Dow Jones futures will open Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market boom came under pressure last week, with the Nasdaq and speculative growth names hit the hardest.
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Teslasee (TSLA) announcements Nine (NIO) en Zoom video communication (ZM) reports earnings on Monday, but both big 2020 winners are well off, along with the Tesla share itself.
It’s a time to be defensive and look for stocks that hold up well. Taiwan Semiconductor (TSM), General Motors (GM), RH (RH), Target (TGT) and InMode (INMD) is worth looking at whether they can form proper bases while the market sorts itself out.
The market march, under pressure, is at a turning point. If you regain the most important support levels, it will be renewed strength. But a Nasdaq break below last week’s low would send a bearish signal.
Tesla shares and Taiwan Semi are on IBD Leaderboard. Tesla and TSM shares are on the IBD 50. RH was Friday’s IBD stock of the day.
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Dow Jones Futures Today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight trades in Dow futures and elsewhere do not necessarily actually trade in the next regular stock market session.
Join IBD experts while analyzing stocks in the stock market on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 113.98 million. The deaths from Covid-19 were 2.52 million.
Coronavirus cases in the US hit 29.13 million, with deaths above 523,000.
An advisory panel late Friday recommended that the FDA give emergency permission for the Johnson & Johnson (JNJ) coronavirus vaccine. The FDA is expected to approve the one-shot vaccine immediately. This will provide another shot in the arm for vaccination attempts.
Vaccinations reached 2.2 million on Friday.
Stock market rally
The stock market rallies had very wild intraday swings, with the major indices declining markedly, near weekly lows.
The Dow Jones industrial average traded 1.8% higher than last week’s stock after hitting a record high on Wednesday. The S&P 500 index fell by 2.5%. The Nasdaq Composition tumbled 4.9%.
The 10-year Treasury yield rose 9% to 1.46% after briefly rising 1.6% on Thursday. Although good news for many financiers, the higher rates outweighed the growth stocks.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 6.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 7.8%. The iShares Expanded Tech Software Sector ETF (IGV) fell 6.8%, with Zoom Video stock being a major component. The VanEck Vectors Semiconductor ETF (SMH) fell 5.1%, with TSM share the best stake.
Due to more speculative story shares, Ark Innovation ETF decreased by 14.8% and Ark Genomics ETF by 13.8%. Tesla shares are the top stake in Ark Invest’s ETFs.
Nio, Zoom earnings on tap
Chinese EV producer Nio and video conferencing leader Zoom Video reported earnings late Monday. The forecasts for the earnings and delivery of Nio will be closely monitored as the competition in China’s EV market increases. Zoom Video will have to inflow another quarter of huge growth, and investors want insight into the company’s prospects as we enter a post-pandemic world later.
Zoom stock fell 10.5% last week to 45.78, below the ten-week line. Shares did gain support during their 200-day moving average Friday. Investors who made huge profits in 2020 and still own ZM shares may prefer to stay strong, but otherwise there are no strong reasons to have a position right now.
The Nio share fell 17% last week to 373.61, which is now 16% below its ten-week line. This is a decisive break and a strong sell signal, especially if the earnings take place on tap. Long-holding holders who have sat with a large profit can choose to hold shares in the earnings report.
As for Tesla shares, the EV leader rose 13.5% to 675.50. It is now 14% below the ten-week line. It gave up about half the profits of its powerful November rally. As with Nio, TSLA stock investors should probably have made at least partial gains by this time.
Shares to watch
TSM shares tumbled 7.8% to 125.94 last week, but found support at the 50-day and 10-week moving average, which rose higher on Friday. In a strong market strengthening, investors may be looking for a setback as a buying opportunity. But for now, investors are likely to have to wait for the TSM stock to complete a new base as the market sorts itself out.
General Motors dropped just 2.4% to 51.33 last week, but also found ten-week line support and bounced slightly higher on Friday. It may soon have a new base after reaching a record in early February.
RH shares retreated 2.9% to 490.37 last week, testing the 50- and 10-weeks. It has a flat base with a buying point of 542.11.
The target stock fell 2.9% last week to 183.40, below its 50-day and 10-week lines. But it is still within a flat base with a buying point of 200.06. The target earnings are payable on Tuesday morning.
InMode shares fell 0.2% to 68.96 and rose 2.7% on Friday. Shares have been trading solidly over the past few weeks after reaching a record high. INMD shares have found support several times during the 21-day period over the past few weeks. The relative strength line is right at record highs. INMD shares should form a base, but the action was very strong.
Analysis of stock market marches
The major indices withdrew last week, especially the Nasdaq composite. The tech-heavy index tried to recover its 50-day moving average on Friday, but could not close above it amid heavy selling at the end. The volume was also much lighter on the days than the downside.
For most of the week, stock market equities looked like they could turn into a violent sector due to the speculative growth and the cyclical names of the real economy. The Dow Jones, which reached a record high on Wednesday, provided further evidence.
However, the Dow Jones and S&P 500 fell sharply on Thursday-Friday, closing just above their 50-day highs.
All major indices are lower than their exponential moving average of 21 days. The 21-day line supported the Nasdaq during the April and September stock markets and in the post-election market election. But in recent days it has been resistance.
The downside is that the intraday low for Nasdaq is large on Tuesday. The low is essentially at the 13,000 level and the lowest on January 29th. A closure below the area is likely to mean the end of the current stock market march. But we are not there yet.
What to do now
Investors should be wary of making new purchases until the Nasdaq is above the 21-day line again. You should have significantly reduced your exposure over the past few weeks. If the Nasdaq presses below and closes on Tuesday’s low, it’s a sign to move further in cash.
Analyze your possessions. Are there any stocks that you had to sell partially or completely last week? In what long-term commitment do you want to hold a core position?
Even if you are cash, it is important to stay engaged. Work on your watchlists, and focus on high RS stocks like Taiwan Semiconductor and Target.
Check out the list of relative strengths at new highs on the IBD stock show. Also use the RS Line At New High and RS Line Blue Dot stock listings on MarketSmith.
Make sure you watch commodity-related plays, finance and other cycles.
Review your transactions from the past few months. Look at your big winners and losers. Look at stocks you sold too early, and miss big winners. Identify the chart patterns and the strengths and weaknesses of your trading movements.
Read the big picture every day to keep up with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at: @IBD_ECarson for stock market updates and more.
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