The stock market rally staged a dramatic turnaround late in the week, with the S&P 500 and Nasdaq composite rebounding from key tests Thursday morning to top resistance levels on Friday. A large number of leading stocks flashed buy signals.
The market rally still needs to hold and extend recent gains, but investors should be looking to add exposure again.
Recent solar IPO Nextracker (NXT) broke out Friday, while Dow Jones giant Caterpillar (CAT), EV chip play On Semiconductor (ON), Royal Caribbean (RCL) and Chinese e-commerce giant PDD Holdings (PDD) are all flashing early or aggressive entries.
The video embedded in the article analyzed a pivotal week for the market, while also reviewing NXT stock, Alteryx (AYX) and Caterpillar.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Rally
The stock market rally traded tightly to start the week, ducked lower at Thursday’s open but then roared back to close with robust gains.
The Dow Jones Industrial Average bounced 1.75% in last week’s stock market trading. The S&P 500 index rose 1.9%. The Nasdaq composite jumped 2.6%. The small-cap Russell 2000 popped 2%.
The 10-year Treasury yield rose 1 basis point to 3.96%, but after tumbling 11 basis points on Friday. The 10-year yield hit 4.09% at Thursday’s high. Fed chief Jerome Powell testifies before Congress on Tuesday and Wednesday, while the February jobs report is due Friday morning.
U.S. crude oil futures jumped 4.4% to $79.68 a barrel last week. Copper prices popped 3.2%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) ran up 3.8% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 4%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 3.7%. The VanEck Vectors Semiconductor ETF (SMH) rose 2.8%.
SPDR S&P Metals & Mining ETF (XME) soared 9.8% last week. The Global X U.S. Infrastructure Development ETF (PAVE) leapt 4.5%. U.S. Global Jets ETF (JETS) ascended 4%. SPDR S&P Homebuilders ETF (XHB) stepped up 3.1%. The Energy Select SPDR ETF (XLE) rose 3.1% and the Financial Select SPDR ETF (XLF) advanced 0.9%. The Health Care Select Sector SPDR Fund (XLV) edged up 0.5%, snapping a nine-week losing streak.
Stocks Near Buy Points
Nextracker stock rallied 4.6% to 33.35 on Friday, capping a 10% weekly gain. NXT stock cleared an IPO base buy point of 33.05 on Friday, according to MarketSmith analysis. The solar tracker and software firm, which came public at 24 a share in early February, is profitable with already-hefty sales.
Several solar stocks are acting well, with First Solar spiking higher on earnings this past week. Nextracker rival Array Technologies (ARRY) is not far from being actionable, while Canadian Solar (CSIQ) flirted with a buy signal.
CAT stock jumped 8.1% to 255.1 last week, regaining its 50-day line, offering an early entry. As of Friday’s close, Caterpillar has a new flat base just above prior consolidations. The buy point is 266.14. Several other machinery stocks are showing strength as well.
RCL stock rose 5.5% to 74.02 this past week, rebounding from the 21-day moving average. Royal Caribbean stock has a very deep cup-with-handle base going back to last April. The buy point is 76.40, but Friday offered an early entry. One issue: Volume was light on Friday, and for the week. A large number of travel stocks are showing bullish action.
ON stock popped 3.49% to 78.94 for the week, but it was a wild ride. On Semiconductor, also known as Onsemi, plunged to its 50-day line intraday Thursday after key customer Tesla said it aimed to slash silicon carbide use in its next-generation vehicle. But ON stock closed down just 1.9%, then climbed Friday to retake the 21-day line. On Semiconductor stock is back above a 77.38 buy point and not yet extended from its 50-day/10-week lines. But investors have to know this is a volatile stock.
PDD stock vaulted 14.3% during the week to 95.69, rebounding back above the 50-day line in above-average volume. PDD Holdings is the parent of Chinese e-commerce giant Pinduoduo as well as the new Temu site in the U.S. Shares tumbled Feb. 21 as larger rival JD.com (JD) said it would step up spending to compete vs. the value-focused Pinduoduo.
PDD stock is offering an early entry in an emerging consolidation, which needs another week to be a proper base.
Apple stock rose 2.9% to 151.03 for the week, including Friday’s 3.5% gain to reclaim the 200-day and 21-day lines. The iPhone giant has a 157.48 handle buy point on a base going back to August. Aggressive investors could buy AAPL stock from its 200-day line bounce. But with a relatively low RS rating and uninspiring growth estimates, there may be a number of better choices. Still, having Apple stock participate in the market rally is a positive for the major indexes.
Tesla stock fell below its 21-day line for the first time in weeks on Thursday, but rebounded Friday, closing the week with a 0.5% rise to 197.86. TSLA stock has been pausing for a few weeks below the 200-day line after a huge run to start the year. Arguably, investors could use 217.75 as a handle buy point, though they should probably wait for Tesla stock to also clear the 200-day line, which is now below 221.
The EV giant announced it will build a plant in Mexico, which will produce its next-generation vehicle. But Tesla didn’t unveil a new EV at Wednesday’s Investor Day, saying that will come “later.”
Meanwhile, Tesla demand appears to be waning again after an initial boost on big January price cuts. The EV giant in the past few days has cut European prices on inventory Model 3 and Y vehicles by a further 6%.
Tuesday’s weekly China EV registration data will be important to gauge demand in the world’s largest EV market, which is in the midst of a huge price war that Tesla began.
Market Rally Analysis
The stock market rally signaled a key turning point, with a big upside reversal late in the week.
On Thursday morning, the S&P 500 undercut its 200-day line. The Nasdaq was closing in on its 50-day line while the Dow Jones was at 2023 lows. It’s not an exaggeration to say that the market rally seemed to be on its last legs.
By Friday’s close, the S&P 500, Nasdaq and Russell 2000 had rallied above their 21-day moving averages, which had served as resistance for the past couple of weeks. The Nasdaq ultimately had an upside, outside week, adding to the bullish character change.
Many leading stocks from a variety of sectors flashed buy signals late in the week, while others moved into position or extended earlier moves.
Chips, building materials, travel, housing, software, medicals, machinery, e-commerce, automakers (not just Tesla stock), auto parts makers and more all are showing strength.
It’s notable that the market rally’s upside reversal began with the 10-year Treasury yield well above 4%. That yield did come back below 4% on Friday, but has been soaring over the past month.
It wouldn’t take much for the S&P 500 and Nasdaq to fall back below their 21-day lines and test major support. On the upside, the early February highs are the next big resistance area.
What To Do Now
The market rally staged a dramatic comeback to end the week. The major indexes are showing momentum, while leading stocks are powering ahead. Broad participation and leadership is another bullish sign.
It’s a good time for investors to start some new positions. Don’t rush to boost exposure and make sure you’re not too concentrated. The market rally could easily falter again, so you don’t want to get caught out making big bets on a single day or stock. If this uptrend has real legs, it won’t take long to “gradually” become fully invested.
This is an important weekend to build up your watchlists. Yes, many leading stocks have broken out or flashed early entries. But several are still in range, while dozens of others are close to being actionable.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
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