The stock market rally had a wild, varied week. By the middle of the week, the indicators were very low. But the techniques were like that Nivea (NVDA) has skyrocketed, shipping chips and playing artificial intelligence. Meanwhile, optimism over the debt ceiling deal returned late in the week, overshadowing the possibility of another Fed rate hike. Still, overall action for the week was mixed, with the breadth at times surprisingly anemic and several leading stocks struggling.
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Dow Jones futures open Sunday night along with S&P 500 futures and Nasdaq futures. Debt ceiling talks remain in focus over the holiday weekend, with signs that a deal is on the way.
Tesla (TSLA), Netflix (NFLX), Arista Networks (ANET), on the semiconductor (on), NetEase (NTES), My mobile (mbly), Smart sheet (SMAR), Aehr test systems (AED) and McKesson (MKK) is trading near buy points.
ANET stock, Netflix, On Semiconductor, NetEase and Mobileye all flashed buy signals on Friday. Tesla, Aehr Test Systems, Smartsheet and MCK stock are all viable options.
Investors may gradually increase exposure if the market rally develops more broadly.
NVDA stock is on IBD’s leaderboard. MBLY stock, Smartsheet are on the IBD 50. Arista Networks was Friday’s IBD Stock of the Day. SMAR stock was Thursday’s pick.
The video included in this article explains the weekly market action and examines Arista Networks, Smartsheet and Tesla stocks.
Debt-ceiling deal talks
Late Friday, the Treasury Department said the money won’t run out until at least June 5, giving negotiators a little more time to strike a deal on the debt ceiling. Previously, the Treasury defaulted in 2010. He said he could come by June 1st.
House Republicans and President Joe Biden appear to be closing in on a debt-limit deal that would impose some limits on personal spending. But there’s no deal yet, and any conflicting deal would have to clear Congress.
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Dow Jones futures open at 6 pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
US stock markets are closed on Monday for the Memorial Day holiday. But other exchanges around the world will remain open.
Remember that overnight action in Dow futures and elsewhere does not translate into actual trading during the next regular stock market session.
Join IBD’s experts as they analyze stocks that may act in the stock market rally on IBD Live
Stock market rally
The stock market’s rally struggled amid debt-ceiling concerns midweek, but bounced back as Nvidia sparked the AI revolution and default fears eased. However, the indicators are mixed.
The Dow Jones Industrial Average fell 1 percent in stock market trading last week. The S&P 500 index rose 0.3 percent. The Nasdaq composite jumped 2.5%. Small cap Russell 2000 closed.
The 10-year Treasury yield rose 13 basis points on the week to 3.82%, the highest point since early March. The next month, the Fed’s rate hike rose to 70 percent.
U.S. crude oil futures rose 1.4 percent last week to $72.67. Copper prices fell 1.3%, but bounced back from 2023 lows, jumping 2.6% on Friday.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) rose 3.4%, with SMAR stock as a small holding. The VanEck Vectors Semiconductor ETF (SMH) exploded with a 10.55% gain in addition to Nvidia’s main holdings and ON stock in the ETF.
Reflecting more speculative historical stocks, the ARK Innovation ETF ( ARKK ) rose 1% last week and the ARK Genomics ETF ( ARKG ) rose 3%. Tesla stock is the No. 1 holding in Arch Invest ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) fell 2.9% last week to a nine-month low. The Global X U.S. Infrastructure ETF ( PAVE ) fell 0.8 percent. The US Global Jets ETF ( JETS ) fell 1.25 percent. The SPDR S&P Homebuilders ETF ( XHB ) fell 2 percent after hitting a 52-week high last week. The Energy Select SPDR ETF ( XLE ) fell 1.1 percent. The Healthcare Select Sector SPDR Fund ( XLV ) fell 2.9 percent. MCK stock is part of XLV.
Financial Options SPDR ETF ( XLF ) retreated 1.5%, falling below its 50-day line. The SPDR S&P Regional Banking ETF ( KRE ) rose 2.75%, but faced resistance at the 50-day line.
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Tesla stock
Tesla stock jumped 7.2% on the week to 193.17, including Friday’s 4.7% big pop. The EV giant has decisively cleared its 50-day line and is now approaching a buy point of 207.89, according to MarketSmith analysis. That buy point is an eight-week cup base or a three-month double-bottom consolidation. Either way, TSLA stock has consolidated below its 200-day line for the entire time. However, the 200-day line is now at the 200 level, below a buy point. A breakout would therefore be valid, with a critical drop below the 200-day line as an exit point.
Other shares near the purchase points
NFLX jumped 5.5% to 378.88 on Friday, clearing an alternate bond buying point of 375.97 from a double-bottom base and hitting a 52-week high.
ANET stock rose more than 18% to 170.35 for the week amid the AI frenzy. Shares jumped above the 50-day line and touched a trend line on Thursday, then jumped 9.1% on Friday, the biggest gain in both sessions. Arista stock is now slightly extended from its initial entry at the 50-day/trend line, but is close to an official buy point of 171.54. Ideally, shares would pause and create a handle. Ennett stock rebounded on May 2 after management failed to raise guidance to satisfy investors.
ON stock rose above its 50-day line on Thursday, then rose 5.6% to 86.62 on Friday. Shares broke the downtrend of the bearish handle, providing an early entry. The official buy point is 87.17, which Onsemi added briefly on Friday. Note that ON Semiconductor stock has a history of breaking out but then falling back to its old base. It is a Tesla chip supplier on Semiconductor.
AEHR stock fell 0.6% for the week to 32.76, but found support at the 50-day line and rebounded strongly at the end of the week. It is a slightly too low handle to be accurate, but investors can use 33.40 as an initial entry point. That’s probably safer than waiting for a traditional hint above 40.79. Air Test Systems is a top customer at Semiconductor.
MBLY stock rose to 45.14 for a 10.6% weekly gain, rising above its 50-day line. That provided powerful input on Thursday and Friday mornings, but my cell phone inventory has now been extended from there. Close to the trend line entry near 46, 47.04 is yet another key level. The official buy point is 48.21. Ideally, MBLY will stop and create the handle where the inventory is. Like ANET stock, Mobileye declined following earnings several weeks ago.
SMAR stock is holding steady below the 49.09 buy point following another short consolidation. Smartsheet stock rose 2.2% to 47.86 for the week, with all the gains and more coming Friday. Following strong results earlier this month, the career-planning software maker has been rallied Monday.com (MNDY) Smart Sheet Income is June 7th.
MCK stock fell 2.4% last week to 387.95, near its six-month consolidation peak. The drug dealer created a handle with 401.53 buy points. McKesson stock is a defensive growth play. So if it holds on to a risky growth rally, McKesson may be delayed.
NTES stock rose 2.4% to 89.51 on the week. On Thursday, shares recovered from their 200-day line following earnings. On Friday, NetEase stock retook the 50-day line, suggesting an early entry. The Chinese mobile game giant has a flat buy score of 95.09.
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Market Rally Analysis
After Thursday’s surprisingly mixed session, technology led again on Friday, but the advance was more broad-based. Optimism over the debt-ceiling deal, after some midweek volatility, helped boost investor sentiment.
Again, this is a split stock market rally. The Nasdaq is heading toward August highs, the Nasdaq 100 is already there. The S&P 500, after slipping back into sideways territory midweek, is right at a 2023 high.
But the Dow Jones broke below its 50-day and 200-day lines last week. The Russell 2000 retreated from its 200-day line, although it pared losses and closed above the 50-day.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) popped 1.6 percent for the week. On Friday, the QQEW jumped 2.5%, hitting a 2023 high and close to its August high. That was a sign of broader participation, at least among growth stocks.
The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1.2% for the week, again falling below all moving averages even with Friday’s strong gains.
In the AI and chip spaces, a large number of stocks made big weekly gains, with many racing past buy points.
Elsewhere, however, market leadership is narrow. Several stocks and groups experienced heavy losses during the mid-week period. Some have gone back, while others may need to be reconfigured.
A debt ceiling deal seems close, but it’s not here yet. If the market is lingering or converging on a default deadline in early June, an actual deal to lift the debt limit is unlikely to generate significant additional gains.
Fed-rate hike concerns may again take center stage. On the bright side, that coincided with relatively strong economic data, easing recession fears.
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What to do now
Last week offered some buying opportunities, although investors need to get in quick. Also, mixed market signals may have produced some understandable caution.
This was “fortune favors the brave” week, but over the past few months, “prudence is the better part of valor” has been a smart approach.
Ideally, a market rally gives clear signals to be more or less aggressive. This has not been the case since early February.
Meanwhile, many AI and chip names raced into buy zones and never looked back, but several other stocks showed clear signs of volatility or selling.
You can add to your exposure if you anticipate that the market rally will cause further growth and more stock flash buy signals. But do it gradually. If this improvement takes hold, it won’t take long to be fully exposed. If this fragmented market takes Mr. Hyde’s turn, your losses will be reduced.
Run your screen this weekend. Big changes in the past week could mean significant changes to your watchlist. Come back Tuesday alert, flexible and ready to work.
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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