Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. Earnings season is waning somewhat, but inflation and other economic data are on tap this week.
The stock market rebounded from the Aug. 5 global sell-off. A rally attempt is underway, but needs to stage a follow-through day.
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‘Setup Day’ Means Step In Right Direction; Cava, Costco, ONON In Focus
Nvidia (NVDA) continues to struggle. But several AI stocks are showing strength, including Meta Platforms (META), Palantir Technologies (PLTR), ServiceNow (NOW), Samsara (IOT), Arista Networks (ANET) and Nvidia chipmaker Taiwan Semiconductor (TSM).
Meanwhile, a number of stocks moved above their 50-day moving average, including Eli Lilly (LLY), CAVA (CAVA), TradeDesk (TTD), On Holding (ONON) and Costco Wholesale (COST). All arguably flashed early entries, though ONON reports early Tuesday.
Nvidia stock, ServiceNow and Eli Lilly are on Leaderboard. CAVA and Costco stock have joined SwingTrader. Palantir stock, Samara, Arista Networks and Service Now are all on the IBD 50 list. Palantir and Arista stock are on the IBD Big Cap 20. Samsara was Friday’s IBD Stock Of The Day.
The video embedded in the article discussed the market action in depth and analyzed CAVA stock, Costco and On Holding.
Elon Musk To Interview Donald Trump?
Former President Donald Trump said on Aug. 6 that Tesla (TSLA) CEO Elon Musk would interview him on Monday night. Musk, who has endorsed Trump, has not confirmed the interview. The conversation, if it takes place would likely include a discussion about Trump’s electric vehicle policies. Trump has advocated eliminating EV subsidies and mandates, as well as encouraging China EV makers such as Tesla rival BYD (BYDDF), to set up factories in the U.S. Expect a discussion about Bitcoin and cryptocurrencies as well.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
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 leading stocks and the market on IBD Live
Stock Market Rally
The stock market started the week with a terrible Monday open, as yen-carry-trade unwinding and an Nvidia AI chip delay joined recession fears to trigger a global rout as massive volatility spikes.
But the indexes came off lows Monday and began a stock market rally attempt on Tuesday, as the yen stabilized while stronger U.S. economic data calmed nerves.
The Dow Jones Industrial Average fell 0.6% in last week’s stock market trading. The S&P 500 index lost a fraction. The Nasdaq composite dipped 0.2%. The small-cap Russell 2000 retreated 1.35%.
The Dow Jones recovered to close just above its 50-day line, while the Russell 2000 continues to hit resistance there. The S&P 500 and Nasdaq haven’t cleared their 10-day lines yet, let alone the 21-day or 50-day averages.
The stock market still hasn’t confirmed its rally attempt with a follow-through day. That could happen any time this coming week. Remember, not all confirmed rallies succeed.
On Friday, the major indexes paused, but the number of stocks moving above their 50-day lines, including Cava, Eli Lilly and Costco, was an encouraging sign. Those join a number of stocks from a variety of sectors setting up or flashing early entries.
U.S. crude oil futures jumped 4.5% to $76.84 a barrel last week, snapping a four-week losing streak.
Treasury Yields Rebound, Key Data Due
The 10-year Treasury yield jumped 15 basis points to 3.94%. The 10-year yield dived to 3.67% briefly on Monday and topped 4% intraday Thursday.
Markets have priced in a rate cut for the Sept. 18 meeting, but it’s a tossup between 25 0r 50 basis points.
In the coming week, investors will get the July producer price index on Tuesday and the consumer price index on Wednesday. On Thursday, get ready for the July jobs report, weekly jobless claims and August regional manufacturing reports from the Philly Fed and New York Fed.
These economic reports could provide the catalyst for a follow-through day, or send the indexes back toward recent lows.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.2% last week. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 2.8%, with ServiceNow, Palantir and Samsara all members. The VanEck Vectors Semiconductor ETF (SMH) gained 2.9%. Nvidia is the No. 1 holding in SMH, with Taiwan Semiconductor stock No. 2.
SPDR S&P Metals & Mining ETF (XME) declined 0.8% last week. The Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.1%. SPDR S&P Homebuilders ETF (XHB) retreated 2.9%. The Energy Select SPDR ETF (XLE) gained 1.1% and the Health Care Select Sector SPDR Fund (XLV) sank 0.6%, with Lilly stock a major component.
The Industrial Select Sector SPDR Fund (XLI) climbed 1.25%.
The Financial Select SPDR ETF (XLF) advanced 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged up 0.6% last week and ARK Genomics ETF (ARKG) fell 1.4%. Tesla stock is still a big holding at Ark Invest. TSLA stock fell 3.7% last week to 200, falling below the 200-day line and essentially wiping out its huge recent run. Shares did come well off lows.
Time The Market With IBD’s ETF Market Strategy
AI Stocks To Watch
Palantir stock skyrocketed 21.3% last week 30.02, hitting a three-year high. Shares roared back from a brief Monday plunge to its 200-day line.
Strong Palantir earnings and guidance, along with a new alliance with Microsoft (MSFT), have provided positive catalysts for the market. While PLTR stock is currently extended from the 50-day line and a prior buy point of 27.50, it is definitely worth keeping an eye on.
Meta stock saw a 6.1% jump to 517.77, reclaiming the 50-day line decisively. Investors can consider using a prior buy point of 514.01 as an entry, or look to the Aug. 1 post-earnings high of 527.17. It may take another week for Meta stock to form a new base.
ServiceNow stock had a 2.65% rise for the week, reaching 811.59 after testing its 50-day line on Monday. The stock broke out past a 806.52 handle buy point and an alternate entry of 815.32 on July 25 following earnings, but soon retraced with the market. Shares were able to regain the handle buy point on Friday.
Samsara stock surged 8% to 38.24 for the week, despite briefly dipping below the 50-day and 200-day lines on Monday. IOT stock has a cup-with-handle buy point of 39.21. The volatile nature of the Internet of Things play tends to lead to wild moves following earnings, with Q2 earnings expected in early September.
Arista stock rallied 5.2% to 335.87 for the week, bouncing back from an intraday tumble on Monday. Shares are currently above their 50-day line, potentially indicating a new base forming after one more week.
Taiwan Semiconductor stock initially dropped to its 40-week line on Monday morning but later surged 11.55% to 167.17, nearly reaching its 50-day line. The company reported a nearly 45% increase in July sales compared to a year earlier, driven by AI chips for Nvidia and other companies.
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Nvidia Stock
Can AI stocks continue to thrive if the industry leader, Nvidia, is facing challenges?
Nvidia stock has rebounded from Monday’s lows and is back above the 100 level and a prior base. Despite falling 2.35% to 104.75 for the week and encountering resistance at the 10-day line, according to MarketSurge, NVDA stock experienced its fourth consecutive weekly decline.
Concerns about AI spending fatigue persist, while reports of production delays for Blackwell, Nvidia’s next-generation AI chip, have weighed on NVDA.
What To Do Now
Investors may have taken advantage of pilot buys later in the week, capitalizing on early movers. However, it is important to remember that if the market faces challenges, many promising stocks may struggle.
It is advisable for investors to remain largely in cash, awaiting a Follow-Through Day (FTD). Once this occurs, whether it happens soon or in the future, gradually increase exposure as market conditions and positions become more favorable. By adding 10% per day, it doesn’t take long to be fully invested.
Focus on maintaining watchlists of stocks displaying promising action, while concentrating on a smaller list of top potential targets. Be prepared to take action, but also be prepared to hold back.
Read The Big Picture daily to stay informed about market direction, leading stocks, and sectors.
Follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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