Dow Jones futures tipped higher late Monday, along with S&P 500 futures and Nasdaq futures. The rise in the stock market has had a rough session for growth, including but certainly not limited Tesla (TSLA), Square (SQ) and Nvidia shares.
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Chip breakouts have struggled with software names faltering around their 50-day line.
According to well-known investor Mark Minervini on Monday’s IBD Live, the major indices were all near record highs, it was a “hard penny” market. Even with the stock market rising higher and entering a power trend on Friday, it was a tough environment to make low profits.
Rising 10-year treasury yields, weaker Bitcoin prices and bad news for Nvidia and Tesla stocks weighed specifically on tech stocks on Monday. Coinbase (COIN) continued to consolidate after last week’s volatile direct listing.
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Important earnings
United Airlines (UAL), Steel Dynamics (STLD) and Dow Jones giant IBM (IBM) reported earnings after the close.
United Airlines reported a wider-than-expected loss and missed revenue. UAL stocks fell slightly in overnight trading. Shares fell 1.6% to 54.99 on Monday, testing their 50-day line. Airline and other travel supplies have withdrawn in recent weeks after riding on a “reopening” rally.
Steel Dynamics earnings rose above forecasts. STLD share rose lower in expanded trading. Shares fell 0.6% to 51.19 on Monday. Over the course of the day, the Steel Dynamics stock hit 52.72, clearing just a four-week tight pattern with a 52.69 buy point.
IBM earnings beat the view, while revenue rose higher, a rare year-on-year gain. Cloud revenue led the way. IBM shares rose modestly overnight and flirted with a possible outbreak. Shares fell 0.35% to 131.12 on Monday. IBM shares have been consolidating for several weeks. Investors may see this as a handle for a 14-month consolidation, with 137.17 as the buying point. But the relative strength line has been on a declining trend since late 2011, highlighting the long-term underperformance of IBM stocks against the S&P 500 index.
Netflix earnings due
A number of earnings reports are due to appear on Tuesday, but the big event is Netflix (NFLX) after closing. Shares rose 1.45% to 554.44 on Monday. NFLX shares may have a small handle from Tuesday’s close with a buyout of 559.85. It barely has a handle on a weekly chart.
Probably the NFLX stock is already on a trend line returning to the January 20 peak, which was set after the Q4 earnings report.
Netflix stock performed well on Monday, but its RS line is just above a 52-week low as stocks have been sideways over the past nine months.
Nvidia Shares and Square are on IBD Leaderboard. Square stock is on the IBD 50.
Bitcoin price volatile, Coinbase IPO consolidates
The Bitcoin price traded above $ 56,000 on Monday night. The cryptocurrency returned from a Saturday night low of more than $ 51,000 to a rise and reached $ 57,600 on Monday morning, but fell from above $ 61,000 on Friday night. Bitcoin reached a record high of $ 64,899 early Wednesday, hours ahead of the direct listing of Coinbase.
Coinbase shares fell 2.6% to 333 on Monday. This was the third consecutive day.
Coinbase shares had a reference price of 385 and rose rapidly to 429.54 in Wednesday’s debut. But the stock quickly turned lower. By late afternoon, COIN shares had broken 350 and did not strike back.
Wait until an IPO base forms. Maybe there is an early entry for aggressive traders, but many people who bought COIN shares above 350 might want to leave.
Dow Jones Futures Today
Dow Jones futures rose 0.1% to fair value, and IBM shares offered a meager boost. S&P 500 futures and Nasdaq 100 futures were slightly higher than break-even point.
Remember that overnight actions in Dow futures and elsewhere do not necessarily translate into stocks in the next regular session.
Join IBD experts while analyzing stocks in the stock market on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 142.65 million. The deaths from Covid-19 were 3.04 million.
Coronavirus cases in the US hit 32.46 million, with deaths above 581,000.
Stock market rally Monday
The rise in the stock market had a lower session on the major indices, but smaller businesses and growth names had a more difficult time.
The Dow Jones industrial average fell 0.4% on Monday. The S&P 500 index lost 0.5%. The Nasdaq composition fell 1%. The small-cap Russell 2000 fell 1.2%.
The ten-year treasury yield rose by 3 basis points to 1.6%. The ten-year yield tumbled last week, although it recovered slightly on Friday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) yielded 1.3%, although many growth names suffered larger losses. The VanEck Vectors Semiconductor ETF (SMH) sold 2.5%. Nvidia shares are a major component in SMH, but there has been widespread weakness among chips.
SPDR S&P Metals & Mining ETF (XME) fell 1.3% and Global X US Infrastructure Development ETF (PAVE) lost 0.55%. US Global Jets ETF (JETS) fell 1.25%.
Due to more speculative story shares, ARK Innovation ETF (ARKK) decreased by 3.2% and ARK Genomics ETF (ARKG) by 2.5%. Tesla shares are the no. 1 shares in the ETFs of ARK Investments. Square Stock is a top five ARK stock. ARK Invest has bought many COIN shares since it became known.
Tesla Stock
Tesla stock fell 3.4% to 714.63 but closed in the top half of its range after testing its 50-day and 21-day moving averages. On Saturday, two men died in a Model S crash in which no one was in the driver ‘s seat, indicating that the Tesla was on Autopilot or self-driving.
After the shutdown, Tesla CEO Elon Musk tweeted: “Data logbooks that have been restored so far show that Autopilot was not activated and that this car did not buy FSD.” The TSLA share rose slightly overnight.
The sharp fall in Bitcoin probably also weighed on Tesla on Friday, which invested $ 1.5 billion in the cryptocurrency earlier this year.
On the upside, it will be a positive sign to test key support for Tesla shares. It could have a handle on a daily chart with a 780.89 buy point after Tuesday. A handle that appears on a weekly chart will be even better, and weak holders will shake up Tesla earnings next week.
Square stock
Square stocks tumbled 4.2% to 245.33 and closed slightly above 50 days.
SQ shares have now fallen in three of the last four sessions, but that is after rising ten consecutive days. As with Tesla, Square shares are likely to fall in part due to the Bitcoin price drop. After Tuesday, the SQ stock will handle a daily chart with a 278.23 buy point. On a weekly chart, the handle is already there. But a handle is no guarantee of an outbreak or that the outbreak will succeed.
Nvidia Stock
The Nvidia share fell 3.5% to 614.47, which again cut a 615 buy point from a cup base. The British government has said it is intervening in Nvidia’s planned acquisition of British wireless disk designer Arm Holdings. This at least indicates a longer Nvidia-Arm approval process.
While NVDA shares have declined in three of the past four days, the volume in these retreats has been much lighter than during the past three days.
Taiwan Semiconductor (TSM) sank 2.9% and fell further from its 50-day line with the RS line reaching a 2021 low. Micron Technology (MU) fell 2.5%, below the 50-day high after hitting a 20-year high last week. Lamb research (LRCX), which reported later this week, sank 3.4% to 621.73, almost retreating to a buying point of 603.70.
Market analysis
The Dow Jones and S&P 500 have almost expanded, so Monday’s decline looks completely normal, even healthy, for the two indices. The Nasdaq lineup lost more ground, but still holds its highest peak in March and its 50-day line. The Russell 2000 suffered the biggest loss and fell back below the 50-day line.
The stock market march did not suffer too much damage to the indices, excluding Russell 2000. However, many leading stocks had a difficult session.
Finances such as Goldman Sachs (GS) and Wells Fargo (WFC) held, increased by the recovery of treasury yields, although it generally did not gain much ground. Cyclicals did OK. Rio Tinto (RIO) approaches a buying point while lithium miner Albemarle (ALB) regained its 50-day line and broke a deteriorating trend.
Growth stocks trying to come back, perhaps early buy signals, took it on the chin. Tesla, Square as well as many software names, such as Twilio (TWLO), tested or interrupted their 50-day lines. Even worse, the name of chips that actually broke out weeks ago has suffered significant losses.
Maybe it’s a final shake-up before the growth stock rises higher. But they may continue to weaken, or the overall rise in the stock market may struggle again.
What investors need to do now
It was already a “hard penny” market, as Minervini says. Just as a stock breaks out or an early buy signal flickers, the sector often turns out of favor. Like Yoda fighting with a light saber, active investors need to work twice as hard to make money on the dollar if they can even earn it.
This is not an environment to be particularly aggressive. While it’s good to be invested, keep your long-term winners or stocks on which you have a decent cushion, there is no convincing argument to increase exposure. Instead, investors should eliminate the backward and losers, especially as the earnings season increases.
Read the big picture every day to stay in step with the direction of the market and leading stocks and sectors.
Follow Ed Carson on Twitter at: @IBD_ECarson for stock market updates and more.
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