Last week the stock market rallied strongly and broadly, despite a surprising hawkish Federal Reserve. This gives confidence to the longer-term prospects of the uptrend. The Nasdaq is extended and the odds of the market pulling back are higher in the short-term. Friday's market performance may have been the beginning of a decline, but not much.
An economic downturn could provide new opportunities to buy stocks that are currently out of reach. Investors should exercise caution when making purchases in the near term, particularly in tech.
Dow Jones futures, S&P 500 and Nasdaq Futures will all open on Sunday evening.
The BA stock is currently trading at a point where it's a good time to buy. Boeing (BA), and Airbus (EADSY), the rival, will probably announce a slew of new orders during the Paris Air Show which began Sunday. McKesson's (MCK), which broke free from a consolidation, is now above a trendline. Smith & Nephew's (SNN) price is also rising. Marriott International (MAR), Chipotle Mexican Grill(CMG), Boyd Gaming(BYD), and Floor & Decor(FND) all have buy points near them. All seven stocks come from non-tech market leaders.
Three hot stocks are beginning to fall: Advanced Micro Devices, Samsara IOT and Rambus RMBS.
Many leaders do not retreat. Nvidia's (NVDA), which has risen 10% in the past week, hit a new record high on Friday. Meta Platforms (META), which had been at its 16-month high before Friday's close, was a little lower. Tesla (TSLA), a day after two small losses ended a 13-day winning streak record, reached a new eight-month high on Friday.
IBD Leaderboard includes Tesla, META Stock and Nvidia. CMG is listed on the Leaderboard Watchlist. MCK stock has been added to SwingTrader, along with Boeing and FND stocks. IBD 50 includes IOT and Chipotle. IBD Big Cap 20 includes Tesla and Chipotle. McKesson is Friday's IBD stock of the day.
The article includes a video that reviews market activity over the last week, and analyses McKesson stock, Chipotle stock and AMD stocks.
Dow Jones Futures Today
Dow Jones Futures opens at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures. S&P 500 and Nasdaq futures open at 6 p.m. ET.
The U.S. Stock Markets will be closed Monday, June 19 for the Juneteenth Holiday, but other stock exchanges around the globe will be open. Dow futures are expected to trade as usual.
Keep in mind that overnight trading in Dow futures or elsewhere may not necessarily translate to actual trading during the next regular session of the stock market.
Stock Market Rally
Stock market rallies were strong, particularly on the Nasdaq despite modest losses on Friday.
Last week, the Dow Jones Industrial Average reached its highest levels in a year. S&P 500 index rose 2.6% for its best weekly gain in March. The Nasdaq composite jumped 3.25% for its eighth consecutive weekly gain. Russell 2000, a small-cap index, rose 0.5%. This was well below its weekly highs.
The yield on the 10-year Treasury note rose by 2 basis points, to 3.77%.
Last week, U.S. crude futures increased by 2.3% to $71.78 per barrel. Copper prices climbed 2.5%.
The Innovator IBD ETF (FFTY), which is a growth ETF, gained 2.1% in the past week. The iShares Expanded Tech Software Sector ETF (IGV), a growth ETF, jumped 5.2%. VanEck Vectors Semiconductor ETF SMH grew by 4.45%, with Nvidia & AMD stocks as major holdings.
Last week, the SPDR S&P Metals & Mining ETF XME grew by 2.9%. Global Jets (JETS), a component of the Global Jets ETF, rose 5.65%. The SPDR S&P Homebuilders ETF XHB grew by 2.4%. Energy Select SPDR ETF XLE fell 0.6%. Health Care Select Sector SPDR Fund XLV was up by 1.4%. MCK is included in XLV.
The Industrial Select Sector SPDR Fund XLI jumped 3%. BA is a key holding in the XLI.
The Financial Select SPDR ETF XLF rose by 1.3%. The SPDR S&P Regional Banking ETF KRE fell by 0.9%, after a big gain since early May.
ARK Innovation ETFs (ARKK) and ARK Genomics jumped 3.9% last week, reflecting stocks with more speculative news. Tesla is the top holding across Ark Invest's ETFs. Ark Invest ETFs have the No. 1 holding in Tesla stock.
Stocks to Watch
This past week, BA's stock climbed 1.2% to 219.99. It is just below the flat-base purchase point of 221.43. Boeing is not like other industrial stocks that look stretched from their 50-day line.
MCK stock rose 3.1% Friday to 406.20. It broke out of a handle buy point of 401.53.
SNN's stock rose 6.9% last week to 32.16, breaking a trendline that was part of an overlapping base.
CMG's stock fell 0.4% in low volume to 2,032.92, trading at the 21-day line, with the 10-week line catching on. Chipotle is in a tight pattern that spans four weeks with an official buy point of 2,139.88. This pattern could become a flat basis in a week.
MAR fell 1.5%, to 176.36. Support was found at the 10-week and 21-day lines. According to MarketSmith's analysis, Marriott stock has an 183.37 buying point from a base that is flat and adjacent to other bases.
BYD's stock fell 0.6% last week to 68, which is just above the 10-week line. Boyd Gaming's 71.69 buying point is based on a flat basis next to two cup-and-handle consolidations. Investors can use 70.04 to enter early.
FND shares climbed 0.3% to 96.26. This is just above the 50 day line. Floor & Decor's stock is at a 101.39 purchase point from a base of a cup with handle, but investors can enter the market aggressively by buying it at 99.50.
AMD's stock dropped 3.9% last week to 120.08, after reversing on heavy volume from its 52-week high price of 132.83 reached on Tuesday. The shares are reverting to their 21-day line, and the lows from their recent mini consolidation. AMD released new AI chip to compete with Nvidia but the market response wasn't very positive. If AMD finds some support, is it a good buy? Investors wait for NVDA to rest, or do they buy AMD?
IOT shares fell 0.3%, to 28.90. They retreated reluctantly in the last week after almost surpassing their all-time high price of 31.41 for late 2021. Samara is still trading above the 21-day line. Shares of IOT are currently trading near the 10-day line.
RMBS shares fell 5.2% to 60.38 in the past week, just below the 21-day line. Rambus' stock has declined for the third consecutive week.
Market Rally Analysis
The rally in the market continues to be impressive. The major indexes remained resilient in the face a surprising hawkish Fed on Wednesday and then surged higher on Thursday. The Dow Jones and S&P 500 both set new highs for 2023.
The uptrend continued to hold despite the fact that the Nasdaq was clearly stretched and the S&P also became stretched on Friday.
The market breadth was low on Friday but has significantly improved in recent weeks.
Invesco's S&P Equal Weight ETF, (RSP), jumped 2.5% on Friday to 148.83. This is a big change from a few short weeks ago. Last week, the First Trust Nasdaq 100 Equal Weighted Index ETF QQEW (QQEW), advanced by 3.2%.
The Nasdaq has risen 9.1% over its 50-day line. Meanwhile, the Nasdaq 100 has risen 10.6%. S&P is up 5.5%. All of this indicates a possible market retreat, and the odds are increasing that it will be a large one. Stocks could get even more overextended for a while.
Ideal would be for the Nasdaq to pause, or even give up ground, in low volume, and let moving averages catch-up. This would allow leading stocks to take a rest, possibly retreating back to the 21-day and 10-week lines, or even forming new bases. A pullback can be much more severe, but even a mild decline in the market will cause many names to suffer large losses.
Quality stocks outside of the tech sector could either break out or hold their ground, depending on how mild or broad the pullback was. Boeing, SNN and CMG are among the best-performing stocks.
What to Do Now
It's not the best time to buy techs, with Nasdaq extended and many leaders in chip, software, and AI. Investors may look for other ways to diversify their portfolio. A Nasdaq led pullback may affect everyone. Investors may also want to keep their powder for buying big winners in the tech sector after a pullback.
Consider taking partial profits on big winners either as they rise or when they fall below the 10-day line. This will depend on your overall exposure and the size of each position, as well as your investment style and conviction. Have an exit plan in place.
You'll want keep an eye out for stocks that are consolidating or finding support around key buy points when a market pullback or pause occurs. This long weekend, run your screens to keep track the many leaders and potential leaders.
The rally on the market has been spectacular. The overall trend remains bullish, despite some caution in the near term. Act accordingly.
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