Dow Jones Futures Rise With China Despite Stock Market Rally Caution Signs; 6 Key Movers
Dow Jones futures rose slightly on Wednesday morning, along with S&P 500 futures and Nasdaq futures that were carried by the Chinese markets. The stock market rally was calm on Tuesday, although the major indices hit record highs during the day. The Nasdaq still looks expanded amid notable warnings. Lyft warehouse, Enphase Energy (ENPH), Playgroup (MTCH) and Dow Riese Cisco Systems (CSCO) were remarkable movers after hours.
On Tuesday, Tesla (TSLA) Rival Nio share and recent IPO C3.ai (AI) raced through purchase zones. Bitcoin has seen big gains in buying Tesla lately GameStop (GME) has fallen below another notable level.
Twitter (TWTR), Enphase Energy, Rapid7 (RPD), Elevator (LYFT) and Cisco Systems reported profits late Tuesday. General Motors (GM) is due early.
Twitter gains outpaced views along with Enphase Stocks, Rapid7, Lyft and Cisco Systems. Twitter stock rose 4% overnight and Lyft rose 13% after both closed, which extended the buy points a bit. Enphase stock fell 7% and moved from its 10-week line towards a buy point on new base after a recent rebound. RPD stock rose as it was trading on a flat basis. Cisco stock fell nearly 5% on poor forecasts after hitting a 52-week high on Monday.
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Online dating giant Match Group announced late Tuesday that it would pay $ 1.725 billion for Hyperconnect, a South Korean social media company that operates video and audio chat apps. Match stock rose 2.4% overnight, signaling a move beyond a consolidation area that will begin on December 17th.
GM stock fell Tuesday from Monday’s highs.
Bitcoin holds profits, Tesla stocks fade
Bitcoin price rose to $ 48,200 early Tuesday and was trading above $ 46,000 on Wednesday morning, little changed from 24 hours earlier. Bitcoin announced on Monday that Tesla had bought the $ 1.5 billion cryptocurrency.
Tesla stock fell 1.6% on Tuesday, erasing Monday’s weak profit.
Nio, AI Stock stand out
Tesla’s Chinese rival Nio rose 6.4% to 62.84, a record close that crucially clarified a downward sloping trendline in a new consolidation just above an earlier base. By the close of trading on Tuesday, Nio stock was slightly extended from that early entry, but could have a new buy point at 67.09. On Monday, Nio stock pulled back an earlier buy point and peered over the trend line.
The most recent IPO AI stock rose 12% to 168.92, breaking a buy point of 160.53 from an IPO basis. AI is slightly outside of the 5% pursuit zone, which extends to 168.56.
GameStop Stock keeps falling
Finally, that GameStop (GME) Saga set a grim new milestone. On January 27, GameStop shares closed 1,054% above their 50-day mark, according to MarketSmith analysis. GME stock is now below its 50-day limit. Shares fell 16% to 50.31 on Tuesday. That’s 90% less than the GME stock’s peak of 483 on Jan. 28.
Biden, Yellen meeting with CEOs
President Joe Biden, Vice President Kamala Harris, and Treasury Secretary Janet Yellen met with key CEOs and business leaders. These included JPMorgan CEO Jamie Dimon and Walmart CEO Doug McMillon, who is also the chair of the Business Roundtable. Business leaders expressed their support for a sizeable new stimulus package but signaled concerns about a minimum wage, particularly at this point. Biden is pushing for a $ 1.9 trillion stimulus plan despite signaling that he can accept tighter restrictions on direct checks of $ 1,400. The president has also hinted that a $ 15 minimum wage hike may not be part of a stimulus package if done through a budget reconciliation bill. This legislation must be limited to tax and spending measures.
The Tesla share is on the IBD leaderboard. The Nio share is with SwingTrader.
Dow Jones Futures today
The Dow Jones futures were up 0.3% from their fair value. The S&P 500 futures were up 0.3%. The Nasdaq 100 futures were up 0.4%. The Cisco share consists of a Dow Jones, S&P 500 and Nasdaq 100 component.
Futures rose after the Shanghai Stock Exchange opened. The Shanghai Composite rose 1.4% while the Hang Seng Index in Hong Kong rose 1.9%.
Alibaba (BABA) founder Jack Ma was reportedly seen after weeks of isolation amid government proceedings to play golf that was only interrupted by an appearance on a video conference call. Alibaba stock rose slightly.
Remember that night action in Dow futures and elsewhere does not necessarily result in an actual trade in the next regular trading session.
Analyze actionable stocks in the stock market rally on IBD Live with IBD experts.
Coronavirus cases reached 107.49 million worldwide. Covid-19 deaths topped 2.35 million.
Coronavirus cases in the US have hit 27.79 million people, with deaths over 479,000.
Stock market rally
The stock market rally saw little movement in any of the major indices, but they all hit new highs. The Nasdaq topped 14,000 for the first time. The tech-heavy index remains extended compared to the 50-day line.
The Dow Jones Industrial Average closed just below break-even in trading on Tuesday. The S&P 500 index fell 0.1%. The Nasdaq network rose 0.1%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) and the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 0.85%. The VanEck Vectors Semiconductor ETF (SMH) was down 0.3%.
Market rally warning flags
The stock market rally is at record highs while leading stocks are doing well. However, there are some warnings.
The Nasdaq is now 7.9% above its 50-day moving average and 4% above its 21-day exponential average. If the Nasdaq is more than 6% above its 50-day line, the risk of a pullback increases. The longer the index becomes, the higher the risks and the greater the likelihood of a significant decline.
On Monday the Nasdaq closed 8.1% above its 50-day line and 4.3% above its 21-day line. On Jan 25, just before a pull-out, those numbers were 8.2% and 4.1%, respectively. On September 2, shortly before a correction, those numbers were 11.6% and 6%. On March 10, 2000, the Nasdaq closed 17% above its 50-day high and 7.8% above its 21-day high.
So the Nasdaq could definitely go up from here. What happens after that?
Ideally, the stock market rally could move sideways or gradually retreat for a few weeks, allowing the 50-day catch-up process to catch up without investors suffering serious losses.
Leverage for investors
Margin debt rose 34% year over year in December. That’s a seven-year high, but below the 55% gain typically associated with pre-bear peaks. However, call options skyrocketed 437% year over year in January. Coupled with the surge in leveraged ETFs, it’s clear that investor leverage is at least showing a yellow flag.
The huge gains on several hot stocks are also raising some eyebrows at the froth in the overall market.
Digital turbine (APPS), EXP world (EXPI), Futu Holdings (FUTU) and Tilray (TLRY) look greatly expanded and may show some climax type action. They could continue to run or even go sideways, as Tesla stock did after it looked like a high in early January. Futu and Tilray stocks rose again on Wednesday morning. However, the risk of a sharp withdrawal is high. Investors should definitely have a game plan and exit strategy for these names.
There seems to be a strong desire for the next rocket to shake off the risks. GME stocks and related Reddit games are a clear example. Investors shouldn’t jump into an already-advanced stock or asset without worrying about what they’re buying in the first place. CAN SLIM investing is about buying the right stocks – with solid fundamentals and new products or services – at the right time when the chance of success is highest.
At the right time, the market definitely belongs, the M in CAN SLIM. It’s a confirmed stock market rally so investors can still make new purchases. However, given the warning signs, they should be cautious about adding exposure and should consider taking profits on expanded stocks and cutting back latecomers.
Read the full picture each day to keep up with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for information on the exchanges and more.
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