Dow Jones futures edged higher Monday morning, while S&P 500 futures were flat and Nasdaq futures declined slightly. Bitcoin rebounded powerfully after undercutting recent lows Sunday.
The stock market rally went on a true roller-coaster ride last week, with some volatile daily action only to end about where it started. The Dow Jones, S&P 500 and Nasdaq composite closed with fractional losses while the small-cap Russell 2000 edged higher.
The market rally will likely take its cue this coming week from a deluge of earnings reports. Tesla (TSLA) kicks off earnings on Monday, with Google parent Alphabet (GOOGL), Microsoft (MSFT), Apple (AAPL), Facebook (FB) and Amazon.com (AMZN) also due this week.
These earnings reports alone will have a big impact on the stock market rally. All six stocks are on the S&P 500 and Nasdaq, with Apple and Microsoft on the Dow Jones Industrial Average.
Apple stock has a $2.25 trillion market cap, with Microsoft stock, Amazon and Google each worth more than $1.5 trillion. All told, these six stocks have a market cap of just over $9 trillion. Plus, their results will have major implications for rivals, customers and suppliers.
Tesla Eyes Breakout With Earnings Due, But Chart Has Flaws
Tesla stock has a cup-with-handle buy point. Amazon stock also has formed a handle in a long consolidation. Facebook stock is just above an initial buy point, though it has some alternate entries as well. Apple stock and Google have tight patterns, though it’s not clear if either is actionable. MSFT stock is consolidating at record highs.
Bitcoin Hits Lows, Rebounds
The Bitcoin price traded above $53,000, up vs. a day earlier. Sunday afternoon the digital asset fell below $48,000, hitting its lowest levels since early March.
From its April 14 peak of $64,829 — hours before Coinbase (COIN) came public — Bitcoin has retreated steady, undercutting $50,000 for the first time in weeks on Friday.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures were essentially flat. Nasdaq 100 futures retreated 0.2%.
Given the deluge of earnings coming this week, it wouldn’t be surprising to see stocks mark time into some of those reports come in.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 147.88 million. Covid-19 deaths topped 3.12 million.
Coronavirus cases in the U.S. have hit 32.82 million, with deaths above 586,000.
New U.S. coronavirus cases are slowing once again as vaccinations reach more and more people. But India infections continue to soar, with many other countries seeing big outbreaks.
Many states have resumed Johnson & Johnson (JNJ) coronavirus vaccine shots after a CDC advisory panel concluded Friday that the benefits outweigh the risks. Some 15 women under the age of 50 have developed a very rare but serious blood clotting issue from the one-shot J&J vaccine.
Stock Market Rally Last Week
The stock market rally had ups and downs, but finished with minimal weekly changes.
The Dow Jones Industrial Average dipped 0.5% in last week’s stock market trading. The S&P 500 index edged down 0.1%. The Nasdaq composite lost 0.25%. The Russell 2000 gained 0.5%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.6%, rebounding from steep losses during the week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 0.7%, even with top component MSFT stock edging higher. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.3%.
Five Stocks Near Buy Points For An Unusual Market
Tesla stock fell 1.4% to 729.40 last week, but found support at its 21-day and 50-day lines. The electric vehicle giant now has a 780.89 handle buy point.
However, the midpoint of the handle is just above the middle of the ragged, deep base. The 50-day moving average continues to decline. The relative strength line for Tesla stock is not far from recent lows. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
Don’t necessarily expect earnings to be a big Tesla catalyst. After the last four earnings reports, Tesla has fallen 10.3%, 6.35%, 1.2% and 5%, respectively, the next day. After the Q1 2020 post-earnings sell-off, shares quickly rebounded after a few weeks later broke out to begin another big run. But after the last three earnings reports, TSLA stock trended lower for several weeks.
Microsoft earnings are due Tuesday night. MSFT stock edged up 0.2% to 261.15 last week, finishing Friday at a record close. It’s just above the 5% chase zone from a 246.23 buy point.
Microsoft, along with ServiceNow (NOW), which also is near a buy point with earnings on tap next week, will give insight into software demand. The Dow tech giant also will offer clues about PC demand.
But Microsoft’s growth has been in the cloud, with its Azure unit giving a good picture, along with Amazon Web Services and Google Cloud, about growth in cloud-computing services.
Google earnings also are due late Tuesday. GOOGL stock rose 0.75% to 2,299.33 last week. Friday’s 2.1% gain pushed shares to a record high, slightly extended from a prior base. Google stock technically now has a three-weeks-tight pattern with a 2,306.22 buy point, but that’s just above Friday’s high. Along with earnings coming up, Google stock doesn’t seem to offer a safe entry at the moment.
Google’s results will reveal strength in online advertising, both in search and YouTube.
Facebook earnings are due Wednesday night. FB stock fell 1.65% to 301.13, its second straight weekly decline. But it rose 1.55% to 301.13, back above its 21-day line and its 299.81 buy point from a handle in a consolidation going back to late August. Investors could view 315.98 as an alternate entry. Investors also could use a break of a downward-sloping trend line as an aggressive entry.
Apple earnings also are on tap late Wednesday. Apple stock nudged up 0.1% to 134.32 last week, with Friday’s 1.8% gain wiping out a down week and a potential handle on a weekly chart. AAPL stock could have a handle after Monday’s close, but it would likely be very shallow, shaking out few weak holders. Technically, Apple has a three-weeks-tight with a 135.63 entry, according to MarketSmith analysis. But tight patterns are generally preferable after a breakout, not before.
Amazon earnings are due late Thursday. Amazon stock fell 1.7% to 3,340.88. It now has a handle buy point of 3,436.50 on a consolidation going back to early September. That handle entry is about even with Amazon stock’s early-February short-term peak.
Amazon will offer insight into e-commerce and consumer spending generally. AWS remains the cloud-computing leader, despite fast-charging Microsoft Azure.
Market Rally Analysis
The stock market rally had an interesting week. The major indexes pulled back Monday and Tuesday, with leading stocks taking some notable hits. Leaders led Wednesday’s rebound. The market reversed lower Thursday on reports that President Biden would go ahead with a plan to nearly double the top capital gains tax rate. But Friday’s rally brought the indexes back to where they started.
Last week was a good example of why investors should look at weekly charts to try to put daily action in perspective. Admittedly, some chip stocks and other leaders didn’t look that good on a weekly chart as of Wednesday morning.
Ultimately, the week was relatively positive. The Dow Jones and S&P 500 are a little closer to their 50-day moving average, though the S&P 500 at 5.1% isn’t far from being extended. The Nasdaq is near the top of what looks like a handle just below record highs.
The Russell 2000 is back above its 50-day line. On Friday, it rose to its highest level since April 6 and its best close since March 19. Given that leading stocks have tended to trade like the Russell 2000 recently — check out the FFTY chart above — that’s especially encouraging.
Earnings Week Prep
With the biggest earnings week on tap, you need to be prepared.
First and foremost: Are any of your stocks reporting earnings this coming week? If so, do you have a sufficient cushion in those stocks? A good rule of thumb is to look for a 10% gain in a stock heading into earnings, or at least 5%. But it depends on market conditions, the company’s earnings history and your conviction in the stock. You can choose to hold all your shares, sell a partial stake or your entire holding.
Are key rivals, customers or suppliers reporting earnings this coming week? That could influence your holdings, especially if those haven’t reported yet. Apple earnings could swing SWKS stock ahead of its earnings the following evening.
EV Stocks, Tech Giants To Report As Fed Meets: Investing Action Plan
Earnings season can trigger a number of breakouts. So keep a close eye on leading stocks near buy points with earnings due. Set up alerts and pay attention to those that you might buy if strong reports fuel the stock.
Be ready to act, but don’t rush. Wait at least five minutes after the open, or even the first hour, before buying. Stocks may soar or plunge at the open, but then quickly reverse.
Finally, if stock you own sells off despite seemingly strong earnings, don’t get caught up trying to explain “why” or insist that the market got it wrong. Focus on the “what” — what the stock is doing on earnings. Then decide “what” your response is.
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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