Dow Jones futures fell modestly Monday morning, along with S&P 500 futures and Nasdaq futures. Crude oil prices rose as OPEC+ kept current crude oil production quotas. Tesla (TSLA) fell amid reports a big China production cut.
The stock market rally showed strength and resilience last week. The major indexes soared Wednesday in a bullish reaction to Fed chief Jerome Powell’s speech, with the S&P 500 retaking its 200-day moving average. On Friday, the S&P 500 tested and held that key level for a second straight session, despite a hot jobs report.
Investors could be increasing exposure incrementally, but the 200-day line is still in play. Don’t get too aggressive until there’s a decisive clearing of that long-term level.
OPEC and key allies such as Russia agreed to leave oil production targets intact, after OPEC+ cut quotas by two million barrels per day at the October meeting. On Friday, European Union leaders set a $60 a barrel price cap on Russian crude, followed by other Group of Seven nations and Australia. The aim is to punish Moscow for the Ukraine war without cutting off Russian oil.
A few weeks ago, some OPEC+ members had mulled increasing production to offset a possible Russian production hit, and with U.S. Strategic Petroleum Reserve releases likely to slow or stop soon. But crude oil prices tumbled over the past month, amid China demand concerns. But they rose last week as Beijing is finally easing Covid curbs.
Early Monday, crude oil futures rose nearly 3%. Natural gas prices tumbled 7%.
Tesla Production Cut
Tesla (TSLA) sold a record 100,291 China-made electric vehicles in November, according to data released by the company. Many of those vehicles are being exported. But Tesla will cut Shanghai plant production by up to 20% as soon as this week, according to widespread reports. China demand has struggled to keep up with soaring output, even with late October price cut and various other incentives. Tesla, which had talked of building up European inventory to end the “delivery wave,” has not exported from Shanghai to Europe in the past few weeks.
Tesla stock fell 3%.
Dow Jones Futures Today
Dow Jones futures lost 0.5% vs. fair value. S&P 500 futures sank 0.6% and Nasdaq 100 futures fell 0.5%. Tesla stock is weighing on S&P 500 and Nasdaq 100 futures.
The 10-year Treasury yield climbed 1 basis point to 3.52%.
Hong Kong’s Hang Seng jumped 4.5% Monday, extending a recent rebound, as China starts to reopen its economy and ease Covid restrictions. The Chinese yuan rose past 7 yuan vs. the dollar for the first time since September.
Stocks To Watch
Dow Jones giant Boeing (BA), lithium giant SQM (SQM), Dexcom (DXCM), Cheniere Energy (LNG) and the Invesco Solar ETF (TAN) are all near buy points. Boeing, Dexcom, SQM stock and the TAN ETF — which includes First Solar (FSLR), Enphase Energy (ENPH) and many other top names — are actionable now. LNG stock has a new flat base.
Chip giants Taiwan Semiconductor (TSM) and Nvidia (NVDA) have rallied strongly over the past several weeks, closing in on their 200-day moving averages. Taiwan Semi and Nvidia stock back above the 200-day lines wouldn’t offer buying opportunities, but would be a positive sign for techs and the overall market rally. Chips almost always participate in last market uptrends, given their market heft and their key role in so many industries.
The video embedded in the article discussed the market action over the past week and analyzed Dexcom, LNG stock and the TAN ETF.
Earnings season is finally easing, while the economic calendar is less intense in the coming week.
Stock Market Rally
The stock market rally had a strong week. The indexes’ gains were modest-to-solid but found support and broke above key resistance.
The Dow Jones Industrial Average edged up 0.2% in last week’s stock market trading. The S&P 500 index climbed 1.1%. The Nasdaq composite jumped 2.1%. The small-cap Russell 2000 1.3%.
The 10-year Treasury yield dived 18 basis points to 3.51%, the lowest since late September. The 10-yield bounced Friday with the strong jobs report but ultimately closed slightly lower that day
U.S. crude oil futures rose 4.9% to $79.98 a barrel last week, but fell back below $80 on Friday. Natural gas plunged more than 14%.
The VanEck Vectors Semiconductor ETF (SMH) climbed 1.1% last week, but fell back below its 200-day line on Friday. TSM stock and Nvidia are both major components. Taiwan Semi edged up 0.1% for the week. Nvidia stock rose 3.7%.
SPDR S&P Metals & Mining ETF (XME) leapt 4.4%% last week to the best level in nearly six months. The Global X U.S. Infrastructure Development ETF (PAVE) climbed 1%. U.S. Global Jets ETF (JETS) ascended. 0.7%. SPDR S&P Homebuilders ETF (XHB) advanced 0.9%. The Energy Select SPDR ETF (XLE) fell 1.7% and the Financial Select SPDR ETF (XLF) fell 1.7%. The Health Care Select Sector SPDR Fund (XLV) advanced 1.9%, nearing a record high. DXCM stock is an XLV component.
Stocks Near Buy Points
Boeing stock rose 2.5% to 182.87 for the week. Boeing popped 4% Friday, on a Wall Street Journal report that United Airlines (UAL) is close to buying “dozens” of 787 Dreamliner jets. BA stock is just beyond the 5% chase zone of a 173.95 cup-base buy point, but investors could treat clearing recent levels as an alternate entry.
SQM stock 7.8% to 99.85 last week, rebounding from near its 200-day line and reclaiming its 50-day. While the lithium giant has an official 112.45 cup-with-handle buy point, an early entry around current levels might be safer.
DXCM stock rebounded from its 21-day line last week, breaking the downtrend of a short consolidation to offer an early entry. Shares closed up 5.5% to 118.11, still relatively close to its 21-day line, with its 10-week line racing to catch up. Dexcom stock now has a flat base on a weekly chart with a 123.46 buy point, according to MarketSmith analysis. That flat base could be seen as a handle to a deep cup going back to early April.
LNG stock edged up nearly 1% to 174.72, finding support at its 50-day line. Shares have risen for three straight weeks, but on anemic volume, which is not great. On a weekly chart, Cheniere Energy now has a flat base with a 182.45 buy point, right next a failed cup-with-handle base. LNG stock could have an early entry above Thursday’s high of 178.12, which corresponds to some key recent trading levels.
The Invesco Solar ETF is in range of an 83.20 cup-with-handle buy point, climbing 1.5% to 83.76 for the week. FSLR stock and Enphase are the clear leaders, but the whole group is once again rebounding. TAN is a little less volatile than individual solar stocks but still can make big moves.
Market Rally Analysis
The stock market rally had an impressive week, even though the laggard Nasdaq was the only big index with a strong gain.
On Wednesday, Fed chief Powell largely reiterated expectations of slower rate hikes but no quick end to tightening. But the major indexes jumped that day, with the S&P 500 reclaiming its 200-day line for the first time since early April.
A damaging market sell-off wouldn’t have been shocking Friday given the hot jobs report and Wednesday’s big move. But the indexes closed narrowly mixed. The S&P 500 slashed losses and held support at its 200-day line. The Russell 2000, which also moved back above its 200-day line on Wednesday, quickly rebounded from a 200-day test Friday to close higher
The Nasdaq rebounded from around its 50-day moving average midweek to hit two-month highs. The Dow Jones, which has led the market rally, edged higher, right at seven-month highs.
Still, the S&P 500 index has not yet decisively cleared its 200-day line and is right on a declining-tops trendline.
In late March, the S&P 500 appeared to be decisively above its 200-day. But the Nasdaq hit resistance at its 200-day line, falling back and dragging the other indexes lower.
Today, the Nasdaq has some distance before reaching its 200-day average, but that will also serve as a big test. That’s yet another reason why investors will want to see Taiwan Semiconductor and NVDA stock clearing their 200-day lines, even though TSM stock is NYSE-listed.
Still, while some chip names have been leading and others are setting up, semiconductors and techs overall are not leading the current market rally.
Industrial, infrastructure, solar, financial and medical groups are among those doing well.
What To Do Now
The stock market rally is continuing to act well, coming out ahead after a big week of Fed-related news.
But the uptrend is not in the clear, with the S&P 500 still very much in play.
Investors can be gradually adding exposure here, though standing pat with current holdings remains a solid strategy. If this market rally ends up having real legs, you’ll have plenty of time to get fully invested.
In either case, be ready to scale out if conditions turn. Taking partial profits relatively quickly still makes a lot of sense.
When scanning for possible buys, keep looking for early entries. With individual stocks, sectors and the overall market still prone to big swings, buying on too-much strength has often meant buying near a short-term top.
Keep working on your watchlists. Look beyond traditional tech growth names, which remain laggards overall.
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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