Dow Jones futures will open Sunday, along with S&P 500 futures and Nasdaq futures. The stock market rally continued to strengthen last week, with more breakouts and buying opportunities picking up. But investors should step cautiously, ready to act in a still-tricky market.
Nio, Tesla EV Rivals To Report Sales
Nio (NIO), Xpeng (XPEV), Li Auto (LI) and BYD Co. (BYDDF) are expected to release May production and delivery figures next week, perhaps as soon as June 1. Can Nio and its China EV rivals take advantage of Tesla (TSLA) woes in that huge auto maker? Or will chip shortages stymie their expansion plans?
Nio in particular has warned that chip woes will limit production in Q2. Xpeng and Li Auto, which reported earnings last week, see sequential growth in the second quarter.
Tesla’s China sales for May will come later in June from industry reports. In April, Tesla’s China sales plunged by nearly two thirds. It’s unclear if that reflected weak demand amid a China consumer backlash, fanned by state media, or production limits due to chip or battery shortages. China has been Tesla’s main growth driver over the past year, so an extended retreat would be a major blow for the EV giant.
Nio stock reclaimed its 50-day line last week, along with Xpeng, Li Auto and BYD, but all are still far below old highs. Tesla stock reclaimed its 200-day moving average, moving back toward its 50-day.
AMC Stock, GME Stock: Meme Streets
Finally, meme stocks boosted by Reddit users remain in focus, after GameStop (GME) and AMC Entertainment (AMC) soared last week. GME stock leapt 26%, even with Friday’s 13% slide. AMC stock vaulted 116%, hitting a record high.
Whether it’s a squeeze play or buyers selling to new retail investors, AMC stock and GME stock have a huge amount of momentum, with bulls plowing into options, especially for AMC stock. Fundamentals are terrible. The long-term pitches for AMC and GameStop, which were struggling before the pandemic, come with enough grains of salt that they should come with a health warning.
When a stock swings 20%, 40% or more intraday with no clear reason, investors generally should steer clear and focus on trades where they have an edge.
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The Bitcoin price retreated Friday, dropping to above $36,000 heading into the long weekend. Weekend trading often is even more volatile for Bitcoin and other digital currencies, with trading volume lighter.
Bitcoin tried to get above $40,000 several times over the past week, quickly turned back each time. The $40K level is an area close to Bitcoin’s 200-day moving average.
Bitcoin hit a record $64,829.14 in mid-April, but the sell-off really began from May 9 when it began tumbling from just above $59,000. The cryptocurrency fell to nearly $30,000 in late May.
Coinbase (COIN) fell 4.3% on Friday to 236.54 as Bitcoin slid. But COIN stock rose 5.4% for the week.
Dow Jones Futures Today
Dow Jones futures will open at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq 100 futures. While U.S. markets will be closed for the Memorial Day holiday on Monday, Dow futures will trade Monday morning and then Monday evening.
Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 170.12 million. Covid-19 deaths topped 3.53 million.
Coronavirus cases in the U.S. have hit 34.02 million, with deaths above 608,000.
Stock Market Rally
The stock market rally improved last week, with solid-to-strong gains in the major indexes and leading stocks and sectors.
The Dow Jones Industrial Average climbed 0.9% in last week’s stock market trading. The S&P 500 index rose 1.2%. The Nasdaq composite popped 2.1%. The small-cap Russell 2000 gained 2.6%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) bounced 3.5% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rallied 2.8%. The VanEck Vectors Semiconductor ETF (SMH) leapt 4.6%, with Nvidia stock a major component.
SPDR S&P Metals & Mining ETF (XME) rebounded 4.3% and Global X U.S. Infrastructure Development ETF (PAVE) rose 1.6%. U.S. Global Jets ETF (JETS) ascended 3.5%. SPDR S&P Homebuilders ETF (XHB) climbed 3.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) soared 5.8% and ARK Genomics ETF (ARKG) 4.3%. Both fell back Friday after hitting resistance at their 200-day moving averages, with their 50-day lines racing to undercut the 200-day. Tesla stock is the No. 1 holding across ARK Invest’s ETFs. ARK Invest has become a major investor in COIN stock as well.
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Nvidia Hits Buy Point
Nvidia jumped 8.4% last week to 649.78, just clearing a 648.67 buy point from a short cup base. Friday’s high-volume breakout was a delayed reaction to strong Nvidia earnings Wednesday night. NVDA stock has rallied nearly 20% from its May 19 intraday low, so a pullback would not be a surprise. Keep in mind that Nvidia’s last three breakouts have quickly failed.
Investors could have bought Nvidia stock on May 20 or 21, as it rebounded from its 50-day line and broke a short trend line. But that would have been risky given Nvidia’s looming earnings.
The relative strength line for NVDA stock is right at consolidation highs, though still below 2020’s all-time highs.
Goldman Stock Eyes New Entry
Goldman Sachs stock rose 1.6% to 372.02 last week. It’s now just within the 5% chase zone from a 356.95 cup-base buy point, according to MarketSmith analysis. But it’s closing in on a 377.08 entry over a short consolidation. On a daily chart, it looks like a high handle. On a weekly chart GS stock has a three weeks tight with a 373.08 entry. Goldman stock almost had a four-weeks-tight pattern, but last week’s 1.6% gain slightly exceeds the 1.5% weekly swing limit.
GE Stock Flashes Buy Signal, Near Breakout
GE stock jumped 6.3% to 14.06 last week. On Thursday, General Electric stock spiked 7.1%, blasting above a trend line and a short-term high just over 14, nearly reaching the 14.51 official buy point.
GE stock pulled back slightly Friday. Investors could buy General Electric now or with a breakout.
Google Stock Still In Range
Google stock climbed 2.7% last week to 2,356.85, even with slim declines on Thursday and Friday. The FANG giant rebounded from its 10-week line in the prior week. Even now, Google stock is just 4.1% above its 10-week line, still well within range. In another week, GOOGL stock could have a flat base with a 2,431.48 buy point.
Market Rally Analysis
The stock market rally had a strong week, even with weak closes on some days. The Dow Jones and S&P 500 index are closing in on all-time highs. The Nasdaq and Russell 2000 reclaimed their 50-day moving averages. Best of all, leading stocks fared well, with breakouts and other buying opportunities working across a variety of industries, as Goldman, GE, Google and Nvidia outperformed.
Still, the market rally remains “under pressure.” One bad day and the Nasdaq is back below its 50-day moving average with the S&P 500 threatening to also drop.
What To Do Now
When the market is trending higher, as it has over the past several sessions, investing becomes so much easier. Investors hopefully took advantage of the recent positive trend to gradually increase their exposure.
Don’t rush to build up exposure, let the market rally pull you in. After the April 2020 follow-through days, the rip-roaring stock market rally delivered a slew of powerful breakouts. Today’s slower, choppy market environment will gradually pull investors in — assuming the short-term trend continues.
Like a tennis player waiting to return serve, investors need to be focused and ready to react quickly to a variety of scenarios.
Have your watchlists updated. Set up alerts and pay close attention to your most promising potential buys. In this market, getting into stocks as close to the buy point as possible is especially important. So stay engaged with the market.
Always have an exit strategy. If the market sours again, what is your line in the sand with your holdings?
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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