Dow Jones futures tilted higher Monday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally revived last week, with the S&P 500 nearly at a new high while a diverse list of leaders flashed buy signals, including AMD stock and Google parent Alphabet (GOOGL).
While it might not be everything investors wanted from Santa heading into Christmas holiday, it’s a lot better than the lump of coal they were expecting after Monday, Dec. 19.
Tesla (TSLA) was a big winner last week, rebounding powerfully from the top of a prior base to clear its 50-day line. But Tesla stock isn’t in buy range yet. Meanwhile Tradeweb Markets (TW), ArcBest (ARCB), Advanced Micro Devices (AMD), West Pharmaceutical Services (WST) and Google stock all are actionable now.
Tesla, Google, AMD and TW stock are on IBD Leaderboard. Google stock is on SwingTrader. Google and WST stock are on IBD Long-Term Leaders. Google, West Pharma, Tradeweb and AMD stock are on the IBD 50. Tradeweb also is IBD Stock Of The Day.
The video embedded in this article covers the market rebound and analyzed Tradeweb, AMD and ARCB stock.
Dow Jones Futures Today
Dow Jones futures were 0.15% above fair value. S&P 500 futures climbed 0.25% and Nasdaq 100 futures rose 0.3%.
The 10-year Treasury yield rose 1 basis point to 1.5%.
U.S. crude oil futures sank more than 1%, after airlines canceled thousands of flights over Christmas weekend due to Covid cases in flight crews. Natural gas prices jumped.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 280.41 million. Covid-19 deaths topped 5.41 million.
Coronavirus cases in the U.S. have hit 53.22 million, with deaths above 837,000.
On Dec. 23, new Covid cases hit a record high worldwide and an 11-month high in the U.S., as the super-infectious omicron variant turbocharges an already-rising case count in much of the world. However, omicron cases appear to be much milder on average than with prior Covid variants. Deaths are not picking up so far.
Stock Market Rally
The stock market rally started off the past week poorly but then came on strong, with three solid gains and closing near session highs. Technically, it’s a little early for a Santa Claus rally, but investors didn’t mind opening up gifts a bit early.
The Dow Jones Industrial Average rose 1.65% in last week’s stock market trading. The S&P 500 index climbed 2.3%. The Nasdaq composite and small-cap Russell 2000, which looked the worst on Monday, both rallied for 3.2% weekly gains.
The 10-year Treasury yield jumped 9 basis points last week to 1.49%. Crude oil prices popped 4% to $73.79 a barrel.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rebounded 4.75% last week. The Innovator IBD Breakout Opportunities ETF (BOUT) climbed 3.5%, nearly at a record high. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 2.4%. The VanEck Vectors Semiconductor ETF (SMH) rallied 4.4%, with AMD stock a major component.
SPDR S&P Metals & Mining ETF (XME) rose 3.1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) was up 1.7%. U.S. Global Jets ETF (JETS) ascended 6.7%. The SPDR S&P Homebuilders ETF (XHB) climbed 2.7%. The Energy Select SPDR ETF (XLE) edged up 0.9% and the Financial Select SPDR ETF (XLF) 0.6%, after both erased steep losses earlier in the week. The Health Care Select Sector SPDR Fund (XLV) climbed 1%, right at new highs.
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Tradeweb stock jumped 3.8% to 98.89 on Thursday, capping a 4.2% weekly gain. TW rebounded bullishly from its 50-day line and broke a trend line, flashing an early buy signal Thursday. But it kept rising, briefly hitting a record high and topping a 99.35 buy point from a four-weeks-tight pattern that was almost a flat base. The relative strength line for TW stock is near a record high.
ArcBest stock popped 5.45% to 111.65 last week, in a bullish outside move, clearing a trend line and a short-term peak as it extended a 50-day line rebound. That offered an early entry for ARCB stock, which has an official buy point of 116.89.
AMD stock rose 1.6% to 146.14 on Thursday, breaking a trend line and capping a strong weekly bounce from the 50-day line. It’s actionable here, with the Dec. 16 high of 147.93 another key hurdle.
Several other chipmakers, including AMD rival Nvidia (NVDA), are at or near buy points.
West Pharma Stock
West Pharmaceutical stock broke above a cup-with-handle base buy point of 458.09 on Thursday, according to MarketSmith analysis. That continued a strong bounce from the 21-day and 10-week lines. WST stock rose 2.2% to 459.84 for the week. As a medical supplier, WST stock is another “picks and shovels” play, generating steady growth.
A wide variety of medical stocks are showing strength in recent weeks.
Google stock, after hitting a two-month low intraday Monday, rebounded for a 3.7% weekly gain to 2,938.33. That’s back above the 50-day line, a short trend line and an old buy point of 2,925.17. GOOGL stock now has a new flat base with a 3,019.43 buy point.
Tesla stock hit a low of 886.12 on Tuesday morning, more than round-tripping a 38% rally from a 900.50 cup-base buy point cleared in late October. But shares then roared higher, surging more than 14% for the week to 1,067 and reclaiming its 50-day moving average. Tesla stock was the S&P 500’s biggest winner on Wednesday and Thursday on above-average volume even as overall market trading dwindled.
CEO Elon Musk, amid some confusion, signaled last week that he’s nearly finished selling TSLA stock to cover a tax payment.
While the rebound from the prior base and running past the 50-day line are bullish moves, Tesla stock is not yet actionable. The EV giant has a consolidation that can be viewed as a double-bottom base with a 1,202.05 buy point. A downward-sloping trend line from the early November peak offers an early entry around 1,115.
Tesla rose 1% early Monday.
Musk said Friday evening that Tesla was rolling out FSD Beta 10.8, the latest version of its driver-assist system being used by several thousand Full Self-Driving owners.
In early January, perhaps before the open of the first trading session of 2022 on Jan. 3, Tesla will release fourth-quarter production and delivery figures. Analysts are expecting another record quarter for deliveries, with plants near Berlin and Austin set to begin production soon.
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Market Rally Analysis
The stock market rally is looking promising again. On Monday, the Nasdaq undercut the early December lows, ending its rally attempt. But the S&P 500 did not, so the overall market rally continued. It didn’t look good at the time. But the major indexes rebounded strongly over the next three sessions, reclaiming their 50-day moving averages.
The S&P 500 hit a closing high Thursday. The Nasdaq broke a trend line and cleared its high on Dec. 16, when the market reversed sharply lower. For the week, the Nasdaq had a bullish outside week higher. All that action provides more confidence in the health of the market rally. Volume weakened as the week wore on, which isn’t great, but isn’t surprising given the approaching holiday.
The Russell 2000 rebounded from Monday’s nine-month low, but is still below its 200-day and 50-day lines. That’s a good proxy for overall market breadth, which improved in the past few sessions but remains woeful. New highs trumped new lows Thursday, a welcome shift.
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On the plus side, market leadership continues to broaden.
Travel stocks were big winners, and a clear signal that markets, for now, are once again feeling more confident about the omicron Covid variant. Medicals have quietly been very strong. Networking stocks are clear leaders in recent weeks. TW stock and other exchange plays are doing well, while many financials aren’t that far off from looking interesting.
Several chips are flashing buy signals, including AMD stock but also several chip-equipment makers. Trucking plays are looking solid, with ARCB stock perhaps leading a convoy in the coming weeks. Housing-related stocks, despite some bumps, are standing tall.
Software remains a weak area, but there are a few kernels of strength.
What To Do Now
The stock market rally is showing real momentum. If you haven’t already, you can start to add to your exposure. But don’t suddenly rush into stocks. See how some initial buys do. If your stocks and the market continue to act well, you can gradually come off the sidelines.
To get ready, work on your watchlists. Look for stocks with strong relative strength that are holding or reclaiming key support. Make sure to include stocks from a variety of groups and sectors. Then focus on stocks that are actionable or nearly so.
Historically, investors might expect more presents this coming week. The traditional Santa Claus rally covers the last five trading days of the year, plus the first two trading sessions of the new year.
But it’s no guarantee. While the market reacted favorably to the latest omicron Covid headlines, coronavirus or other headlines could roil markets amid light volume.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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