Dow Jones futures fell slightly on Sunday evening, along with S&P 500 and Nasdaq futures. The stock market rally had a generally positive week, with the Nasdaq and small caps leading the way.
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But with the major indexes at resistance levels after strong recent gains, the market rally showed resilience amid some mixed headlines.
Stocks to watch
Chip stocks are rallying, a positive sign for any market rally. Monolithic Power Systems ( MPWR ), KLA ( KLAC ), Analog Devices ( ADI ), Axcelis Technologies ( ACLS ), and Onsemi ( ON ) are up but currently in no man’s land, extended from early entries but below of the traditional points of purchase.
Apple ( AAPL ) may still be within reach of an early entry, but investors may want to wait to see if AAPL stock can forge a handle.
Tesla shares sold off on Friday, but the electric vehicle giant needs to take a break. Meanwhile, the California DMV has accused Tesla ( TSLA ) of false advertising in promoting Autopilot and fully automated driving.
Finally, Celsius (CELH) took a heat control after big gains in recent days and weeks. What Should Investors Do With CELH Stock With Earnings Available Tuesday?
MPWR stock is listed in IBD’s Long Term Leaders. KLAC stock is on the Long-Term Leaders Watchlist. CELH, Axcelis Technologies, Onsemi, KLA and Monolithic Power stocks are in the IBD 50. ADI, Onsemi and Monolithic Power stocks are in the IBD Big Cap 20. ACLS stocks were the IBD stocks of day of friday Monolithic Power and ON stock were stocks of the day earlier in the week.
The video embedded in this article discussed market action and analyzed shares of Vertex Pharmaceuticals (VRTX), EQT (EQT), and ACLS.
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Berkshire Earnings
Berkshire Hathaway’s ( BRKB ) operating profit rose 39% from a year earlier to $9.28 billion. But Warren Buffett’s conglomerate suffered a net loss of $43.8 billion. That reflects a loss of $53 billion in investments amid the stock market slump that bottomed out in June.
Berkshire bought back just $1 billion of its own stock in the second quarter, down from $3.2 billion in the first quarter. Instead, Berkshire has loaded up on Occidental Petroleum (OXY).
Buffett’s company still had $105.4 billion in cash at the end of June compared with $106.3 billion at the end of March.
Shares of BRKB fell 2.8% last week to 292.07, trading between its 200-day and 50-day lines. Berkshire shares have recovered from their June lows, but are still a long way from their late March high of 362.10.
Dow Jones futures today
Dow Jones futures fell 0.2%. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.35%.
The Senate passed tax spending and climate legislation with Vice President Kamala Harris breaking a 50-50 tie. The House is likely to take up the package, which includes green energy incentives, expanded ObamaCare subsidies, some drug price controls and tax increases, within days.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
Join IBD’s experts as they analyze actionable stocks in the stock market’s recovery on IBD Live
Stock Exchange meeting
The Dow Jones Industrial Average was down 0.1% in the stock market last week. The S&P 500 rose 0.4%. The Nasdaq composite rose 2.15%. The small-cap Russell 2000 advanced 1.9%.
The 10-year Treasury yield rose 20 basis points to 2.84%, including up 16 basis points on Friday after the hot jobs report. Odds of a 75 basis point Fed rate hike on Sept. 21 rose to two-thirds from 40% ahead of the jobs data.
Fed Governor Michelle Bowman said on Saturday that she supports rate hikes similar to the 75 basis point moves of the past two weeks until “we see inflation come down in a consistent, meaningful and lasting way.”
US crude futures fell 9.7% on the week to $89.01 a barrel, hitting their lowest levels since before Russia’s invasion of Ukraine in late February.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rallied 2.9% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.7%. The iShares Extended Technology Software Sector ETF ( IGV ) rose 3.7%. The VanEck Vectors Semiconductor ETF (SMH) gained 2.7%.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.5% last week. The Global X US Infrastructure Development ETF (PAVE) rose 0.15%. US Global Jets ETF (JETS) rose 3.2%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.2%, its seventh straight weekly advance. The Energy Select SPDR ETF (XLE) fell 6.8% and the Financial Select SPDR ETF (XLF) fell 0.1%. The Select Healthcare Sector SPDR Fund ( XLV ) retreated 0.7%, despite strength in biotechs.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) rose nearly 11% last week and the ARK Genomics ETF ( ARKG ) rose 10.5%. Tesla stock remains a major holding in Ark Invest’s ETFs.
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Chip Stocks
Monolithic Power shares rose nearly 15% to 532.33 last week on strong gains. Investors may have been able to buy shares of MPWR at the August 2nd earnings gap as it cleared some other areas of resistance. But as of Friday’s close, Monolithic shares were 17% above their 200-day line and 24% above their 50-day line. The relative strength line is already high, indicating the outperformance of MPWR stock relative to the S&P 500. The stock has a 580.10 buy point from the consolidation through the end of November. But ideally, the stock would stop and form a handle. This would offer a lower entry and allow the moving averages to take hold.
It’s the same story for shares of Axcelis, Onsemi and KLAC, all of which reported gains over the past two weeks, and are now extending from moving averages, but below traditional breakouts. ADI shares are very similar, although Analog Devices earnings are available on August 17th.
Apple stock
Apple shares rose 1.75% to 165.35, their fifth straight weekly gain. Investors may have bought AAPL stock as it cleared the 200-day line on July 29 following earnings. At 3.7% above the 200-day line, it may still be actionable as an early entry. Apple is the only megacap trading above its 200-day line.
The RS line for Apple stock is already at highs. The official buy point is 183.04, but a hold, at current levels or slightly higher, would be attractive.
Tesla stock
Tesla shares sank 6.6% to 864.51 on Friday, down 3% for the week, as they erased much of a seven-day winning streak. This also pushed the stock below the 200-day line. But if TSLA shares can stall for several days around current levels, a break above Thursday’s high of 940.82 could provide an aggressive entry. It would be too low for a traditional handle.
At Tesla’s annual meeting Thursday night, shareholders approved a 3-for-1 stock split, a long-awaited move. The actual split will take place on August 5th. At the annual meeting, CEO Elon Musk spoke at length about Tesla’s outlook, but didn’t say anything dramatic. Elon Musk’s ongoing Twitter saga could be weighing on TSLA stock.
Legal experts say Twitter ( TWTR ) has a strong case that Musk should go ahead with his $54.20-per-share takeover deal. The Musk-Twitter trial will take place in October. Amid the latest legal filings, TWTR shares rose 3.6% to 42.52 on Friday, clawing back the 200-day line and hitting their best levels in nearly three months.
Meanwhile, the California Department of Motor Vehicles on July 28 accused the electric vehicle giant of misleading customers about Autopilot and FSD capabilities, according to documents first reported by the Los Angeles Times. But if the state DMV wins its action, it will likely only require Tesla to modify its advertising and marketing.
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Stock Celsius
Shares of Celsius have been on a huge tear since they soared above their 200-day line on July 5. News broke on August 1 that PepsiCo ( PEP ) was taking a large stake in CELH and would be the energy drink maker’s main distributor.
Shares of CELH fell 9% to 98.62 on Friday, although they retraced their 10-day line and still jumped nearly 11% for the week. Celsius will move from the small-cap S&P 600 to the S&P MidCap 400. But fewer mutual funds and ETFs track the mid-cap fund versus the S&P 600, so the result is that fewer index funds can hold CELH stock. Also, energy drink leader Monster Beverage ( MNST ) fell 5% Friday on weak gains.
Earnings in Celsius expire on Tuesday, so investors need to make decisions. If you bought CELH stock near the 200-day or resistance around the 72, you still have plenty of cushion. You can choose to block some partial benefits. For those who bought extended, say, on Monday’s Pepsi news, you could have little cushion or be sitting on a loss heading into the results. Celsius shares tend to move a lot on earnings.
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Analysis of market concentration
It was a mixed week for the stock market rally. Growth stocks and small caps led the way while the Dow Jones and S&P 500 were little changed
But given the deluge of earnings and the hot jobs report pointing to big Fed rate hikes for longer, the market rally may have been oversold late last week after the stocks reach resistance levels. But they paused, at most. Friday’s action was particularly encouraging.
The Nasdaq is above early June highs, but is reaching a trend line from the start of the year. The Russell 2000 is at early June highs, while the S&P 500 and Dow Jones are still working at this key level.
A longer break or a modest withdrawal would be healthy. The market’s rally has made great progress, with most of the advance on relatively light volume.
Meanwhile, many leading stocks or potential leaders could use a breather. Major indices stalling or pulling back provide an opportunity for the likes of Monolithic Power and Onsemi to forge in, creating lower entries and letting the moving averages catch up.
The same goes for shares of Apple, Tesla and many others.
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