Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
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S&P 500 Enters Power Trend; Broadcom, Comfort Systems, NextEra Energy In Focus
The stock market rally showed mixed action last week. The Dow Jones hit a record high while the S&P 500 edged higher and Russell 2000 edged lower. The Nasdaq composite lagged, as Nvidia (NVDA) earnings failed to impress. But the tech-heavy composite did recover its 50-day line in a solid Friday bounce.
The S&P 500 has entered a power trend, a positive sign for the market rally. A number of stocks broke out or set up in the past week.
ServiceNow (NOW), Netflix (NFLX), AppLovin (APP), Comfort Systems (FIX), NextEra Energy (NEE) and Spotify (SPOT) are all in buy areas.
So is China EV giant BYD (BYDDF). The Tesla (TSLA) archrival broke out Friday, with BYD reporting a big jump in sales on Sunday. Several other China EV makers reported August deliveries as well.
Broadcom (AVGO), Samsara (IOT) and Dick’s Sporting Goods (DKS) are around buy points with earnings due this coming week.
On Friday, investors will get the August jobs report.
Nvidia and ServiceNow stock are on IBD Leaderboard. Comfort Systems is on IBD SwingTrader. Nvidia stock, Netflix, Samsara and Comfort Systems are on the IBD 50.
The video embedded in this article discussed the market action on Friday and for the week. It also analyzes Broadcom stock, Comfort Systems and NextEra Energy.
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.
U.S. stock markets will be closed Monday for Labor Day, though other exchanges around the world will be open. Dow futures will trade normally.
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 rally had mixed action during the week, but had a strong finish Friday.
The Dow Jones Industrial Average rose 0.9% in last week’s stock market trading. The S&P 500 index climbed 0.2%. The Nasdaq composite fell 0.9%, but gained 1.1% on Friday. The small-cap Russell 2000 lost a fraction.
The S&P 500 closed the week a fraction below the top of its recent range and just below all-time highs. On Friday, the benchmark index entered a power trend. It’s a positive sign, but not a buy signal itself. Mike Webster, IBD’s chief market strategist, said on IBD Live Friday:
“It’s very important to know that (the start of a power trend) … is not a buy signal. It is just a different phase. So what it does is you treat additional buy signals differently. Doesn’t mean you take extra action today but if we get more buy signals next week or the week after while the power trend is still going, if you were going to go on margin, if there’s stuff to buy, if you’re making progress and the power trend is still on, that would be the time to do it.”
The Nasdaq has some work to do before getting to its own power trend. Right now, it needs to decisively reclaim the 50-day line, then clear its recent range and the 18,000 level. On the flip side, there’s the risk that the Nasdaq could break below its 21-day line.
More broadly, the recent action in the Nasdaq, Nvidia and megacaps suggests that the tech sector may lag the non-tech sector for a while.
The 10-year Treasury yield rose 10 basis points to 3.91%, but it’s down 77 basis points over the last four months.
U.S. crude oil futures fell 1.7% to $73.55 a barrel last week.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.85% last week. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.5%. ServiceNow stock is a big IGV position, with Samsara also in the ETF. The VanEck Vectors Semiconductor ETF (SMH) slumped 2%. Nvidia stock is the dominant SMH holding, with Broadcom also a key member.
SPDR S&P Metals & Mining ETF (XME) edged up about 0.1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) climbed 0.5%. The SPDR S&P Homebuilders ETF (XHB) declined 1.5%. The Energy Select SPDR ETF (XLE) rose 1% and the Health Care Select Sector SPDR Fund (XLV) gained 1.1%.
The Industrial Select Sector SPDR Fund (XLI) rallied 1.7% while the Financial Select SPDR ETF (XLF) leapt 2.95%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 3.1% last week and ARK Genomics ETF (ARKG) declined 2.15%. Tesla stock is still a major holding across Ark Invest’s ETFs. Cathie Wood also has built up a significant position in Nvidia and owns a small stake in BYD stock.
Time The Market With IBD’s ETF Market Strategy
Nvidia Stock
NVDA stock sold off 7.7% last week to 119.37. Shares rose 1.5% on Friday but still closed just below its 50-day line.
Nvidia reported a 152% EPS gain late Wednesday and guided up for Q3 revenue.
However, the beat-and-raise was not as significant as in previous quarters.
Following Friday’s close, Nvidia stock now has a handle, setting a lower official buy point of 131.26.
Stocks In Buy Zones
ServiceNow saw a 3.2% increase to 855 last week, continuing its rebound from the low on Aug. 5. On Friday, NOW stock broke out above an 850.33 buy point from a new flat base.
AppLovin stock rose 3% to 92.87. On Friday, APP stock finally closed above a 91.91 buy point from a V-shaped consolidation after several intraday attempts. The relative strength line, which measures a stock’s performance against the S&P 500, is close to reaching a multiyear high.
Netflix stock increased by 2.1% to 701.35 last week, just surpassing a 697.49 cup-base buy point.
Comfort Systems stock rose by 4.4% to 353.52. The AI-adjacent heating and cooling company closed above a 347.73 handle buy point on Friday, as well as an alternate entry at 352.47, the top of the base.
NextEra stock went up by 1.1% to 80.51, just surpassing an 80.47 buy point on Aug. 26.
Spotify stock inched up by 0.1% to 342.88, maintaining support at the 21-day line and staying within range of a 331.08 flat-base buy point, according to MarketSurge. The stock has been trading tightly for weeks, with investors potentially using 350.32 as a de facto four-weeks-tight entry within an emerging consolidation.
BYD stock broke out of a cup-with-handle base on Friday, surging by 5.2% to 30.50 for the week. Up by 10.2% in 2024, BYD is the only EV maker that has seen positive growth this year.
China EV Sales
Over the weekend, BYD reported August sales of 373,083, a significant increase compared to July’s record of 342,383, although there were expectations that it would reach closer to 400,000.
Among other China EV makers, Li Auto (LI) reported a decrease in August deliveries compared to July’s record. Nio (NIO) deliveries slightly dropped but remained above 20,000 for the fourth consecutive month. XPeng (XPEV) and Zeekr (ZK) reported substantial month-to-month gains. All four EV stocks have experienced significant declines in 2024.
Tesla stock surged by 3.8% on Friday but fell by 2.8% for the week to 214.11, dropping below its 50-day moving average.
Stock Market Analysis
While the market rally is currently taking a pause, it has made considerable progress since the low on Aug. 5. More stocks are forming bases that are not as V-shaped, with handles starting to take shape.
The S&P 500 entering a power trend indicates this broader trend.
Investors who have been making multiple buys since the follow-through day on Aug. 13 may want to exercise caution when significantly increasing exposure until the current pause resolves.
If the S&P 500 and Nasdaq are able to break out of their recent short-term ranges, it would be highly bullish and likely coincide with several breakouts.
However, if the Nasdaq clearly falls below the 50-day and 21-day moving averages, many recent buys and setups, especially in the tech sector, could falter.
It is advisable not to be overly exposed to AI and tech stocks. Finance, utilities, as well as some retail and footwear companies, are showing strength, along with various medical companies.
Ensure that your watchlists are up to date and review your portfolio regularly.
Read The Big Picture every day to stay updated on market direction, leading stocks, and sectors.
For stock market updates and more, follow Ed Carson on Threads at @edcarson1971 and on Twitter at @IBD_ECarson.
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