 5% buy zone after clearing the cup's standard entry point of 29.82, 10 cents above the cup's left-side high. The 5% buy zone from 29.82 goes up to 31.31.
However, the midcap growth stock delivered an excellent early entry point near 23.50 three weeks ago as Confluent catapulted above its 10- and 40-week moving averages while still carving out the right side of its double-bottom-like pattern.
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Stock Market Losers
On the downside in the stock market today, coal and oil-and-gas drilling stocks fared worst. Both groups sank at least 3%. Coal miner Arch Resources dropped 2.1% for its fifth decline in a row. The stock holds a lowly 23 Composite Rating. Arch had been constructing a long base since topping out near 183 in May 2022.
However, the stock issued a key sell signal in the week ended March 17. Arch Resources slid more than 12% in heavy volume, taking out its 10-week moving average and 40-week line in the process.
Good stocks trade above, and not below, these two critical technical levels.
West Texas intermediate crude oil futures sank 4.1% to $69.68 a barrel. Oil is down more than 13% year to date.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
