by The stock market rally showed growing momentum over the past week, with the major averages all making big moves. Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
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Leadership in the market rally remains narrow, concentrated in the artificial intelligence space as well as chips and software. Many of those inventories have expanded. But as market breadth continues to improve, a wider range of buying opportunities will emerge.
Already, Tesla (TSLA) broke out on Friday. DexCom (DXCM), lennar (To borrow JPMorgan Chase (JPM) flashed early entries late in the week. Marriott International (MAR) is demonstrably also doable.
They all reflect possible areas of leadership. Tesla stock joins EV rivals like BYD (BYDDF) when redeeming Purchase Points. DXCM stocks are one of many medical products securities trying to move higher. LEN shares are among a number of homebuilders recovering. JPM shares stand out among financials, but the industry is recovering. MAR stocks belong to a largely resurgent travel industry.
Investors should look for more exposure amid the promising bullish shift. But be prepared to take a step back.
In the meantime, Apple (AAPL) is expected to show off its mixed reality headset on Monday, its first new hardware product since the Apple Watch in 2015. The headset will go up against rivals like the Meta Quest from Meta platforms (META). Apple stock is poised to hit January 2022 highs, approaching a $3 trillion market cap.
Tesla shares joined IBD Leaderboard on Friday, joining Meta shares. LEN shares hit SwingTrader on Friday. Lennar was the IBD stock of the day on Friday.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
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
The stock market rally showed strong, broad gains, especially late in the week.
The Dow Jones Industrial Average soared 2% during last week’s stock trading. The S&P 500 index rose 1.8%. The Nasdaq composite gained 2%. The small-cap Russell 2000 rose 3.3%.
The 10-year Treasury yield fell 13 basis points this week to 3.69%, but rose 8 basis points on Friday.
U.S. crude oil futures fell 1.3% to $71.74 a barrel last week, despite rising 2.3% from Friday.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 2.1%. The VanEck Vectors Semiconductor ETF (SMH) fell 0.8%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 6.45% last week and ARK Genomics ETF (ARKG) was up 4.9%. Tesla stock is the No. 1 position in Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD stock.
SPDR S&P Metals & Mining ETF (XME) rallied 4.2% last week. The Global X US Infrastructure Development ETF (PAVE) popped just over 3%. US Global Jets ETF (JETS) rose 3.1%. SPDR S&P Homebuilders ETF (XHB) rose 3.5%. The Energy Select SPDR ETF (XLE) gained 1.4%. The Health Care Select Sector SPDR Fund (XLV) climbed 2.2%. DXCM stock is in XLV.
The Financial Select SPDR ETF (XLF) rose 2.15% in an external up week. JPM stock is an important XLF component.
The SPDR S&P Regional Banking ETF (KRE) rose 4.8%.
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Apple Mixed Reality headset
Apple will showcase its latest hardware and software innovations during a keynote presentation Monday at 10 a.m. PT at its annual Worldwide Developers Conference. It describes the latest operating systems for the iPhone, iPad, Mac, Apple TV and Apple Watch. But the buzz is all about a mixed reality headset, possibly called Reality Pro. It would be the first new hardware product since the Apple Watch debuted in 2015. The expected $3,000 price tag could put off buyers. Meta platforms (META) recently unveiled its latest Meta Quest headset.
Apple shares rose 3.15% to 180.95 last week. That’s just below the January 2022 peak of 182.94.
Tesla stock
Shares of Tesla rose 10.8% this week to 213.97, including a 3.1% gain on Friday. Stocks cleared their 200-day moving average on Tuesday. On Friday, TSLA stock passed a buy point of 207.89 from what is a cup or double-bottom basis. The EV giant has achieved above-average volume for five consecutive sessions, following a few such days in the previous three months.
Meanwhile, BYD shares rose 5.6% during the week to 31.50. Friday’s gain of 2.3% pushed the Chinese EV and battery giant back above a buy mark of 31.17 cups with handle initially approved on May 10. On Thursday, BYD reported record deliveries in May, surpassing the late 2022 peak.
Tesla now says its base Model 3 will get the full $7,500 U.S. tax credit along with all other Model 3 and Model Y vehicles, according to reports late Friday. It’s not clear how, but maybe Tesla is now using 2170 cells made at the Nevada site instead of the China-made LFP batteries.
Other stocks near buying points
DXCM jumped 6.5% to 122.57 last week. On Thursday, DexCom reclaimed its 50-day line and added to Friday’s gains in above-average volume. That’s an early access offer. The continuous glucose monitor maker has a buy point above 126.44 in a new flat base, right next to two other consolidations, according to MarketSmith’s analysis. Several other makers of medical products and systems are worth checking out, including Shock wave medical (SWAV) and Intuitive surgical (ISRG).
LEN shares rose 3.6% to 112 on Friday and rebounded above the 50-day mark, offering an aggressive entry into an emerging consolidation. On Wednesday, Lennar shares fell to test an earlier buy point. Several other homebuilders posted bullish gains on Friday, but LEN shares moved in large volumes.
JPM shares rose 3% to 140.47, closing right on a downtrend in a new flat base alongside a previous consolidation. It also does not extend from the 50 day line. JPMorgan looks a lot healthier than other banks, but bank stocks did make bullish moves Friday.
MAR shares gained 3.55% to 177.22 on Friday after regaining the 50-day line on Thursday. Undoubtedly, Marriott offers early entry from an emerging flat base. Royal Caribbean (RCL) is sailing higher, but most other travel stocks are like Marriott, trying to take off in fits and starts.
Analysis of the market rally
The stock market rally showed even more strength this week, with some hopeful signs that breadth and leadership are improving.
The Nasdaq continued to move forward, hitting a 13-month high on Friday. But last week was about more than AI play.
The S&P 500 has decisively cleared its range for 2023 and is approaching the August 2022 highs.
The Dow Jones, which had been testing its 200-day line for much of the week, jumped above its 50-day line on Friday. The Russell 2000, which broke below the 50-day mark on Wednesday, rose to its best level since early March and also crossed the 200-day mark for the first time since.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 1.4% this week to a 52-week high.
The Invesco S&P 500 Equal Weight ETF (RSP) is up 1.9% this week. Friday’s 2.2% gain pushed the RSP well above its 50-day and 200-day lines, breaking a downward trend that stretched back to early February.
Advances beat losers on Thursday and Friday. On Friday, the winners led more than 5 to 1 on the NYSE and nearly 3 to 1 on the Nasdaq. Still, the long-term trend is weak. And a downward A/D line is critical.
The Nasdaq and Nasdaq 100 are extended, with the latter now 9.5% above the 50-day mark. Ideally, big-cap techs, particularly AI players, would slow down or pause while other industries step up. That was generally the pattern on Friday, with the Dow Jones, Russell 2000 and RSP all outpacing the Nasdaq 100’s 0.75% gain.
That creates buying opportunities, such as Tesla, Lennar, DexCom and JPMorgan.
A few strong days, of course, do not guarantee a broad market run. From a macro perspective, the debt ceiling is no longer a concern. The Fed, which a few days ago appeared to be heading for a rate hike on June 14, now appears to be on the verge of pausing. Now that the earnings season is (finally) drawing to a close, the news cycle can enter a relatively quiet period.
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What to do now
As the market rally gathers momentum and broadens, investors should pay attention. Yes, this could be another head fake. The limited advance could resume or, worse, the overall market rally could buckle or break down.
But right now, the market is sending bullish signals. If you wait for a powerful bull market to undeniably take place, the leading stocks will all expand well.
Investors should be looking for additional exposure, especially if they have mostly been cash-in. But do this gradually to minimize the impact of sudden market reversals.
It is important to be flexible. And just as you don’t want to get stuck in a bearish mindset, don’t be a blind bull if the broader market or your positions are faltering.
This is an important time to build your watchlists. Have a select group of stocks to target, but be sure to cast a wide net to keep an eye out for a wide range of potential leaders.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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