Dow Jones futures will open Sunday night, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell looming late next week. The stock market rally pulled back last week from key resistance as Treasury yields returned to 3%.
Highly valued growth names that made big moves in the past two months were among the biggest losers. Bitcoin and other cryptocurrencies sold off heavily on Friday.
Investors should wait to see how the market pullback plays out before adding new exposure.
Warren Buffett Stocks An apple (AAPL) and Occidental Petroleum (OXY) are worth watching. Occidental Petroleum rallied on Friday after Warren Buffett’s Berkshire Hathaway won regulatory OK to raise its stake in OXY to 50%. AAPL stock is trading right around a trendline entry. Tesla (TSLA), Celsius Holdings (CELH), AstraZeneca (AZN), Monolithic energy systems (MPWR) and Insulate (PODD) are also close to different buy points.
Shares of CELH and Monolithic Power are at IBD ranking watch list. AZN shares are included SwingTrader. MPWR shares included IBD long-term leaders. Celsius, Monolithic and Tesla merchandise are at IBD 50. Monolithic and OXY Warehouse are on IBD Big Cap 20.
Insulet and AstraZeneca were IBD Stock of the Day selected last week.
Fed Powell’s boss
Fed chief Powell will deliver a policy speech Friday at the annual meeting in Jackson Hole. Powell has used the speech in previous years to mark notable political changes. It’s unclear what he might say that would surprise the markets. The Federal Reserve is in the middle of a cycle of raising interest rates to combat high inflation. Policymakers may soon move toward smaller rate hikes from the Fed, but Powell may not be ready to tip his hand.
Markets are divided on whether the Fed will raise interest rates by 75 basis points for a third straight time at its Sept. 20-21 meeting or opt for a half-point move.
Even after his speech, there will still be several key economic reports ahead of the Fed’s September meeting, including the August jobs report and the consumer price index.
Bitcoin is falling
Bitcoin crashed Friday after a modest retreat earlier in the week. It was trading near $21,000 on Friday evening. After falling below $18,000 in June, the price of Bitcoin rallied back to near $25,000 on August 14. Like speculative growth stocks, Bitcoin and cryptocurrencies are struggling with rising government bond yields. Higher yields are also strengthening the dollar.
Bitcoin-related stocks such as Coinbase (COIN) also fell sharply in the past week.
Dow Jones futures today
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Stock market rallies
The stock market rally began the week moving toward or above key resistance, but eventually retreated, mostly or entirely, on Friday.
The Dow Jones Industrial Average fell 0.2% last week Exchange Trading. The S&P 500 fell 1.2%. The Nasdaq Composite fell 2.6%. The small-cap Russell 2000 fell 2.9%.
The yield on the 10-year Treasury note jumped 14 basis points to 2.99%, including 11 basis points on Friday.
U.S. crude futures fell 1.4 percent to $90.77 a barrel last week, but recovered well above weekly lows. Natural gas futures were trading near 14-year highs.
Avg the best ETFsInnovator IBD 50 ETF (FFTY) tumbled 2.9% last week, while the Innovator IBD Breakout Opportunities ETF (BOOTH) fell 0.4%, erasing strong weekly gains. iShares Expanded Tech-Software Sector ETF (IGV) sank by 3.9%. VanEck Vectors Semiconductor ETF (SMH) fell 4.2%, with MPWR shares flat.
SPDR S&P Metals & Mining ETF (XME) sank 4.2% last week. Global X US Infrastructure Development ETF (PAVING) fell by 1.4%. US Global Jets ETF (STREAMS) fell by 4.2%. SPDR S&P Homebuilders ETF (XHB) turned lower, sinking 3%, ending an eight-week winning streak. Energy Select SPDR ETF (XLE) rose 1.3%, with OXY shares a significant contributor. The Financial Select SPDR ETF (XLF) gave up 1.8%. Select Healthcare Sector SPDR Fund (XLV) fell 0.5% last week but rose on Friday.
Tesla stock is a major holding in Ark Invest’s ETF.
Warren Buffett Stocks
OXY shares jumped 9.9% to 71.29 on Friday, beating a cup-with-handle buy point of 66.26 on triple normal volume, according to MarketSmith analysis. Shares are already up slightly by 5% shopping areaso investors may want to wait for a pullback.
Occidental Petroleum has outperformed many other oil stocks as Warren Buffett’s Berkshire has built up a stake in OXY stock of just over 20% in recent months.
On Friday, Berkshire disclosed that the Federal Energy Regulatory Commission had approved its request to buy up to 50 percent of Occidental Petroleum, triggering a breakthrough. Berkshire filed for the right to do so on July 11, the company said Friday.
Berkshire’s No. 1 position is in Apple, which has outperformed other megacaps and the broader market over the past two months. Apple shares fell 1.7% to 171.55 on Friday. The tech giant Dow Jones snapped a six-week winning streak but fell just 0.3%. AAPL stock is back below a downtrend line, currently around 173, which could serve as an early entry. The official buy point is 183.04. Ideally, Apple stock will soon become a handle.
Other stocks to watch
Tesla shares fell 1.1% to 890, retreating back below the 200-day line. TSLA shares hit 944 on Tuesday, a three-month high and clearing an aggressive entry. Overall, Tesla held up much better than rival electric car makers and Ark-type stocks last week, but is far from the official buy point of 1,208.10.
On August 25th, TSLA stock will split 3 for 1. Whether this will be a positive or negative catalyst is unclear. Tesla proposed the split months ago, while shareholders approved it on August 4.
Shares of CELH fell 6.5% to 98.28 last week, but are finding support around their 21-day moving average. A brief undercut of the 21-day line can be helpful. After a surge since late May, Celsius shares have now formed the handle of a deep, nine-month consolidation, offering 109.84 buy points.
Shares of AZN rose 0.8% to 67.17 last week, nearly reclaiming an old buy point of 67.50 after recovering from the 50-day line the previous week. The line of relative strength weakened in recent weeks as AstraZeneca shares consolidated while the broader market advanced. But shares of AZN and other defensive growth names may be poised to outperform again.
Shares of MPWR fell just over 3% in the past week to 511.65, which was an inside week from the previous week. Monolithic Power shares have 541.49 cup-with-handle a buy point after the chipmaker jumped from early July to early August. A drop to the 21-day moving average would match the 500 level and just undercut the bottom of the handle.
PODD shares fell 1.2% to 267.42 last week. Shares of the diabetes product maker have a 276.48 deep buy point double bottom base. Shares of Insulet could use a little more shaking, perhaps to the 21-day moving average.
Market Rally Analysis
The stock market rally hit resistance around the 200-day moving average last week. The S&P 500 came within one point of that key level, while the Dow Jones and Russell 2000 moved above it during the week but ended up below it.
At first, the major indices were flat, resisting the pullback, even as ARKK and highly valued growth names posted sharp losses. But on Friday, the Nasdaq finally broke below its 10-day moving average, moving toward its 21-day line.
The major indexes have been up for several weeks, with many former leaders jumping 50%, 100% or more from the bottom. So the 200-day line was a logical place to pull back.
Rising Treasury yields helped provide a news hook for last week’s retreat. Higher interest rates are weighing on stocks, especially highly valued growth names. The recovery in energy prices, if sustained, could limit or even halt the decline in inflation, while also leading to more rate hikes by the Fed for longer.
However, higher energy prices are good news for oil and gas stocks such as Occidental Petroleum, which was among the big gainers last week.
Shares in drugmakers and defensive growth held up relatively well, including shares of AZN and Hershey (HSY).
A pullback to the 21-day line would likely be good news for the market’s rally, allowing stocks like Monolithic and Celsius to carve out deeper handles for a proper shakeout. But you never know if a modest pullback will turn into something more serious, or which sectors might have a tougher time.
What should we do now
Investors should be cautious about adding net exposure right now as the stock market rally winds down. If you decide to buy a new stock, you can offset this by taking partial or full profits in other holdings.
You don’t need to reduce exposure for now, but don’t let decent profits go to zero and be quick to cut losing positions.
This is a great time to work on watch lists. There is still a lot of leadership or potential leadership in the market. Many stocks may carve out handles, bases or pullbacks in the coming days, creating multiple buying opportunities.
Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.
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