Why The Market Rally Could Use A Holiday
Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, heading into the Thanksgiving Day holiday.
The stock market rally was positive for a second straight session. Fed officials see slower rate hikes coming “soon,” according to Fed minutes from the November meeting released Wednesday afternoon.
Investors should be cautious about adding exposure given key technical resistance and notable economic reports up ahead.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures climbed 0.25%.
The 10-year Treasury yield fell 2 basis points to 3.69%.
U.S. stock exchanges will be closed Thursday for the Thanksgiving Day holiday. On Friday, U.S. exchanges will close early at 1 p.m. ET. But other exchanges around the world will be open normally on Thursday and Friday.
Stock Market Rally
The stock market rally had some wobbles Wednesday, but extended gains, led by techs.
Initial jobless claims rose to a three-month high while continuing claims hit an eight-month best. S&P Global’s purchasing managers indexes for U.S. manufacturing and services both signaled contraction.
The Fed minutes reinforced expectations of a 50-basis point rate hike at the Dec. 14 meeting. Markets still favor another half-point move in February, but there’s a decent chance of a quarter-point hike.
The Dow Jones Industrial Average rose 0.3% in Wednesday’s stock market trading. The S&P 500 index climbed 0.6%, led by TSLA stock. The Nasdaq composite popped 1%. The small-cap Russell 2000 edged up 0.1%.
U.S. crude oil prices tumbled 3.7% to $77.94 a barrel. Natural gas futures jumped 7.2%.
The 10-year Treasury yield sank 5 basis points to 3.71%. The two-year Treasury yield, more closely tied to the Fed rate hike outlook, dipped below 4.5%.
The U.S. dollar fell significantly for a second straight session, back near recent lows.
SPDR S&P Metals & Mining ETF (XME) edged up 0.3%. U.S. Global Jets ETF (JETS) nudged 0.1% higher. SPDR S&P Homebuilders ETF (XHB) climbed 0.5%. The Energy Select SPDR ETF (XLE) fell 1.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.4%. Dow Jones giant UNH stock is the top holding in XLV.
Tesla stock jumped 7.8% to 183.20 on Wednesday, rebounding from Tuesday’s bear market lows as Citigroup upgraded the EV giant from a sell to a hold. TSLA stock is still down 19.5% so far this month and has roughly halved in 2022.
Stocks To Watch
Dexcom stock advanced 1.7% to 112.92, finding support at the 21-day moving average. DXCM stock has been pausing this month after gapping up on earnings on Oct. 28. Dexcom stock arguably has a long handle with a 123.46 buy point from a seven-month consolidation. Investors could buy DXCM stock from an early entry off the 21-day line, perhaps using Tuesday’s high of 113.88 as a specific buy point.
Medpace stock fell 1.3% to 218.81 on Wednesday. Shares have been consolidating near record highs since skyrocketing 38% on Oct. 25 following earnings. Since then, MEDP stock has been forging a messy handle on a deep, yearlong cup base. While shares have had some big intraday swings, MEDP stock is currently on track to forge a three-weeks-tight pattern by Friday’s close. Investors might use the Nov. 15 close of 226.57 as an early entry, above the bulk of recent trading.
NBIX stock sank 1.5% to 118.97. Shares are consolidating near multiyear highs, extended from an October breakout. Despite a plunge to the 50-day line last week, Neurocrine stock has a three-weeks-tight pattern that’s on track to go for a fourth week. Technically, that has a 126.09 buy point, though investors may want to wait for some quieter action.
Shockwave stock popped 4.7% to 264.06 on Wednesday, back above its 21-day line but hitting resistance at the 50-day line. After a failed breakout in late October and sharp sell-off that continued through earnings, SWAV stock has bounced back over the past week. A new base will take more time, but aggressive investors could use a strong move above the 50-day as an early entry.
UNH stock climbed 1.3% to 529.71, rebounding above its 50-day and 21-day lines after briefly undercutting its 200-day line last week. UnitedHealth stock used to be an IBD Long-Term Leader and still shares many characteristics. Investors could use a bounce from the 50-day line as either an early entry or a Long-Term Leader entry. UNH stock needs to forge a new base after a breakout from a cup-with-handle base quickly failed last month.
Market Rally Analysis
The stock market rally added to Tuesday’s gains. The S&P 500 just topped its Nov. 15 intraday high and closed within 1% of its 200-day line.
The Russell 2000 came right up to its 200-day line.
The Nasdaq added to Tuesday’s rebound from the 21-day moving average, though it’s still below its Nov. 15 short-term high and well below its 200-day.
The Dow Jones came within 20 points of its Aug. 16 intraday high.
The S&P 500 moving decisively above its 200-day line — which coincides roughly with a yearlong declining-tops trendline — is a huge test for the market rally.
A slew of economic data could swing Fed rate expectations and thus the stock market. On Wednesday, Nov. 30, the October JOLTS report will show job openings, with Fed chief Jerome Powell speaking later in the day. On Thursday, the PCE price index, the Fed’s favorite inflation gauge, will be released, along with jobless claims and the ISM manufacturing index. The November jobs report is due on Friday, Nov. 2.
Ideally, the market would move sideways for a few days, letting at least the 21-day line catch up, heading into those economic reports.
What To Do Now
The market rally has shown some nice gains this week, with more stocks flashing buy signals in the past few days. Investors could have added a little more exposure as a result.
But they may want to be cautious about making significant new buys with the S&P 500 hovering below its 200-day line and so much Fed-critical economic due next week.
Also consider taking some partial profits in stocks that run up quickly. Stocks have been making short-lived advances amid a choppy uptrend and sector rotation.
Still, investors should be working hard on their investing shopping lists, looking for set ups and actionable names across a variety of sectors.
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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