Dow Jones Futures: Market Rally Strong, But Here’s Why You Should Be Cautious

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.


The stock market rally made solid gains during the shortened holiday week. The Dow Jones hit a seven-month high. But the S&P 500 is nearing its 200-day moving average, a key resistance area. Several economic reports are expected next week, including the November jobs report. They will be key to the Fed’s interest rate expectations.

Thus, investors may want to be cautious about adding large exposures in the very short term.

Basic income

Data storage company Clean storage (PSTG), a Chinese e-commerce giant Pinduoduo (PDD), Dollar General (DG) and: Ulta Beauty: ( ULTA ) to report earnings this coming week. PDD stocks, Dollar General, Pure Storage and Ulta Beauty are also close to buy spots. (CRM) and: Snowflake (SNOW) headlines a series of software revenue reports, the key to guidance for the entire industry and the outlook for IT spending. Snowflake is expected to report its first quarterly earnings. But the stock of SNOW and most of these other software games are pretty high.

Megacaps are also still struggling. Tesla ( TSLA ) has bounced back this week, but from bear market lows. (AMZN) is still below the moving averages. Apple: (AAPL), Microsoft (MSFT), Nvidia: (NVDA) and parent of Google The alphabet ( GOOGL ) are all above their 50-day lines but below their 200-day.

The video embedded in this article recaps the market rally over the past week and provides analysis Dexcom (DXCM), Avis budget group (CAR) and PSTG shares.

Weekend News:

Holiday shopping seems decent at best. Black Friday online sales rose 2.3% from a year earlier to a record $9.12 billion amid somewhat thin crowds. Apple products are in demand.

The Biden administration eased Venezuela’s oil sanctions, allowing Chevron (CVX) to produce crude oil domestically and export it to the US within the next six months. That’s a big change in policy. This comes at a time when the United States may soon stop releases from the much-reduced strategic oil reserves.

Macau has temporarily renewed casino licenses for 10 years Wynn Resorts (WYNN), Las Vegas Sands (LVS), MGM Resorts (MGM) and: Melco Resorts & Entertainment (MLCO). That raises a lot of uncertainty for Macau-based casino operators, which are still grappling with China’s Covid restrictions. Deadlines must be set by January 1.

China’s protests are growing against the government’s strict zero-covid policy, with many citizens simply ignoring lockdown orders, the biggest challenge for President Xi Jinping since he took power in 2012.

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Dow Jones futures today

Dow Jones futures open at 6pm ET, along with S&P 500 futures and Nasdaq 100 futures.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze stocks in action on IBD Live’s Stock Market Rally

Stock market rally

The stock market rally made solid gains over Thanksgiving.

The Dow Jones Industrial Average rose 1.7% in last week’s trading. The S&P 500 index rose by 1.5%. The Nasdaq composite rose 0.8%. The small-cap Russell 2000 rose 1%.

The 10-year Treasury yield fell 11 basis points to 3.71%.

U.S. crude oil futures fell nearly 2% last week to $78.31 a barrel.


Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.1% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8%, with Microsoft and CRM shares the two biggest holdings. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.8%, with NVDA stock as its main component.

Reflecting more speculative stocks historically, the ARK Innovation ETF ( ARKK ) fell 1.5% last week and the ARK Genomics ETF ( ARKG ) fell 1.9%. Tesla stock is a large holding in Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF ( XME ) jumped 4% last week, just below a potential entry. The Global X US Infrastructure Development ETF ( PAVE ) rose 1.8% to a seven-month high. The US Global Jets ETF (JETS) rose 2.3% in a good week for travel plays. SPDR S&P Homebuilders ETF (XHB) advanced 1.85%. The Energy Select SPDR ETF ( XLE ) rose 0.2%, near a record high. The Financial Select SPDR ETF ( XLF ) gained 2% and the Health Care Select Sector SPDR Fund ( XLV ) gained 1.8%, both at seven-month bests.

Five Best Chinese Stocks to Watch Now

Apple Stock, Megacaps

Apple shares fell 2.15% to 148.04 last week, with most of that coming on Friday as China’s Covid lockdowns hurt iPhone production. AAPL shares are finding support at the 50-day line, but the 200-day line has been a point of resistance.

Microsoft shares rose 2.6% last week to 247.49, breaking above its 50-day line. But the stock is still well below its 200-day low. Shares of Nvidia jumped 5.6%, well above the 50-day line, but still have some way to go to recover the 200-day line. Shares of Google were up 0.1%, slightly above their 50-day high.

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Shares of AMZN fell 0.7%, even below the 21-day line, still near bear market lows.

Tesla shares rebounded from Wednesday’s bear market low of 166.19 to close the week up 1.5% at 182.56. But it is still well below the 21-day, 50-day lines, and especially the 200-day lines.

Stocks are near buy points with earnings available

Pinduoduo earnings must be paid before opening on Monday. Shares of Pinduoduo fell 6.4% to 65.69, but after a huge rally over several weeks. PDD stock has a buy point with a 72.84 cup handle and is currently finding support near its bullish 21-day line. But the base is 47% deep. And China’s risks are high as renewed lockdowns squeeze an already struggling economy.

Pure Storage’s earnings are due later Wednesday. Last week, PSTG shares fell 0.9% to 30.46, continuing to hold a 21-day line. It has a cup bottom with a handle at 32.07 buy point, although investors can use 32.55 as a new handle entry after a brief breakout attempt. Shares of Pure Storage now have a five-week pattern with a buy point of 32.55. Meanwhile, NetApp’s earnings are on Tuesday night as the storage giant bounces back above its 200-day line.

The dollar’s overall gains will take place early Thursday. Last week, DG shares fell 0.2% to 257.30, holding up well against the rival. Dollar tree (DLTR) fell on weak guidance. According to MarketSmith’s analysis, investors can still use a 261.69 cup-basis buy point.

Ulta Beauty reported late Thursday. Shares of ULTA rose 1.8% to 448.46 last week. Shares are extended from the 426.99 cup handle buy point on the daily chart. On the weekly chart, Ulta Beauty is hovering around a base buy point of the 451.40 cup. But recent gains have come on light volume, while shares of ULTA extended above its 50-day line.

These 5 stocks to watch are near buy points

Market rally analysis

The stock market rally had a solid week, continuing to bounce off key support levels. On Friday, the Dow Jones erased its August 16 peak to hit a seven-month high. The Russell 2000 just retook its 200-day line on Friday.

Late in the week, the Nasdaq bounced off its 21-day line but still has some distance from its 200-day line. Since Apple, Microsoft, Tesla stocks and software makers aren’t all that high, that’s not really a surprise.

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The S&P 500 also advanced, pulling back from the 4,000 level. It is now within 1% of its 200-day moving average. The S&P 500 came within a point of that key level on August 16, but then sold off for nearly two months. A decisive move above the 200-day line that coincides with the downtrend of the tops would indicate that the current uptrend is more than just a bear market rally.

But key economic reports are coming out. On Wednesday, the October JOLTS report will show job openings, and Fed Chair Jerome Powell will speak later in the day. The PCE price index, the Fed’s favorite inflation gauge, will be released on Thursday, along with jobless claims and ISM manufacturing indexes. The November jobs report is due out on Friday.

The subdued inflation and labor data will bolster expectations for a smaller 50-point Fed rate hike on Dec. 14 and likely signal a further slowdown in rate hikes early next year. The tepid numbers could undermine the Fed’s key hopes again.

A positive market reaction to economic data can trigger a flurry of buy signals. Many stocks are created from different fields.

Time the market with IBD’s ETF Market Strategy

What to do now?

The stock market rally is in good shape. Investors should take advantage of this growing trend with modest exposure.

In the very short term, investors may be cautious about making new purchases. The market rally faces a major technical test, with inflation and jobs reports likely to play a key role in its course. China’s Covid lockdowns are another big wild card.

But it is definitely time to get ready for new purchases. Build those checklists, making sure to find potential purchases from a variety of industries. Then stay with the market action. Be prepared to make new purchases or decrease depending on market action.

Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.


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