Dow Jones Futures Loom After Market Rally Takes Big Step; 9 Stocks Flash Buy Signals

Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures.




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The stock market’s rallying effort had a strong finish on Friday, with major indexes sharply higher on the December jobs report and the ISM Services Index.

ELF beauty (ELF), SLB (SLB), caterpillar (cat), Rio Tinto (RIO), stop (ATKR), KLA (KLA)C, United Therapeutics (UTHR), Insulate (PODD), and TJX (TJX) break out, flash buy signal or arguably actionable.

Commercial metal (CMC) reports before opening. CMC stock jumped last week, rebounding from the moving average and clearing a tight area. But the upcoming CMC earnings added a lot of risk.

After the market closes on Friday, Messi’s (M) warned that holiday fourth-quarter sales would be lower. This sees consumers under pressure in 2023. Macy’s stock was down more than 4% late Friday, with other retailers lower.

ELF Beauty and Cat stocks joined the IBD leaderboard on Friday, with UTHR stock on the leaderboard’s watchlist. ATKR stocks and commercial metals are on the IBD 50 list KLAC stock is in the IBD Big Cap 20.

ELF Beauty was Friday’s IBD Stock of the Day. United Therapeutics and RIO stocks were picked earlier in the week.

Meanwhile, Tesla ( TSLA ) rocked China’s EV market with massive price cuts on Friday in the wake of weaker-than-expected sales there. Tesla stock dipped for the week but reversed higher on Friday. Tesla’s move may hurt its profit margins, but it will help the EV giant counter boom BYD (BYDDF), which is increasingly profitable. BYD stock fell on Friday but still had a strong week. China EV startups eg take (NIO), Lee Auto (LI) and expeng (XPEV), which is losing money, faces a tougher challenge. Nio stocks, Li Auto and Xpeng dipped on Friday but pulled out weekly gains.

Dow Jones futures today

Dow Jones futures open at 6 pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Note that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


Join IBD experts as they analyze actionable stocks on the stock market rally on IBD Live


Stock market rally

The new stock market rally looked shaky for most of the week, but then rebounded strongly on Friday.

Some strong labor market data weighed on major indicators, but Friday’s jobs report had some soft elements, notably tepid wage growth. Also, the ISM services index showed a big drop, indicating that the economy is going to slow significantly.

The Dow Jones Industrial Average rose 1.5% in last week’s stock market trading, along with the S&P 500 index. The Nasdaq Composite rose 1%. The small-cap Russell 2000 rose 1.8%. All indices came in with gains and then some on Friday.

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The 10-year Treasury yield fell 26 basis points to 3.57%. The odds of a quarter-point Fed rate hike on February 1 are now up to 74%. Markets are betting on a quarter-point in March in a range of 4.75%-5%. Markets aren’t seeing any more rate hikes despite Fed forecasts above 5%.

US crude oil futures fell 8.1% last week to $73.77 a barrel. Natural gas tumbled 17%.

ETF

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 0.55% last week, while the Innovator IBD Breakout Opportunity ETF ( BEUT ) gained 1.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.9%. The VanEck Vector Semiconductor ETF (SMH) popped 4.3%, retracing the 50-day line.

Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) rose 0.4% last week and the ARK Genomics ETF ( ARKG ) gained 0.2%. Tesla stock remains a major holding across Arc Invest’s ETFs. Cathy Wood to increase TSLA holdings to start 2023

The SPDR S&P Metals & Mining ETF (XME) jumped 6.1% last week, a bullish bounce from all of its key moving indexes. Global x US Infrastructure Development ETF (PAVE) popped 3.1%. The US Global Jets ETF (JETS) rose 7.9%. The SPDR S&P Homebuilders ETF (XHB) bounced 5.5% The Energy Select SPDR ETF (XLE) gained 0.1%, with SLB stock a significant component. The Financial Select SPDR ETF ( XLF ) rose 3.45%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.1%, but recovered its 50-day line on Friday.


Five Best Chinese Stocks to Watch Now


Stock to watch

ELF stocks were fairly clean. Shares rose 4.4% to 58.05 on Friday, coming off a flat base on more than double normal volume, according to MarketSmith analysis. The relative strength line has hit new highs.

SLB stock rose 3.5% to 54.50 on Friday, extending a bounce from the 50-day line and clearing an early entry into its consolidation. SLB was formerly known as Schlumberger.

CAT stock rose 3.6% to 248.86, moving decisively into a buy zone from a 6%-deep flat base on the side of a long, deep consolidation.

RIO stock rose nearly 3% to 74.07, clearing a cup-y-handle buy point.

KLAC and ATKR stocks bounced off their 10-week lines and topped their 21-day moving averages, offering early entries.

UTHR stock bounced slightly from its 10-week line as it traded extremely strongly. United Thera could probably use a little more strength to clear a small downtrend.

PODD stock recovered its 50-day line, but backed off to close just below the 21-day line. A move above the 300 level would suggest an initial entry into a flat base.

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TJX stock broke out of a shallow flat base next to a long, deep cup pattern.

Tesla rules the China EV market

On Friday, Tesla cut prices in key Asian markets of China and Japan, Australia and South Korea. This came in the wake of a record fourth-quarter delivery that missed the view for the second straight quarter. With backlogs falling rapidly – ​​essentially zero in China – Tesla will have to act bravely to try to maintain current deliveries.

Given some big end-of-year incentives, some of which ran into 2023, the price cuts in China may not be as big as they appear on the surface. Still, the Tesla Model 3, facing stiff competition in China, now costs about $600 more than the similar BYD Seal, essentially erasing the nearly $10,000 gap in just a few months.

While the price cuts will hurt Tesla’s valuable gross margins, the question is how much they will boost Model 3 and Y demand and for how long.

Tesla’s China price war is aimed in large part at BYD, which is either the world’s largest EV maker or the fastest-growing No. 2. But BYD is profitable with solid auto gross margins. Also, its big export push, including Australia and, on January 31, Japan, could help it cushion.

A China EV price war could be a big concern for EV startups. Nio and XPeng still lose money. Lee Auto has been disproportionately profitable.

Note that Tesla’s second China price cut in 10 weeks could only be the start of vicious discounting. Tesla has plenty of spare capacity while its rivals are all ramping up, especially BYD. And they’re all going to be strictly in the $30,000-$50,000 range where the Tesla resides.

Tesla stock fell 8.2% for the week to 113.06, continuing a massive selloff. But shares rose 2.5% to finish the session off Friday’s fresh bear market low of 101.81. BYD stock fell 1.55% on Friday, but is still up 7% for the week, above its 50-day line.

Nio, Li Auto and XPEV stocks fell 4.5%, 9.2% and 15% respectively on Friday. But for the week they rose 2%-6%.

Tesla stock obviously looks terrible right now, but none of these EV stocks are looking good.


Tesla vs. BYD: The EV Giants Fight for the Crown, But Which Is the Better Buy?


Market rally analysis

Stock market took positive steps on Friday.

The Dow Jones has moved above its 50-day and 21-day moving averages after hitting resistance in recent days. The Dow is even more relevant in today’s markets, where industrials, healthcare and many Dow-style companies are leading the way, such as Caterpillar.

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The S&P 500 cleared its 21-day line, up to the 50-day line. The Russell 2000 retook the 21-day but still has a little work to do to reach the 50-day.

The S&P Midcap 400 moved above its 21-day, 50-day and 200-day moving averages. The Invesco S&P 500 Equal Weight ETF (RSP) did just that.

The Nasdaq is near its 21-day line for the first time in a week, but is clearly lagging behind.

Even as the Dow is still at its December peak, other indexes face multiple challenges. Another big move would be for the S&P 500 to break above its 50-day line.

This could signal the start of a more meaningful rally, even if it’s just a short, tradable rally, but it’s not clear yet.

The leading stock, which has generally outperformed the S&P 500 in recent months, showed strong moves on Friday with several breakouts and buy signals. But that follows some disappointing reversals earlier in the week and more broadly over the past few months.

See if a market rally can create momentum in major indices and leading stocks. On Thursday, the consumer price index is on tap.


Time the market with IBD’s ETF Market Strategy


what to do now

The stock market rally is looking good for now. Investors may want to add some exposure, either through individual stock or sector broad market ETFs. But don’t get too excited.

This could be a bullish turn, or another head fake.

Markets can move lower quickly. Or, the S&P 500 could rally to the 200-day or December peak — and back.

Taking small positions may be the best course initially. Let the market draw you in. Be prepared to cut losses quickly and still consider taking partial profits quickly.

But it’s definitely time to make your watchlist. Make sure you have a diverse list. While the growth and technical sectors are still lagging with a few exceptions like KLAC stock, a large number of stocks from different sectors look attractive.

Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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