Dow Jones futures rose modestly early Friday, along with S&P 500 futures and Nasdaq futures. Lululemon, Costco and Broadcom reported earnings after the close.
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The stock market rally rebounded modestly on Thursday, but only regained a small portion of the losses suffered in the last several days. Investors should still be cautious amid choppy market action. The S&P 500 remains below its 200-day line with most indexes also hitting resistance at their 21-day moving averages.
Semiconductor stocks did well, with chipmaker Nvidia (NVDA) among the S&P 500’s top performers Thursday. But chip-equipment makers are generally in better shape, with KLA Corp. (KLAC), Axcelis Technologies (ACLS) and Ultra Clean Holdings (UCTT) flashing buy signals Thursday. ASML (ASML) and Applied Materials (AMAT) are among those near buy points.
Key Earnings
Costco Wholesale (COST), Lululemon Athletica (LULU) and Broadcom (AVGO) reported late Thursday.
COST stock were little changed overnight after Costco earnings and sales just missed views. Costco stock lost a fraction in Thursday’s regular session but is down nearly 11% so far this month.
LULU stock tumbled in extended trade after the yoga apparel retailer guided slightly lower for the critical holiday quarter. Lululemon earnings topped Q3 views slightly. Lululemon stock edged up 0.6% to 374.11 Thursday, closing in range of a 370.56 cup-with-handle buy point. But it’s set to fall out of that buy area.
AVGO stock rose solidly in premarket trade as Broadcom earnings and guidance topped views, with the chip-and-software giant also hiking its dividend. Broadcom stock closed up 2.4% to 531.08, just below the 200-day line. Last week’s high of 552.42 might offer some sort of entry.
LULU stock is on IBD Leaderboard as an earnings options play. KLAC stock is on IBD Long-Term Leaders.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.5%.
Crude oil futures rose slightly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally had a solid session, with the indexes largely going sideways after the first hour of trading.
The Dow Jones Industrial Average climbed 0.55% in Thursday’s stock market trading. The S&P 500 index rose 0.75%. The Nasdaq composite rallied 1.1%. The small-cap Russell 2000 advanced 0.7%.
U.S. crude oil prices dipped 0.8% to $71.46 a barrel, with some big intraday swings. Crude futures are now at levels that the Biden administration signaled would trigger refilling the Strategic Petroleum Reserve, which has been drained to long-term lows this year to reduce energy costs.
The 10-year Treasury yield popped 8 basis points to 3.49%, but it was an inside day after tumbling to 3.41% on Wednesday.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rallied 1.8%. The VanEck Vectors Semiconductor ETF (SMH) popped 2.55%. Nvidia stock, ASML, KLA and AMAT are all SMH holdings. Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) gained 2.4% and ARK Genomics ETF (ARKG) 2.2%.
SPDR S&P Metals & Mining ETF (XME) edged up 0.3% and the Global X U.S. Infrastructure Development ETF (PAVE) advanced 0.8%. U.S. Global Jets ETF (JETS) dipped 0.3%. SPDR S&P Homebuilders ETF (XHB) rose 0.6%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) nudged 0.1% higher. The Health Care Select Sector SPDR Fund (XLV) rose 0.9%.
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Chip Stocks Near Buy Points
Several chip-gear makers are in or near buy zones. In general, semiconductor-equipment makers have some bleak forecasts for the year ahead, but chip-gear stocks often bottom well before business turns around.
KLAC stock rose 2% to 395.92, clearing some buy points between 392.60-396.02. Trading was very light, but there were a number of big gains in spiking volume as KLA was rebounding from bear-market lows in October and November. The relative strength line is at a record high, even with shares well off their January peak. KLA stock is a Long-Term Leader, but the time to buy a stock as an LTL is when it’s closer to the 200- or 50-day lines.
ACLS stock popped 4.9% to 81.93, getting back above an 80.34 cup-with-handle buy point, according to MarketSmith analysis. Axcelis is well extended from the 50-day line, but the 21-day line has been racing higher. The RS line for ACLS stock is at a 15-year high.
UCTT stock climbed 5.6% to 36.59, topping a 36.10 cup-with-handle buy point and hitting its best levels since April. The base formed right at the bottom, with no prior uptrend. But the handle largely formed above the 200-day line. The RS line for UCTT stock is at an 8-month high.
ASML stock edged up 0.9% to 606.89. Shares surged from its Oct. 13 bear market low until Nov. 15. Since then, the high-end Dutch semiconductor-equipment giant has been consolidating comfortably above the 200-day line, at the best levels since April. The 21-day line is close to catching up. A break above recent highs could offer an early entry. Ideally, ASML would rebound off the 21-day line or forge a proper base.
AMAT stock gained 2.4% to 108.61 on Thursday. Shares are slightly above the 200-day line after its own Oct. 13-Nov. 15 run. Applied Materials has a three-weeks-tight pattern, offering a 112.22 buy point. Investors could use a short trendline, perhaps with Thursday’s high of 109.43 as a trigger, as a slightly earlier entry.
Meanwhile, chip giant Nvidia rallied 6.5% to 171.69, rebounding from its 21-day line. NVDA stock is just below its 200-day line now. An aggressive trader could use a decisive clearing of the 200-day line as a buy signal. But it might be better to wait for Nvidia stock to clear the 200-day and form some sort of consolidation, a la ASML or AMAT, to spy a safer entry.
Market Rally Analysis
The stock market rally snapped a recent losing streak with modest-to-solid gains. But it didn’t fundamentally change the technical picture. The major indexes are moving sideways, finding support at key levels but also hitting resistance.
The S&P 500 index just managed to close back above its 21-day moving average. The benchmark index needs to get back above its 200-day moving average and its Dec. 1 high.
The Nasdaq composite held support at its 50-day moving average, regaining the 11,000 level but closing just shy of its 21-day. The Russell 2000, which tumbled below its 200-day and 21-day line earlier this week, backed off from its 21-day intraday.
The Dow Jones, which closed just above its 21-day average on Wednesday, bounced modestly on Thursday.
Markets may not make any decisive move with key news coming.
The November producer price index is due out Friday morning. Wholesale inflation should show continued steady deceleration. But the real concern is in service prices. The November CPI report is set for Dec. 13, with the year-end Fed meeting ending the next day.
Those events could be the catalyst for big market moves up or down. Of course, over the past month the indexes have had big moves around the October CPI, Fed chief Powell’s speech and more, but sideways, choppy action continued.
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What To Do Now
Some stocks flashed buy signals Wednesday, including KLAC, ACLS, United Rentals (URI) and Dexcom (DXCM). Investors could have nibbled on some of these — or not.
Overall exposure should remain low. The current market trend is sideways and choppy. That’s just a tough environment for making headway trading stocks. If you make new buys and get a decent gain, consider taking partial profits quickly. Too many promising stocks have round-tripped 5%, 10% gains over the past several weeks.
A number of stocks from a variety of sectors are setting up. So keep your watchlists up to date and stay engaged.
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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