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

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A new stock market rally attempt got underway this past week, with big early gains for the Dow Jones and other major indexes. But as hopes for a Fed pivot faded again, Treasury yields rebounded and stocks tumbled from resistance. Along with warnings from Advanced Micro Devices (AMD) and CVS Health (CVS) that pounded their stocks late in the week, the major indexes wiped out most of their gains.

While the market rally attempt isn’t over, the Dow Jones, S&P 500 and Nasdaq are close to bear market lows. Investors should be extremely cautious in the current environment.

Vertex stock, Neurocrine Biosciences (NBIX) and Eli Lilly (LLY) are trading right around buy points. NBIX stock and Vertex Pharmaceuticals (VRTX) are on IBD Leaderboard.

Tesla (TSLA), Enphase Energy (ENPH) and On Semiconductor (ON), three stocks that had been close to buy points, suffered big sell-offs. TSLA stock sold off Monday on disappointing deliveries, then kept sliding. Enphase stock briefly flashed an aggressive buy signal Tuesday, then abruptly plunged Wednesday. ON stock closed above a trendline entry on Thursday, then dived Friday as AMD triggered a chip sell-off.

Megacaps aren’t helping. Microsoft stock, Google parent Alphabet (GOOGL) and Amazon.com (AMZN), all just below their 21-day lines on Thursday, fell sharply on Friday, back toward bear market or short-term lows. Apple (AAPL), which never reached its falling 21-day, skidded toward short-term lows.

Microsoft (MSFT) and Google stock are on IBD Long-Term Leaders. ON stock is on the IBD 50. Onsemi, Vertex Pharmaceuticals (VRTX) and ENPH stock are on the IBD Big Cap 20. Vertex was Friday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET on Sunday, 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

Stock Market Rally

A stock market rally attempt got off to a strong start, but was reeling by the end of the week, back near bear market lows.

The Dow Jones Industrial Average rose 2% in last week’s stock market trading. The S&P 500 index climbed 1.5%. The Nasdaq composite edged up 0.7% after tumbling 3.8% on Friday. The small-cap Russell 2000 advanced 2.2%.

Apple stock rose 1.4% for the week, but sank 3.7% on Friday. Microsoft eked out a 0.6% weekly rise as AMD’s warning on PC demand sent Mr. Softy skidding 5.1% Friday. Google and Amazon stock climbed 3.2% and 1.4%, respectively, slashing solid weekly gains on Friday as well.

The 10-year Treasury yield rallied 8 basis points to 3.88%, rising for a 10th straight week. That’s after tumbling to 3.56% intraday Tuesday, testing its 21-day line. The 10-year Treasury yield is getting close to 12-year highs near 4% set in late September.

The U.S. dollar, down sharply at one point, rallied for a modest weekly gain.

U.S. crude oil futures surged 16.5% to $92.64 a barrel, rising all five days. The OPEC+ production quota cut of 2 million barrels per day fueled gains. Meanwhile, U.S. shale operators remain cautious about ramping up drilling.

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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.7% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 2.6%, with MSFT stock a massive holding. The VanEck Vectors Semiconductor ETF (SMH) rose 1.9%, but sold off hard Friday on the AMD warning and an expanded U.S. ban of chip technology exports to China. AMD stock is a big SMH holding with On Semiconductor a notable component.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.6% last week and ARK Genomics ETF (ARKG) fell 0.15%, after both sold off more than 6% on Friday. Tesla stock remains a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) leapt 7.3% last week. The Global X U.S. Infrastructure Development ETF (PAVE) popped 3.4%. U.S. Global Jets ETF (JETS) ascended 3.7%. SPDR S&P Homebuilders ETF (XHB) ran up 4.5%. The Energy Select SPDR ETF (XLE) surged 13.6% and the Financial Select SPDR ETF (XLF) rose 1.9%. The Health Care Select Sector SPDR Fund (XLV) climbed 1.25% with LLY stock a big holding.

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Tesla Stock

Shares plunged 16% this past week to 223.07 after record third-quarter Tesla deliveries fell short of views amid China demand concerns. Elon Musk signaled he will go ahead with the Twitter (TWTR) takeover, reviving fears that he’ll sell more TSLA stock to finance the deal. Musk touting the start of Tesla Semi production failed to provide a lift Friday. Shares are still above the late May lows of 206.84, but not by much.

Market Rally Analysis

The stock market action last week was almost textbook. The major indexes, at bear market lows, rebounded strongly from deeply oversold conditions on Monday-Tuesday. But the stock market rally attempt quickly hit resistance at the 21-day moving average — while Treasury yields and the dollar bounced back. The selling intensified Friday with the strong jobs report, pushing yields and the dollar even higher.

So now what? The stock market rally attempt is still in force until the major indexes undercut their recent lows. But the Dow, S&P 500 and Nasdaq are not far off.

A follow-through day could still come at any time to confirm the market uptrend. That would be a positive sign. Investors should remain cautious, especially if the indexes stage a FTD below their 21-day lines. Also, a follow-through before Thursday’s consumer price index carries extra risks.

New Bear Market Leg?

On the flip side, the risks are high that the bear market will break lower for another leg down.

The market rebounded early in the week amid hopes that the Federal Reserve would slow rate hikes, perhaps in part due to overseas strains. Falling job openings and Australia’s small rate increase bolstered that case. But Fed officials continue to insist they are not backing off, while Friday’s jobs report was far too hot. Ultimately, the odds of a fourth straight 75-basis-point rate hike in November, already high, strengthened over the past week. Markets are close to locking in at least 50 basis points in December — with a small but rising chance of 75 basis points.

In addition to the Federal Reserve and recession concerns, earnings season could be a minefield. Warnings from AMD and CVS follow several other high-profile preannouncements, with earnings about to kick off next week. Even after a long bear market and clearly difficult business conditions, markets still haven’t priced in bad news, with AMD stock and CVS tumbling more than 10% on Friday.

Key Sectors

Energy stocks look strong as crude oil prices soar. Many seem extended after big run-ups, however.

Meanwhile, the spike in oil prices may be bad news for the broader market. Higher energy costs, especially gas prices, will complicate the Federal Reserve’s task of reining in inflation. Gas prices had already rebounded significantly, especially in California, on various refinery issues.

Some biotech and drug names are still acting well, somewhat insulated from economic concerns. But can they make much headway if the broader market heads to new lows?

Meanwhile, some tech and medical products names that had flashed buy signals in recent days were big losers Friday. Some held up reasonably well, while others staged big sell-offs, including ENPH stock and On Semiconductor. Tesla stock, which even a week ago was plausibly close to an entry point, dived toward 2022 lows.

Apple stock, Microsoft and other tech titans aren’t leading the downside, but they certainly aren’t bolstering the major indexes.

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What To Do Now

The arguments for being all or entirely in cash remained strong even at weekly highs, and are even stronger now. The market rally attempt is reeling. The indexes could soon break below bear market lows.

If you bought some new positions recently — aside from the energy sector and select medicals — you may have had to cut or exit them already. Even if you’re taking only pilot positions, don’t let the losses mount. If you have gains, you might want to lock some of that in given the overall market conditions.

Keep working on your watchlists and stay engaged. The market rally attempt could still spring back to life, which would likely trigger buy signals for a large number of stocks. So focus on stocks that are setting up. But also keep a wider list of strong stocks that are showing relative strength, even if their charts need repair work.

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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