Dow Jones futures rose modestly late Thursday, along with S&P 500 futures and Nasdaq futures. A new stock market rally attempt closed Thursday with modest gains after a wild session. Tesla (TSLA) and several other leaders held key support levels. Costco Wholesale (COST) reported earnings late.
Costco’s stock fell in extended trading after it reported mixed results. Shares had closed up slightly after finding support at the 50-day moving average intraday.
Tesla stock also rebounded from an early move below its 50-day moving average and 10-week line. Nvidia (NVDA) bounced from its 10-week line. Adobe (ADBE), ServiceNow (NOW), Alibaba (BABA), Veeva Systems (VEEV) and Chipotle Mexican Grill (CMG) also found support at one or both of those key levels, but they all closed slightly lower.
Stock Market Rally Attempt
The stock market opened lower with Tesla and several tech leaders extending Wednesday’s losses. The Nasdaq fell as much as 1.1% but held just above its Monday low — less than one point! The tech-heavy index quickly moved higher, advancing nearly 1.6% before giving up nearly all those gains.
IBD moved to a stock market correction reading on Wednesday, given the action of the major indexes and leading stocks. However, the Nasdaq is on day four of a stock market rally attempt, starting with the “pink rally day” on Monday, when the tech-heavy index hit recent lows but closed near session highs.
That means a follow-through day to confirm a new rally could happen any day on the Nasdaq, assuming it doesn’t undercut Monday’s lows. The Dow Jones and S&P 500 are only on day one of a rally attempt, because they did undercut Monday’s low on Thursday before rebounding higher.
Tesla, Nvidia, Adobe, ServiceNow and Chipotle stock are on IBD Leaderboard. Adobe stock, ServiceNow, Alibaba and Microsoft are on Long-Term Leaders, with Veeva on the watchlist. Nvidia, Veeva, Adobe, Amazon and Alibaba stock are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value. S&P 500 futures climbed 0.6%. Nasdaq 100 futures advanced 0.7%. But a modest Dow Jones futures gain doesn’t seem that meaningful compared to the up-and-down market gyrations Thursday and recent days.6Remember 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 32.38 million. Covid-19 deaths topped 986,000.
Coronavirus cases in the U.S. have hit 7.18 million, with deaths above 207,000.
Coronavirus restrictions are increasing in the U.K., France and some other European countries as Covid-19 cases surge. That could take a toll on economic growth in Europe.
Stock Market Correction
The major indexes had a roller-coaster session with the stock market correction in force.
The Dow Jones Industrial Average rose 0.2% in Thursday’s stock market trading. The S&P 500 index climbed 0.3% and the Nasdaq composite 0.4%.
Tesla stock tumbled below its 50-day line soon after the open. But shares rebounded to close up nearly 2% at 387.79, within a daily range of 351.30-389. TSLA stock is still down sharply for the week.
Nvidia climbed 1.85%, holding above its 10-week line. Adobe, ServiceNow and Veeva stock fell less than 1%. Chipotle recovered slightly after touching its 50-day line, though it closed down 1.5%. Alibaba fell 1.1% after a 10-week line test.
Meanwhile, Apple stock rose 1%. Amazon edged up 0.7% and Microsoft 1.3%. All three giants fell 3%-4% on Wednesday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.4%, with Microsoft, Adobe and ServiceNow stock all major components. The VanEck Vectors Semiconductor ETF (SMH) advanced 0.9%, with Nvidia stock a leading holding.
Costco earnings rose 16% to $3.13 a share, comfortably beating views. But sales just missed, even with e-commerce sales up 91%.
Costco stock fell 3% in extended trade, signaling a move back toward the 50-day line. Shares rose 0.7% to 347 on Thursday, after hitting 338.31 intraday.
Stock Market Rally Analysis
After Wednesday’s discouraging sell-off, Thursday’s was ultimately a positive session. But the wild whipsaw intraday action underscores that the stock market lacks a clear, consistent direction. At various points Thursday, the Nasdaq came this close to undercutting Monday’s low — killing the rally attempt — but then spent much of the afternoon signaling a likely follow-through day.
Look away for a few minutes — a few seconds — and the Nasdaq made a notable shift.
The major indexes are still near recent lows and a long way from their early September peaks.
A follow-through day on the Nasdaq could come at any time thanks to Monday’s “pink rally” day. That would confirm the new stock market rally, but the Nasdaq likely would still be below the 50-day moving average, and almost certainly below its Sept. 10 short-term high. So there would still be reason to be cautious.
Not all confirmed market rallies succeed.
More important, few stocks are in position to buy. There would likely be some pullback opportunities and stocks trying to clear short consolidations, but it could take a little more time for a big wave of possible buys.
Investing Game Plan
For now, investors should remain defensive.
With a confirmed stock market rally possible in the near future, investors have to be ready. Build your watchlists. Focus on stocks with strong relative strength, though with a special focus on stocks such as Nvidia or Chipotle that could be actionable in a confirmed uptrend.
Make sure to look at daily and weekly charts. Weekly charts can eliminate some of the “noise” from daily action during volatile market conditions. They put daily and intraday moves in context, tempering investors’ desire to jump back in.
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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