Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally had a strong, broad rebound last week, with the Nasdaq and S&P 500 hitting record highs and many leaders breaking out or offering early entries.
XThe market rally could be shaping up in a healthier fashion as the economy and society start to settle into a post-pandemic "new normal." But let the market be your guide.
Tesla made a bullish move last week, reclaiming key levels and flashing aggressive entries. Meanwhile, Nio (NIO) and fellow China EV makers Xpeng (XPEV) and Li Auto (LI) are shaping up. Tesla should release its Q2 global delivery figures next week, while Nio and some of its local peers are set to release June sales.
Meanwhile, Amazon.com (AMZN), Applied Materials (AMAT) and Shopify (SHOP) are consolidating near highs, setting up or working on new entries.
Tesla and AMAT stock are on IBD Leaderboard. Tesla stock is on the IBD 50.
Bitcoin Price
Meanwhile, Bitcoin retreated sharply Friday to $32,000. On Tuesday, the Bitcoin price briefly plunged below $29,000, the lowest since January, before rebounding. But cryptocurrencies have been in steep downtrends for several weeks.
Bitcoin peaked at 64,829.14 in mid-April.
Dow Jones Futures Today
Dow Jones futures begin trading 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
Coronavirus News
Coronavirus cases worldwide reached 181.18 million. Covid-19 deaths topped 3.92 million.
Coronavirus cases in the U.S. have hit 34.48 million, with deaths above 619,000.
Stock Market Rally Last Week
The stock market rally improved dramatically in just a few sessions. The Dow Jones Industrial Average gained 3.4% in last week's stock market trading. The S&P 500 index rallied 2.7%. The Nasdaq composite climbed 2.35%. The small-cap Russell 2000 popped 4.4%.
The 10-year Treasury yield rose 9 basis points to 1.54%, the first weekly gain in six. Most of that came Friday following a strong inflation reading.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) ran up 4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 3.8%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 2.4% after running up sharply in recent weeks. The VanEck Vectors Semiconductor ETF (SMH) picked up 2.7%.
SPDR S&P Metals & Mining ETF (XME) rebounded 4.1%, though that's after plunging 12.3% in the prior week. The Global X U.S. Infrastructure Development ETF (PAVE) rose 4.65%. U.S. Global Jets ETF (JETS) dipped 0.7%, the fourth straight weekly loss amid concerns about the impact of the Delta variant of Covid-19 on travel. SPDR S&P Homebuilders ETF (XHB) gained 3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rallied 5.5% and ARK Genomics ETF (ARKG) 4%. Both have definitely cleared their 50-day and 200-day moving averages. Tesla stock is the No. 1 holding across Ark Invest's ETFs.
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Tesla Stock
Tesla stock dipped 1.2% on Friday, but jumped 7.8% for the week to 671.87. Shares rebounded from their 200-day line to reclaim their 50-day line. TSLA stock also broke a downward-sloping trend line. That trend line offers reasons for an aggressive entry, perhaps a place to start a position, sizing off the 10-week line.
If Tesla falls below its 50-day/10-week lines, and especially its 200-day/40-week lines, that would be a bad sign.
Investors could also use 780.89 as a place to add or start a Tesla stock position. It's the middle of the W in a faulty double-bottom base. It's faulty because the second leg of the W didn't quite undercut the first leg.
Still the relative strength line for Tesla stock did hit new lows during the second leg. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
While the RS line has risen modestly in the past few weeks, it still remains close to its 2021 lows.
Keep in mind that Tesla will likely release second-quarter production and delivery figures on Thursday or Friday. That could spur big TSLA stock gains or losses.
Nio Stock, Xpeng, Li Auto
Meanwhile, Nio stock retreated 3.9% last week to 45.02, after running up more than 50% from the May 13 low of 30.71. That's a much-bigger bounce than Tesla stock, but Nio also sold off far more than its U.S. rival.
Nio stock doesn't have an entry point yet. If it pulls back further, to its 21-day moving average or below, that might create a very aggressive entry point.
Meanwhile, Xpeng and Li Auto stock have staged even-stronger rebounds than Nio, but that came after the 2020 IPOs suffered massive losses from record highs.
XPEV stock fell 6.8% last week but is still above its 21-day line. That could offer its own early entry.
Li Auto stock, which has more than doubled from its May 11 low, rose for a seventh straight week. So there is no plausible early entry on the table for now.
Nio will likely release June auto sales on Thursday or Friday, with investors looking for signs that a chip shortage is easing for the EV maker. Xpeng and Li Auto should also release monthly delivery figures late next week or soon after.
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Amazon Stock
Amazon stock fell 2.45% last week to 3,401.45, after nearing the high of a cup base. On a weekly MarketSmith chart, AMZN stock has a handle, offering a slightly lower entry of 3,524.96. It would take a few more days for a handle to show up on a daily, but there is a definite pullback to shake out weak holders.
The RS line for AZMN stock is well off highs, but recently hit a consolidation peak.
AMAT Stock
AMAT stock rose 3.8% to 136.19 last week, rebounding from a drop below the 50-day line. Applied Materials stock has a 142.22 handle buy point, though investors might find a slightly lower entry from a trend line.
Memory-chip giant Micron Technology (MU) reports quarterly results on Wednesday. Applied Materials is heavily exposed to memory-related customers.
Shopify Stock
Shopify stock hit a record high 1,552.23 on June 21, technically clearing a 1,499.85 buy point from a cup base. But that's after running up strongly from an early entry point of 1,281.09, which it passed up on June 14. That was the first of seven above-average gains. But after running up quite a bit, SHOP stock was vulnerable for at least a pause, which is what happened.
Shopify stock rose a fraction for the week, but pulled back Wednesday-Friday. On paper, SHOP stock could have a high handle after Monday. But a somewhat-larger pullback, perhaps one that shows up on a weekly chart, would be preferable.
Market Rally Analysis
A week ago, the Nasdaq was leading but the other major indexes were below their 50-day moving averages with banks and many cyclical stocks plunging. This week, the Nasdaq continued to power higher while the other indexes enjoyed even-bigger weekly gains. The S&P 500 is at all-time high levels as well, with the Russell 2000 knocking on the door and the Dow reclaiming its 50-day line.
Another set including techs, apparel retailers and more flashed buy signals, while financials, miners and more rebounded.
A tech-led broad-based market rally with a large number of actionable stocks from a variety of groups is a positive environment for investors. But is this the start of a new trend or a short-lived reprieve from choppy, sector rotation?
Sector Rotation Winding Down?
The months of continual stock market rotation likely is the result in part of massive economic shifts. The economic crash and revival within a year is highly unusual. Now, with the pandemic and restrictions fading, consumer and business spending also may be shifting considerably. Throw in uncertainty over inflation, Fed policy and massive stimulus packages, and Wall Street has had a hard time pricing in all of these big changes and possibilities, whether it's for the broad market, various sectors or individual stocks.
As the economy starts to normalize, the market should have an easier time. That doesn't mean stocks will go on a slow, steady advance until the end of time. But perhaps the hyper rotation will start to wind down.
However, don't try to lecture the stock market on what it's supposed to be doing. Listen to what the market is saying via the major indexes and leading stocks.
Market Outlook: New Risks For Investors In The Second Half Of 2021
What To Do Now
When the market rally is in a broad advance, making money is relatively easy. But if the major indexes retreat, your holdings likely will come down as well.
Make sure to follow your rules, buying quality stocks at proper points, cutting losses short and sticking to your game plan for taking profits.
Reexamine your portfolio this weekend. Are you comfortable with your exposure, both overall and with specific sectors? Are you missing out on areas of market strength, such as energy or apparel retailers? Remember, don't force yourself into a sector by buying extended or group laggards.
You might consider moving on from stocks that haven't been moving much for several weeks. This is especially tricky because renewed sector rotation could see such stocks suddenly take off.
Keep a broad watchlist, not only to find possible buys but to keep in touch with various areas of the market to spot emerging leadership or trouble.
Quickly look at the charts of several growth and sector ETFs — such as the ones listed above — to quickly gauge sector strength.
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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