Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures.
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The stock market rally had a mixed week, but action was generally negative, again with Treasury yields and mixed earnings weighing on growth.
The Nasdaq fell below its 50-day and 10-week moving averages for the week. Tesla (D.S.L.A) and Nvidia (NVDA) are decisively below their 10-week lines. The decline in Nvidia stock is particularly important because it has been at the forefront of an AI-led market rally.
The S&P 500 edged lower, but found support at its 10-week streak on Friday. The Dow Jones rose slightly this week, bucking the trend.
The market rally is in danger of falling into a correction, but it is not there yet. Arguably what is happening is that the boom is different. While technologies are in a correction, the industries, infrastructure, housing and energy sectors are positioned or gaining ground. Retail, travel, medical, transportation and finance to name a few.
Arista Networks (Aneta), Denarius (TS), visa (V), SLP (SLP), Lenor (Len), Martin Marietta (MLM), Delta Air Lines (DAL), Flowserve (FLS), Lululemon Athletica (Lulu) and JP Morgan Chase (JPM) are all set or hold.
Meanwhile, Cardinal health (CAH), Kava group (CAVA), Home Depot (HD), Stoneco (STNE) and In holding (onion) are trading around buy zones with expected returns in the coming week.
However, investors should think defensively in the current market environment.
Tesla shares, Nvidia and Martin Marietta are running IBD Leaderboard. SLB stock is on SwingTrader. Tesla, SLB, Applied Materials and ANET have shares IBD Big Cap 20. Flowserve is Friday’s IBD Stock of the Day.
The video embedded in this article discusses the weekly market action in depth, while analyzing Flowserve, JPM stock, and Nvidia.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 PM ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember 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 examine stocks that could be in for a stock market rally on IBD Live
Stock market rally
The stock market’s rally had a mixed week, with the Nasdaq and growth names taking a hit.
The Dow Jones Industrial Average rose 0.6% in last week’s stock market trade. The S&P 500 index fell 0.3%. The Nasdaq composite fell 1.9%. The small-cap Russell 2000 yielded 1.65%.
Market breadth is weakening on the Nasdaq, but much less so on the NYSE.
The 10-year Treasury yield rose 11 basis points to 4.17%, a 2023 high of 4.21%. 4. The yield rose from Thursday morning’s low of 3.96%.
As Treasury yields rise and foreign economies weaken, the US dollar will rise in 2023.
U.S. crude futures rose 0.45% to $83.19 a barrel, marking a seventh straight weekly gain. But copper fell 3.4%, down 5.2% in two weeks.
ETFs
Among growth ETFs, the innovator IBD 50 ETF (FFTY) fell 4.9% last week. iShares Expanded Technology-Software Sector ETF (IGVfell 1.7%. VanEck Vectors Semiconductor ETF (SMH) fell 5.2%. Nvidia stock no. 1 is SMH Holding.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) gained 5.8% last week and the ARK Genomics ETF (ARKG6.15% sold. Tesla shares are the No. 1 holding across Arc Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) fell 1.4% last week. Global X US Infrastructure Development ETF (sidewalk) rose 0.2%, with the MLM stock a holding.
US Global Jets ETF (JETS) is down 0.5%, with DAL stock being a significant component. SPDR S&P Homebuilders ETF (XHB) fell 0.7%, with LEN stock up one member.
Energy Select SPDR ETF (XLE) rose 3.5%. SLB is one of the best XLE components. and Health Care Select Sector SPDR Fund (XLV) rose 2.45% with CAH stock advancing. Industrial Select Sector SPDR Fund (XLI) pushed higher by 0.6%.
Fund Selection SPDR ETF (45) Dow Jones giants Visa and JPM rose in part, as both shares were significantly underweight. SPDR S&P Regional Bank ETF (CreateDown 1.65%.
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Tesla stock
Tesla shares fell 4.4% last week to 242.65. Shares fell below their 50-day line on Monday and continued their losses. TSLA stock is now 6.7% below its 10-week line. Ending the week more than 2% below the 10-week is a significant sell signal. Recent buyers should leave.
Those with large cushions may profit somewhat depending on your investment strategy and belief in the stock.
The updated Tesla Model 3 is said to be coming soon, at least in China, but there is no confirmation from the EV company. Cyberdrug is also coming, but it won’t make a big impact until 2024, maybe later in the year.
Nvidia stock
Nvidia fell below its 50-day line on Wednesday, extending Thursday’s low and Friday’s losses. Shares closed down 8.6% at 408.55, the worst weekly decline of the year and the highest volume. NVDA stock is now 5.1% below its 10-week line. Recent investors have to exit.
Long-term investors may or may not profit. If you’re going to keep a winner for its big run, you’re going to have to make adjustments. Nvidia is leading the AI-led rally, but are you ready for the decline?
Also note: Nvidia earnings are due on August 23rd.
The entire chip industry is lagging behind with fellow leaders such as Broadcom (AVGO) and Marvel Technology (Murali) fell below the 50-day line last week. More broadly, AI plays had a tough week.
Market rally analysis
The stock market boom is on the brink of collapse.
The Nasdaq fell below its 50-day and 10-week lines on Wednesday, and are now starting to separate. But it’s definitely not below those levels.
The S&P 500 touched its 10-week line on Friday, but is now holding it. The Russell 2000 almost touched its 10-week mark. Both have hit resistance in a 21-day streak.
The Dow Jones is on its 21st day.
Several growth leaders are below the 10-week line, with Tesla and Nvidia being two notable names. A large number of technical plays suffered heavy losses in the last two weeks.
On the other hand, the S&P 500 holds a 50-day streak even with technical losses. Many sectors are good, with names in the sector including Visa, SLP, JP Morgan, Flowserve and Lululemon. It may continue even if the market enters a mild correction. But most don’t really take off.
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What to do now
Investors should be increasingly defensive, especially when it comes to growth plays. Overall and technical exposure should have been declining over the past two weeks.
You can still buy out of technology, but those areas are usually stagnant or willing to give in and make real improvements. One exception is the energy sector, which has been fueled by weeks of rising oil prices. Some of the names mentioned in this article include SLB stock, which is actually in a buy zone.
A revival of the market rally is still possible, especially if Treasuries yield easily.
The current pullback allows leading stocks to return to key positions and work on new platforms. So buying opportunities may arise in days or weeks.
Investors should prepare for that moment. Keep an eye out for stocks that show strong relative strength and build those watch lists.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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