Dow Jones futures rose modestly Monday morning, along with S&P 500 futures and Nasdaq futures. Bitcoin tumbled Sunday but bounced back by early Monday.
The stock market rally ended up with slim weekly gains or losses on the major indexes, but that belies the big daily and intraday swings and continued sector rotation.
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Nvidia (NVDA) arguably is actionable now, breaking a downtrend Friday and in range from its 50-day line. However, Nvidia earnings are on tap Wednesday. That earnings report and NVDA stock’s reaction will be important for the broader semiconductor sector. Several chip stocks are on the edge of early entries, including equipment makers ASML (ASML) and Lam Research (LRCX).
Google stock is perhaps the best-looking big-cap tech right now. The megacap is in range from its 10-week line and breaking a short trend line. The relative strength line for GOOGL stock is near a record high as well. Facebook (FB) also is looking healthy.
FCX stock is still extended but is one of several mining stocks that have struggled over the past couple weeks. Will mining stocks and commodity plays take a breather or keep running?
Roblox stock is just extended after Friday’s breakout. Can RBLX stock hold its breakout in the coming days? That would be a good sign for new issues and breakouts generally.
Tesla stock is nowhere near actionable, stuck below its 200-day line. But how TSLA stock fares still matters. If the EV giant rebounded powerfully, it would be a positive sign for highly valued growth stocks. If Tesla stock breaks down, it could spell a much longer slump for ARK-style companies and weigh on the Nasdaq and broader rally.
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Bitcoin tumbled to $31,179.69 Sunday, rebounding to above $37,000 Monday morning. The Bitcoin price traded Saturday around $37,000-$38,000.
Bitcoin was extremely volatile last week, even by its standards, with a massive decline followed by big up and down swings. So did Bitcoin rivals such as Ethereum and Dogecoin, both of which are falling sharply Sunday.
Tesla CEO Elon Musk continued to swing Bitcoin up and down over with various tweets, including a Saturday tweet that the “true battle is between fiat & crypto” currencies. Meanwhile, China’s government issued multiple statements cracking down on using Bitcoin or other cryptocurrencies. Over in the U.S., the Treasury wants cryptocurrency transactions of $10,000 or more reported to the IRS to crack down on tax evasion.
Bitcoin peaked at $64,829.14 on April 16. As recently as May 16, the digital asset traded above $49,000. By Wednesday morning, Bitcoin tumbled to just above $30,000, then raced back to above $40,000 hours later. On Friday, Bitcoin slumped again toward $35,000.
With Bitcoin plunging last week, so did related stocks such as Coinbase (COIN). The cryptocurrency exchange, which came public just over a month ago, skidded 13% last week to 224.35, hitting fresh lows. COIN stock debuted via a direct listing on April 16, hitting 429.54 within a few minutes and then heading lower.
COIN stock rose modestly early Monday, helped by a new Goldman Sachs buy rating and 306 price target.
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Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures climbed 0.5%. Nasdaq 100 futures advanced 0.7%. That suggests the Nasdaq will come close to a fresh test of its 50-day line, after Friday’s negative reversal from just above that key level.
China is continuing a crackdown on commodity prices, pushing iron futures lower Monday and easing global inflation fears. Copper prices edged higher but have cooled off in recent days.
Crude oil futures rose modestly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 167.59 million. Covid-19 deaths topped 3.47 million.
Coronavirus cases in the U.S. have hit 33.89 million, with deaths above 604,000.
Stock Market Rally
The stock market rally had a big week of daily swings that roughly canceled out by the end of the week for the major indexes.
The Dow Jones Industrial Average dipped 0.5% in last week’s stock market trading. The S&P 500 index slid 0.4%. The Nasdaq composite edged up 0.3%.
Growth and sector ETFs told a different story.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) retreated 2.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3.7%, as many nontech leaders struggled. The iShares Expanded Tech-Software Sector ETF (IGV) popped 1.8%. The VanEck Vectors Semiconductor ETF (SMH) climbed 2.1%, with Nvidia stock a major component.
SPDR S&P Metals & Mining ETF (XME) fell 1.1%, with miners hard hit while steelmakers held up. Th Global X U.S. Infrastructure Development ETF (PAVE) fell 2.9%. U.S. Global Jets ETF (JETS) lost 1.3% after a solid start to the week. SPDR S&P Homebuilders ETF (XHB) skidded 4.5%. Energy Select Sector SPDR (XLE) retreated 2.4%.
Reflecting stocks with more speculative stories, ARK Innovation ETF (ARKK) climbed 1.5% and ARK Genomics ETF (ARKG) tacked on 2.4%. Both remain below their 200-day moving average. Tesla stock is the top holding across ARK Invest’s ETFs. Several ARK ETFs have amassed a hefty stake in COIN stock already.
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Market Rally Analysis
The market rally is still in effect, but is still under pressure. The Dow Jones and S&P 500 found key support at their 50-day lines. The Nasdaq rebounded from just above its May 12 lows. All of that was encouraging. But the Nasdaq reversed Friday after briefly topping its 50-day line Friday. The big-cap Nasdaq 100 fell back below the 50-day line after reclaiming that level Thursday.
The stock market rally could roar higher or quickly break below recent lows. But for now, it’s still a split market.
Sector rotation continues, with miners, retailers and housing plays hit hard last week. Techs bounced back off weekly lows, but there were a lot of screaming buys either. Facebook and Google look solid, while chips are right on the edge.
A couple of IPOs broke out, but will those moves hold up? Recent breakouts have tended to fizzle or round-trip.
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What To Do Now
This is not a time to be heavily invested.
In a strong market rally, most stocks are going to rise. If you’re buying leading stocks at the right time and cut your losses short, you can rack up big gains for your portfolio with several modest winners and a strong performer or two. In a choppy rally, fewer trades will work and your winning stocks will have smaller gains – either because they never rise much or they run up and fall back. The sector rotation lowers the odds of success.
It’s OK to be modestly invested, holding stocks where you have a decent cushion. But don’t make sizable new bets.
Keep any buys small and have a game plan in place. If you get a modest gain, you can try to hold or quickly cash out quickly. On the flip side, where is your line in the sand for trades that don’t work?
Whether you’re partially invested or entirely on the sidelines, stay engaged. The stock market could break out of its choppy action very quickly. You need to be paying attention — with a frequently updated watchlist — so you can get into the right stocks quickly.
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.
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