Dow Jones futures and S&P 500 fell slightly overnight, while Nasdaq futures moved higher. JPMorgan Chase headlined big gains on Friday.
Technical growth action led to another solid session for the stock market rally, with government bond yields and the dollar continuing to fall.
Google older Alphabet (GOOGL), ASML (ASML), Snowflake (SNOW), Arista Networks (ANET) and Holding on (ONON) flashed buy signals Thursday as many other leaders extended gains.
This has been a good week for investors to add exposure, but the risk of another market pullback is rising.
Aehr test systems (AEHR) reported fiscal Q4 revenue that was modestly above views, while revenue was just better. The chip test equipment maker, with exposure to EV semiconductors, sees revenues up more than 50% for fiscal 2024, but perhaps just below views. Shares of AEHR rose 4% in volatile overnight trading. Shares rose 3.7% to 141.43 on Thursday, extending a bounce from the 10-week line and back above a previous buy point of 40.69 that is no longer valid. The AEHR stock has been consolidating next to the top of a previous base in recent weeks.
JPMorgan Chase (J.P.M.), Wells Fargo (W.F.C.), Citi group (C), Black rock (BLK) and UnitedHealth (UNH) are available early Friday. JPM stock is in a buy zone, while BLK stock is arguably usable. UNH shares and other health insurers have been faltering in recent weeks.
Beautiful Seven In Focus
Meanwhile, the Nasdaq will announce on Friday how it will reweight the Nasdaq 100 through a “special rebalancing” set to take place on July 24. The “Magnificient Seven,” Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Google share, Amazon.nl (AMZN), Tesla (TSLA) and Meta platforms (META) are expected to see lower weights.
On Holding, shares of Nvidia and Tesla are on Leaderboard. ONON Shares and Arista Networks are on SwingTrader. Both On Holding and ANET are also on the IBD 50. TSLA stock is on the IBD Big Cap 20. On Holding was Thursday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures rose higher.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
During the stock market rally, major indices rose for the fourth consecutive session.
The Dow Jones Industrial Average rose just 0.1% during Thursday’s stock trading and hovered around 2023 highs. The S&P 500 index climbed 0.85%, a new 14-month high. The Nasdaq composite rose 1.6%, clearing the 14,000 level to a 15-month high. The small-cap Russell 2000 rose 0.9%.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.5% to its best level in nearly five months.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) soared 1.1%. QQEW lagged the Nasdaq 100 somewhat on Thursday, but is outperforming so far this week.
Market breadth strong, with NYSE trailblazers outrunning laggards by at least 2-to-1 for the fifth consecutive session.
Leading stocks continued to perform well. Several other stocks flashed buy signals while many others continued to run.
US crude oil prices rose 1.5% to $76.89 a barrel, up 5.3% in three sessions. Copper futures rose 2.3%, extending a recent recovery.
The 10-year Treasury yield fell 10 basis points to 3.76%. It is down 29 basis points this week based on moderate inflation reports, and is down from a 2023 high of 4.09%. The US dollar fell for the sixth consecutive session.
Market rally too fast, too furious?
The only real concern for the stock market rally is that the Nasdaq is now 8% above its 50-day line and the Nasdaq 100 8.4% above that level. Historically, the likelihood of a pullback increases as these indexes move 5%-6% above the 50-day mark, but in recent years the Nasdaq has sometimes reached 10% before scaling back.
But a fall back to, say, the 21-day line would be normal action for a bull market. That would also allow some expanded inventories to create new entries.
A relapse can also curb signs of speculative frenzy. Bitcoin jumped Thursday as many other cryptocurrencies and crypto stocks ripped higher as a federal judge ruled that Ripple’s XRP token is not necessarily a security.
Nicholas (NKLA) surged 61% on Thursday on a deal to sell 50 major hydrogen fuel cell rigs.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.65%. Microsoft stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) was up 2.4%. Nvidia stock is the top holding company in SMH, with ASML also a notable member.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) rose 4.5% and ARK Genomics ETF (ARKG) gained 0.9%. Tesla stock is the largest holding in Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) rose 0.9%. US Global Jets ETF (JETS) fell 0.95%. SPDR S&P Homebuilders ETF (XHB) rose 0.35%. The Energy Select SPDR ETF (XLE) fell 0.4% and the Health Care Select Sector SPDR Fund (XLV) rose a fraction. UNH stock is a top UNH component.
The Industrial Select Sector SPDR Fund (XLI) was up 0.1% and the Financial Select SPDR ETF (XLF) was up 0.3%. JPM Shares, Wells Fargo, BlackRock and Citigroup are large XLF holding companies.
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Stocks to watch
Google shares rose 4.7% to 124.54, decisively retaking its 50-day line and breaking a heavy volume trendline. Google launches its Bard chatbot in Europe and Brazil. GOOGL stock has a 129.04 flat-base buy point.
Shares of SNOW rose 7.15% to 184.22 and recovered from the 50-day line in heavy trading, offering early entry, especially in the morning. Snowflake stock has encountered a lot of resistance around the 185-193 level, with large swings in recent weeks. Investors might view 193.94 as a messy buy point in a base stretching back to last August, but quieter action would be helpful.
ASML shares rose 3.6% to 750.74 and continued to recover from the 50-day line reaching as high as 747.13 from a flat=base, base-on-base pattern. Stocks are usable from the clearing of a not-so-steep trendline. ASML earnings are expected early July 19.
ANET share rose 2.8% to 168.61, extending this week’s recovery from the 21-day/10-week lines and breaking a trendline in a consolidation. Shares hit a short-term high on Thursday. The volume was below average, but is picking up compared to previous days. The base had ugly action in June, but has improved. The official buy point is 178.36.
ONON shares stepped 3% higher to 33.55, above a trendline entry but just below a buy point of 33.67 cup-with-handle, according to MarketSmith’s analysis. Shares of the luxury Swiss athletic shoemaker hit 34.48 intraday.
Rebalancing Nasdaq 100
Nasdaq will announce its special rebalancing changes on Friday, likely after the market closes. The realignment occurs because Apple stock, Microsoft, Google, Amazon, Nvidia, Tesla and Meta account for more than half the weight of the Nasdaq 100. So those names are likely to fall, with MSFT stock and Nvidia eager to see outrageous declines.
The other 93 Nasdaq 100 stocks will also see their weight rise or fall.
Starbucks (SBUX), Mondelez International (MDLZ), Book holdings (BKNG), Gilead Sciences (GUILD), Intuitive surgical (ISRG), Analog devices (ADI) and Automatic data processing (ADP) will be special rebalancing winners, Wells Fargo analysts calculated Tuesday.
The actual rebalancing will take place before the opening on July 24. But the news will likely be priced in before then.
Most shares of the Magnificent Seven fell Monday following news of the special reshuffle. But they’ve collectively bounced back, with Nvidia shares and Meta rising, Google and Amazon up solid, and modest gains for Microsoft and Tesla. Apple shares are essentially flat, near all-time highs.
All stocks except Apple and META have offered buying opportunities this week.
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What to do now
The market rally has sent bullish signals through major indices and leading stocks. Investors should take advantage of this environment by expanding existing holdings or making new purchases. Do this gradually, especially as the Nasdaq extends again and the earnings season gets underway again.
You could cut some relative laggards or take a share of profits from winners to free up cash for loading stocks with more potential.
A market pullback could put pressure on new purchases, though longer-holding winners could be in order.
Build those watchlists and go through them. The past few days of trading have been fun, but the work of running screens, setting alerts, and other efforts make investing rewarding.
Read The Big Picture every day to stay in sync with 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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