Dow Jones futures edged lower Thursday night, along with S&P 500 futures and Nasdaq futures. The stock market rally was mixed Thursday, as tech giants Apple stock, Microsoft (MSFT), Amazon.com (AMZN) and Google parent Alphabet (GOOGL) all fell slightly, no longer covering up deteriorating conditions among many leaders.
In addition to the trillion-dollar quartet, Facebook (FB) also dipped while big caps Nvidia (NVDA) and ASML (ASML) — and many other chip stocks — fell solidly in the wake of so-so earnings from Taiwan Semiconductor (TSM). Software slumped, while former leaders that had rebounded for several weeks continued their July retreats. Apparel retailers suffered some chart damage, though Lululemon (LULU) looks strong.
Tesla stock edged lower Thursday but rallied off its 200-day line. Tesla CEO Elon Musk tweeted that there is “some chance that Cybertruck will flop.”
UnitedHealth stock, Morgan Stanley (MS), Marvell Technology (MRVL), United Parcel Service (UPS) and CarMax (KMX) are all setting up near buy points. Dow Jones giant UnitedHealth (UNH) and Morgan Stanley just reported earnings Thursday, while Marvell and CarMax are several weeks from their next quarterly results. UPS stock is on tap in less than two weeks, though. With the exception of chipmaker Marvell, these names are outside of the tech space.
In overnight trade, Moderna (MRNA) jumped on news that the coronavirus vaccine maker will join the S&P 500 index.
The stock market rally came off Thursday’s lows, but still seems troubled. The major indexes are just below record highs, while small caps continue to retreat, market breadth has narrowed. Most of all for active investors, recent breakouts and other buying opportunities have struggled or failed.
Tesla (TSLA), Microsoft, Nvidia, ASML and Google stock are on IBD Leaderboard. Microsoft stock and Google also are on IBD Long-Term Leaders. Nvidia stock and Google are on the IBD 50. MRVL stock was Thursday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures lost 0.1% vs. fair value. S&P 500 futures sank 0.15% and Nasdaq 100 futures fell less than 0.1%.
Coronavirus cases worldwide reached 189.62 million. Covid-19 deaths topped 4.08 million.
Coronavirus cases in the U.S. have hit 34.87 million, with deaths above 624,000.
New Covid cases are picking up in the U.S. and worldwide as the more-infectious Delta variant becomes dominant. Hospitalizations are starting to increase in the U.S., but almost all are unvaccinated. People who are fully vaccinated are at risk of getting the Delta variant, but are strongly protected against serious illness or death.
Nevertheless, Los Angeles County said it would reimpose a mask mandate as of the end of Saturday, July 17.
Moderna stock popped overnight after S&P Dow Jones Indices said it would add it to the S&P 500 before the open on July 21. MRNA stock will replace Alexion Pharmaceuticals (ALXN), which is being acquired by AstraZeneca (AZN).
Stock Market Rally
The stock market rally came off intraday lows but techs continued to retreat.
The Dow Jones Industrial Average rose 0.15% in Thursday’s stock market trading. The S&P 500 index dipped 0.3%. The Nasdaq composite fell 0.7%, but came off lows. The big-cap Nasdaq 100 also lost 0.7%. The small-cap Russell 2000 retreated 0.6%.
The 10-year Treasury yield 6 basis points to 1.3%, back near five-month lows.
Apple stock and Microsoft lost about 0.5%. Google stock and Amazon stock shed about 1%. All of these stock charts still look healthy. Facebook and Nvidia stock undercut their 21-day lines, losing 0.9% and 4.4%, respectively. ASML stock slid 1.75%, back below a buy point after hitting a record high Wednesday.
Growth, Sector ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) lost just over 1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave up 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 1.2%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) slumped 2.7%. Taiwan Semi, NVDA stock and ASML are the top three SMH holdings, but MRVL stock also is a notable component.
SPDR S&P Metals & Mining ETF (XME) dipped 0.2% and Global X U.S. Infrastructure Development ETF (PAVE) edged down 0.1%. U.S. Global Jets ETF (JETS) gave up 0.65%. SPDR S&P Homebuilders ETF (XHB) lost 0.1%. The Energy Select SPDR ETF (XLE) slumped 1.4% and the Financial Select SPDR ETF (XLF) added 0.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.5% and ARK Genomics ETF (ARKG) 0.9%. ARKK tested its 50-day after undercutting its 200-day line on Wednesday. ARKG kept retreating after knifing through its 200-day and 50-day earlier in the week. ARK ETFs and the highly valued growth stocks they hold have sold off hard in July, giving up much or even most of their big rebounds from mid-May to late June. Tesla stock is the top holding across ARK Invest’s ETFs.
Stocks Near Buys
UnitedHealth stock tested its 50-day line, then rebounded to rise 1.3% to 420.05. UNH stock has a 426.08 buy point from a flat base, according to MarketSmith analysis. Before the open, UnitedHealth reported a 34% EPS drop, as members used medical services after avoiding the doctor and elective procedures during the pandemic last year. But earnings and revenue topped views. Several other health insurers, as well as hospitals are trading near buy points as well.
Morgan Stanley stock edged up 0.2% to 92.63, just below a 94.37 buy point. Its short flat base is part of a base-on-base formation. Morgan Stanley reported a 7% EPS drop as trading weakened like many Wall Street peers, but topped estimates. Fellow investment bank Goldman Sachs (GS), which beat forecasts on Tuesday, is holding support at its 50-day line in its own flat base.
Marvell stock shed 0.55% to 55.70, holding up much better than fellow data-center chip plays Nvidia and AMD (AMD). MRVL stock dipped just below a still-valid 55.80 buy point. But investors might want to see a little more strength, such as breaking above a short trend line in its high handle. Investors could use 59.68, just above Wednesday’s intraday high, as an entry. But can MRVL stock lead if Nvidia and the chip sector retreat?
UPS stock edged up 0.6% to 212.86… UPS has a 219.69 flat-base buy point. But investors could use 215.03 as an early entry, just above a short-term high. That would also roughly coincide with breaking a trend line as well as mark a solid rebound from the 50-day/10-week line.
CarMax stock retreated 2.2% to 131.26. KMX stock has a 137.63 cup-with-handle buy point. The handle formed after the used-car retail giant ran up sharply, starting with June 25 surge on earnings. Used-car pricing has skyrocketed as chip shortages limit new-car production. But used-car dealers also are paying up for inventory. AutoNation (AN) and online-only Carvana (CVNA) are close to buy points after briefly breaking out over the past week.
Tesla CEO Elon Musk, in response to an article predicting the Cybertruck will be a flop, agreed that’s a possibility, but tweeted, “I don’t care. I love it so much.” Tesla still hasn’t revealed a finished, street-legal Cybertruck design, though Musk added Thursday that it will have only “some small tweaks.” He gave no production timeline, but deliveries appear likely to slip to some time next year. The Tesla Cybertruck will be made at the under-construction Austin plant. Its touted price and specs seem ambitious. The Rivian R1T is set to launch soon, with General Motors releasing the Hummer EV before year-end. It’s possible the relatively affordable Ford F-150 Lightning, due out next spring, also will beat the Cybertruck to market.
Tesla stock didn’t appear to reach much to Musk’s Cybertruck comments. Shares closed down 0.4% to 650.60, but pared losses after finding support at its 200-day line. TSLA stock has a 700.10 aggressive buy point.
Market Rally Analysis
This column encourages everyone to “read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.” If you want to know how the stock market rally is doing, you need to follow the major indexes. But you also have to pay attention to the leading stocks. Sometimes a market rally will be stronger than what the S&P 500 and Nasdaq suggest. But sometimes, like recently, the major indexes can hide market weakness.
Apple, Microsoft, Google stock all look great, on track for yet another weekly gain. Amazon stock has merely pulled back into its buy zone. But their slim Thursday losses meant they weren’t masking tech and growth weakness. Chip stocks came under pressure with Nvidia and ASML stock leading the way.
The major indexes still look fine. The Nasdaq found support at its 21-day line while the Dow Jones, S&P 500 and Nasdaq 100 closed below their 10-day lines. The Russell 2000, though, is starting to lose sight of its 50-day.
The Nasdaq no long is on the cusp of being extended, just 4% above its 50-day line. Even the Nasdaq 100, at 5.8%, is back below the 6% level.
Ideally, the tech megacaps would continue to pause or edge lower, while other leading stocks pick up and market breadth improves. But it’s quite possible that weakness will persist, and that Thursday’s intraday bounce will be short-lived.
The 21-day line is a key support area for the Nasdaq, with the July 8 low not far beneath that.
What To Do Now
It’s time to be more defensive. For solid winners, you might take some partial profits, depending on your level of conviction in those holdings. Balance conviction with market signals. Some leading stocks held up relatively well until the last day or two, then started showing more significant weakness. What’s your strategy for scaling out of positions?
Don’t let losers get out of hand. Don’t worry about making every possible penny in the market. The key to long-term investing success is avoiding major losses.
As for new buys, investors should be extremely cautious. While the Upwork (UPWK) post-breakout plunge on Wednesday was unusually severe, plenty of stocks are pulling back to or below recent buy points, such as PayPal (PYPL) and Zscaler (ZS). (Both PYPL and ZS are still comfortably above early entries from June.)
It’s possible that techs will pause for a time. Investors should at least pay attention to quality stocks outside of tech, including UNH stock, UPS and Morgan Stanley. While there are reasons to believe the violent sector rotations of 2021 should wane, that doesn’t mean groups wouldn’t go in and out of favor.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE: