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The stock market boom continued this week, with the Nasdaq leading the way higher on the heels of key news ranging from the latest Fed forecast to the employment report to enormous profits from Apple (AAPL), Meta Platforms (META), and others.
Dow Jones futures, along with S&P 500 and Nasdaq futures, will open on Sunday evening. Don’t be shocked to see a market downturn following recent significant gains, with Tesla (TSLA) and Apple (AAPL) stocks rising again. Amazon.com (AMZN) fell on Friday as a result of its poor results and forecast.
However, when the upswing shows symptoms of being more than a negative market rebound, investors might continue to progressively increase their exposure over time. Dow Jones behemoth Microsoft (MSFT), lithium and fertiliser giant SQM (SQM), auto parts company Autoliv (ALV), Pure Storage (PSTG), and Freeport-McMoRan (FCX) are all around purchase points.
Microsoft, Autoliv, and FCX stock have already reported profits, although SQM and PSTG stock won’t be available for many weeks. IBD Long-Term Leaders lists Microsoft. ON Semiconductor (ON) reports early Monday. This week, the EV-focused chipmaker gained 9.8%, breaking out of a cup base to a new high. However, the ON supply has been replenished.
Elon Musk is not responsible
Tesla CEO Elon Musk was held not responsible late Friday in a class action shareholder lawsuit over his August 2018 “funding secured” tweets, in which he indicated he was considering taking Tesla private. Musk also stated on Twitter that “investor support” for a transaction at $420 a share was “confirmed.
“Funding was not “secured,” but Musk’s lawyer contended in federal court in San Francisco that “at that time he didn’t think.” After hours on Friday, Tesla shares gained modestly. Tesla upped Model Y costs by $1,000-$1,500 on Saturday, while lowering the base Model 3 by $500.
On Friday, the Biden administration changed EV tax credit eligibility, making all Model Y vehicles with a price tag of up to $80,000 eligible for $7,500 incentives. The decision also favours the Ford (F) Mach-E and other crossover vehicles.
Today’s Dow Jones Futures
Dow Jones futures, as well as S&P 500 and Nasdaq 100 futures, will open at 6 p.m. ET on Sunday. Remember that overnight trade in Dow futures and other markets does not always transfer into actual trading in the next normal stock market session.
Rally in the Stock Market
The stock market surge recovered from a shaky Monday to set the stage for a great week. The Dow Jones Industrial Average fell 0.2% in last week’s stock market activity. The S&P 500 index gained 1.6%. The Nasdaq composite increased by 3.3%.
The Russell 2000 small-cap index rose 3.9%. Apple stock, which is part of the Dow Jones, S&P 500, and Nasdaq, rose 5.9% for the week, breaking through the 200-day moving average. Despite disappointing Apple profits and revenue, shares rose on Friday.
AMZN stock fell 8.4% on Friday, falling back below its 200-day moving average, although it ended the week up 1.1%. Amazon reported a 98% drop in EPS for the fourth quarter late Thursday. While sales were somewhat higher than expected, Amazon forecasted for a lower-than-expected Q1 revenue, citing high-margin Amazon Web Services as a main factor.
The 10-year Treasury yield jumped 1 basis point this week to 3.53%, with the yield soaring 13 basis points on Friday due to the strong employment data. Thursday’s intraday yield dropped to 3.33%, the lowest since September 13. Last week, U.S. crude oil futures fell 7.9% to $73.39 a barrel, while gasoline fell 10.5% and natural gas fell 12.9%.
Stocks Nearing Buy Levels
Autoliv shares dipped 2.7% last week to 90.27, stabilising after rising 9% on Jan. 27 in response to good earnings. ALV stock is in the buy zone after bottoming at 89.98. However, investors may see the latest delay as a handle on a base dating back to November 2021.
The price for a cup with a handle is 93.88. Many more car parts stocks are expected to rise in value in 2023. Pure Storage stock rose 5.7% for the week to 29.91, significantly rising from major moving averages. PSTG stock has a 31.33 double-bottom buy target, but it was already actionable on Wednesday after breaking through a downward-sloping trendline in that base.
As Pure Storage has recovered in the last two weeks, the volume has been robust. The relative strength line is, at best, mediocre, exhibiting sideways movement during the previous year. But, while PSTG stock hasn’t recovered as quickly as some growth plays, it also didn’t fall in 2022.
Last week, FCX shares declined 3.7% to 43.16, finishing barely below the 21-day moving average as copper prices plummeted. FCX stock is in a three-week tight pattern with a purchase point of 46.83. On a 10-month basis, investors might potentially use that as a handle or alternate handle. Even after Friday’s 2.4% drop, Microsoft stock rose 4.1% to 258.35 last week.
The stock market broke out of a bottoming foundation that developed below the 200-day moving average. However, Thursday’s breakthrough passed the 200-day moving average as well as a yearlong trendline. Investors may view the move as an opportunity to purchase MSFT shares as a Long-Term Leader.
According to MarketSmith research, SQM stock has retaken major moving averages and is working on a double-bottom base with a 112.45 purchase target. Last week, the stock increased 2.6% to 97.09. SQM stock may carve out a handle or enter the market early.
SQM stock is unlikely to disclose profits until March, although lithium peers Albemarle (ALB) and Livent (LTHM) report in less than two weeks. Albemarle has already posted good preliminary Q4 earnings and a positive outlook.
The Global X Lithium & Battery Tech ETF includes SQM shares and Albemarle (LIT). Along with China and other Asian battery manufacturers, Tesla stock and China EV and battery behemoth BYD (BYDDF) are big holdings. The LIT ETF is finding support at its 200-day moving average, just below a double bottom.
Market Rally Evaluation
Another successful week for the stock market boom. Following a down day on Monday, the Nasdaq, S&P 500, and Russell 2000 all enjoyed big weekly gains, closing strongly above their 200-day moving averages and late 2022 highs.
The Dow Jones Industrial Average is underperforming, but it has found support and is not far from its recent highs. Although several top sectors or groupings underperformed, leading stocks frequently broke out, flashed buy signals, set up, or simply extended their recent gains.
All of this is happening amid mixed economic statistics and earnings reports. The market rally’s next test will be the late August highs, with the Russell 2000 closing there and the S&P 500 not far behind. Nonetheless, evidence is mounting that the market rise is real and not just another negative market rebound.
Perhaps the most common criticism levelled at the current market surge is that it is too powerful. The Nasdaq has risen for five weeks in a row. Perhaps Friday’s decline signalled the beginning of a much-needed pause or pullback for the main indices.
This would allow stocks to construct handles or drawback to critical support levels. Many attractive stocks appear to be heavily oversold. One concern is whether Tesla, Roku (ROKU), and other ARK-type speculative growth stocks will continue to rise or fall.
The US dollar fell to its lowest level in recent months on Wednesday following the Fed meeting, but then surged back on Thursday and Friday for a healthy weekly gain. The dollar’s dramatic decline in recent months has been a crucial element in the stock market’s resurgent fortunes. Following Friday’s employment data, markets are now leaning on two more quarter-point Fed rate rises.
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