Dow Jones futures, along with S&P 500 futures and Nasdaq futures, will open Sunday night, with Twitter stock in focus as Elon Musk wraps up his takeover. Stocks rebounded strongly, with the Nasdaq leading the major indexes higher and more high-quality stocks issuing buy signals.
The Nasdaq closed the week near its 10-week moving average and 50-day line, where it has struggled several times this year. A decisive clearing of these key levels by the major indexes would be a positive step, although the market rally will still face many challenges, from technical resistance to the start of earnings season. Conversely, a sell-off from current levels would be a bearish signal.
Elon Musk wants to end the Twitter deal
Late Friday, Tesla CEO Elon Musk notified Twitter (TWTR) that he wants to terminate the $44 billion, $54.20 per share deal. Musk’s lawyers argued that Twitter “failed to comply with its contractual obligations.”
Twitter’s board said it has confidence in the deal and intends to close it. It plans to fight in court for Musk to honor the signed deal. Protracted litigation is likely. Musk could be forced to close the deal or pay a hefty sum — more than $1 billion in breakup fees — to walk away.
It’s a dramatic turnaround from April, when Musk belatedly disclosed a sizable “passive” TWTR stock and swiftly made an acquisition, claiming he could greatly expand growth and promote free speech.
Shares of Twitter fell 5% late on Friday, hitting their lowest level since mid-March. Shares fell 5.1% to 36.81 on Friday after a Washington Post article said the deal was struggling.
TSLA stock edged higher in extended trading.
Meanwhile, Musk’s exit from Tesla could be good news for the truth society where former President Trump is struggling. Shares of Digital World Acquisition Corp. (DWAC), the SPAC merger partner of Truth Social’s parent company, surged 29% late Friday.
Stocks are bullish
McKesson (MCK), UnitedHealth (UNH), Centene (CNC), Lantheus (LNTH), Northrop Grumman (NOC), Alibaba (BABA), SolarEdge Technologies (SEDG), Fortinet (FTNT) and Tesla (TSLA) are or close to Buy zones, from traditional breakouts to early buy points to highly aggressive entries.
Northrop, UnitedHealth and LNTH stocks are on the IBD leaderboard. Centene and McKesson on SwingTrader. FTNT stock is a long-term IBD leader. UNH stock is on the IBD 50. MCK stock and Fortinet on IBD Big Cap 20. McKesson is Friday’s IBD stock today.
The video embedded in the article discusses market conditions and analyzes three bullish stocks: McKesson, Lantheus, and Tesla.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. Sunday, with S&P 500 futures and Nasdaq 100 futures open.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading on the next regular stock market day.
Analyse actionable stocks in a stock market rally with an IBD expert on IBD Live
stock market rebound
The stock market rally has rallied in the latest week, with indexes solid to strong gains.
The Dow Jones Industrial Average rose 0.8% in stock market trading last week. The S&P 500 rose 1.9%. The Nasdaq Composite rose 4.6%. The small-cap Russell 2000 rose 2.4 percent.
The 10-year U.S. Treasury yield rose 13 basis points to 3.1% after falling to 2.75% in intraday trading on Wednesday. The 2-year Treasury yield also climbed to 3.1% after being above the 10-year yield for several days.
U.S. crude futures have fallen more than 3 percent over the past week to $104.79 a barrel, but after falling well below $100 on Wednesday.
Friday’s June jobs report was stronger than expected, but employment tends to be a lagging indicator. The Atlanta Fed’s GDP forecasting tool now expects an annualized decline of 1.2% in the second quarter, compared with last week’s -2.1% decline.
The CME’s FedWatch tool still expects a 75 basis point rate hike later this month and a 50 basis point hike in September. But it sees a possible 0.5 percentage point change at the November meeting, a departure from expectations for a 25 percentage point move over the past few days.
Wednesday’s June consumer price index could influence markets and further Fed rate forecasts, but July’s oversized 75 basis points appears to be locked in.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV), of which FTNT stock is part, rose 4.4%. The VanEck Vectors Semiconductor ETF (SMH) rose 6.45%.
The SPDR S&P Metals & Mining ETF (XME) fell 1.5%, extending its weekly loss. The Global X US Infrastructure Development ETF (PAVE) rose 0.7%. The US Global Jets ETF (JETS) held on to highs and ended flat. The SPDR S&P Homebuilders ETF (XHB) rose 3.2%. The Energy Select SPDR ETF (XLE) fell 2.25% and the Financial Select SPDR ETF (XLF) edged up 0.6%. The Healthcare Select Sector SPDR Fund (XLV) rose 0.8%, with UNH stock a major holding.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) rose 13.7% last week, recovering above its 50-day line. The ARK Genomics ETF (ARKG) surged 14.4%, jumping from its 50-day line. Tesla stock is a major holding of the Ark Invest ETF.
The five best Chinese stocks to watch right now
buy zone stocks
Shares of McKesson rose 3.1% to 331.26 on Friday, showing multiple early buy signals. Shares bounced off the 50-day SMA, broke the downtrend line and cleared short-term resistance at 330.16. According to MarketSmith analysis, MCK stock has a flat base with a buy point of 340.04. The relative strength line, the blue line in the provided chart, has been making new highs in recent days.
UnitedHealth shares edged up 0.8% to 518.63 on Friday. In the session, the Dow Jones giant hit 528.37, clearing the 518.80 handle buy point from the cup or double bottom bottom, but closing below the entry point. On Tuesday, UNH stock tested its 50-day intraday as a small swing. Several health insurers, including Centene, are in or near buying territory, which is a positive sign. But UnitedHealth’s earnings expire on Friday, July 15.
Centene shares rose 3.2% to 88.01 on Friday, above a double-bottom buy point of 87.44. Like UnitedHealth, CNC stock tested its 50-day antenna on Tuesday. Centene’s RS line is at a new high. Centene’s earnings aren’t due until July 26, but UnitedHealth’s results could affect CNC stock on Friday.
Lantheus shares rose 7.4% to 67.79 on Friday, bouncing back above the 50-day line, also breaking above the trend line and above a short-term high. LNTH stock is consolidating after a sharp rise in late February to early June, but it will take another week to become a proper base.
Northrop stock fell 1.2% in the latest week to 480.43 after bouncing back into buy territory the previous week, but bounced back from Tuesday’s 50-day test. NOC stock could trade from the 50-day MA and the old 477.36 buy point. Northrop stock now has a new flat bottom with a buy point of 492.40.
Alibaba stock broke above the 200-day SMA and broke from the bottom, with resistance just above 121. For the week, Alibaba shares rose 4.2% to 120.90, but fell 1.2% on Friday to settle just below those key levels. On Thursday, Alibaba stock would ideally have a bottom formed above or mostly above the 200-day SMA, but many stocks are showing a similar pattern. Several Chinese internet stocks showed an improving trend.
SolarEdge shares rose 6.75% in the latest week to 295.11, rebounding from Tuesday’s 50-day line and regaining its 200-day line on Friday. SEDG stock is gaining a 314.62 buy point from the base of a cup with a handle. But it trades on a trendline from the top of the handle or the top of the three-month base.
Fortinet shares rose 9.3% over the past week to 62.70, regaining its 50-day line and closing just above its 200-day line. This presents a buying opportunity for FTNT stock as an early entry or as a long-term leader. However, volumes were light this week. While Fortinet stock is far from its peak, the RS line is at new highs that few software companies can claim.
Tesla vs. BYD: Which electric car giant is more worth buying?
Tesla shares surged 10.3% to 752.9 in just one week, returning above the 50-day line for the first time in two months. TSLA stock didn’t break below its May low last month, so it’s fair to say it’s trying to clear a bottom that was too short.
Tesla shares rose 2% late Friday after news that Musk was seeking to end the Twitter deal, which could require more TSLA sales or collateral.
Extremely aggressive traders can try to take a position here, but this is not a typical IBD buy, even as an early entry. Tesla stock is still a long way from its 200-day line, and its all-time high is well above that line.
By contrast, Chinese EV rivals BYD (BYD) and Li Auto (LI) are currently in buy territory, trading just below 52-week highs.
Tesla may soon open its network of Supercharger stations in the United States, according to a White House memo. Tesla’s earnings are due on July 20.
Market rebound analysis
The stock market rally a week ago rallied last week after rebounding from Tuesday’s session lows. The Nasdaq rose to its 50-day and 10-week lines and its late-June high, closing just above its 10-week average.
The 10-week line has been a major resistance area for the tech-heavy index.
Major stock indexes retreated sharply Friday morning after a strong jobs report pushed Treasury yields higher. But they rallied to close little changed.
The S&P 500, Dow and Russell 2000 have yet to reach the 50-day/10-week area, but they did reclaim their 21-day moving averages.
Last week’s gains, however, came from light trading volumes, a sign that big institutions haven’t yet made big bets on this market rally.
It wouldn’t be bad for the market rally to pause for a few days or weeks around current levels. That would allow more bases to form and allow the major indexes to catch up with leaders or fall to battered stocks trying to bounce back.
However, more stocks are establishing buy points of various qualities. The healthcare sector still dominates, accounting for four of the nine stocks highlighted here. But there are other industries showing some promise.
Remember, financial markets are still weighing inflation, recession and the risk of Fed rate hikes. Stocks, bonds and commodities are prone to wild swings.
Use IBD’s ETF Market Strategy to Time the Market
what to do now
The market rally remains “under pressure,” but the major indexes look much better than they did a week ago and are on the verge of taking a big step. Leading stocks are growing in number and doing well.
All of this is still tentative. A sharp sell-off, especially from current levels, would be a bearish sign. A few days of bad days will turn a recent buy into a clear loss, with the index hitting another low.
So slowly increase your exposure as the market and your positions come into play. You may still take some of the profits from the winners to lock in gains. Be prepared to cut losses quickly.
Work hard on your watch list this week. Build an extensive list while paying particular attention to a set of potential purchases in the coming days.
Pay special attention to earnings season, which will start to pick up next week. Many companies are expected to miss or issue grim guidance amid high inflation, a strong dollar and slowing growth. So keep an eye out for when your holdings report earnings, or when major competitors are exploited.
Read the big picture every day to stay abreast of market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.
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