Why The Market Rally Could Use A Holiday; Tesla Rebounds, 5 Stocks Near Buy Points

Dow Jones futures rose slightly on Thursday morning, along with S&P 500 futures and Nasdaq futures, with U.S. markets closed for the Thanksgiving Day holiday.




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The stock market rally on Wednesday remained positive for the second session in a row. Fed officials see a slow rate hike “soon,” according to Fed minutes from the November meeting released Wednesday afternoon.

Nasdaq led, encouraged by a rebound Tesla (TSLA). Major indexes are up solidly so far this holiday-short week. But a long break can be constructive for a market rally.

Investors should be cautious about adding exposure given key technical resistance and important economic reports.

however, Dexcom (DXCM), United Health (UNH), Neurocrine Bioscience (NBIX), Medpace Holdings (MEDP) and Shockwave Medical ( SWAV ) are five health care stocks showing interesting action.

DXCM stock and Neurocrine Biosciences are on the IBD leaderboard, with MEDP stock on the leaderboard watchlist. NBIX stocks and Medpace are on the IBD 50.

Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures rose 0.25% and Nasdaq 100 futures climbed 0.4%.

Mainland China reported more than 31,000 Covid cases, including those without symptoms, topping mid-April levels during the Shanghai lockdown. Covid infections with symptoms are still below April peaks.

US stock exchanges will be closed on Thursday for the Thanksgiving Day holiday. On Friday, US exchanges will close early at 1 p.m. ET. But other exchanges around the world are usually open on Thursdays and Fridays.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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Stock market rally

The stock market rally was somewhat muted on Wednesday, but gains were led by technicals.

The number of initial jobless claims rose to a three-month high while continuous claims hit an eight-month best. S&P Global’s Purchasing Managers’ Index for US manufacturing and services signal contraction.

The Fed minutes reinforced expectations of a 50-basis point rate hike at the December 14 meeting. Markets still favor another half-point move in February, but a quarter-point increase is a good chance.

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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 rose 1%. The small-cap Russell 2000 rose 0.1%.

US crude oil prices fell 3.7% to $77.94 a barrel. Natural gas futures rose 7.2%.

The 10-year Treasury yield fell 5 basis points to 3.71%. The two-year Treasury yield, more closely tied to the outlook for a Fed rate hike, fell below 4.5%.

The US dollar fell significantly for the second straight session, near recent lows.


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ETF

The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.5%. VanEck Vector Semiconductor ETF (SMH) rose 0.9%.

The SPDR S&P Metals and Mining ETF ( XME ) rose 0.3%. The US Global Jets ETF ( JETS ) rose 0.1%. The 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 is the top holding in Stock XLV.

Reflecting the more speculative story stocks, the ARK Innovation ETF ( ARKK ) popped 2.9% and the ARK Genomics ETF ( ARKG ) popped 0.9%. TSLA stock is a major holding in Arch Invest’s ETFs

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 down 19.5% so far this month and has nearly halved in 2022.


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Stock to watch

Dexcom stock rose 1.7% to 112.92, finding support at the 21-day moving average. DXCM stock is taking a break this month after hitting earnings on Oct. 28. Dexcom stock argues that there is a long handle with a 123.46 buy point from the seven-month consolidation. Investors can buy DXCM stock from an early entry above the 21-day line, perhaps using Tuesday’s high of 113.88 as a specific buy point.

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Medpace stock fell 1.3% to 218.81 on Wednesday. Shares are strengthening near record highs after skyrocketing 38% on Oct. 25 after earnings. Since then, MEDP stock has been building a tumultuous handle on a deep, year-round cup base. While shares have had some big intraday swings, MEDP stock is currently on track to form a tight three-week pattern by Friday’s close. Investors can use the Nov. 15 close of 226.57 as an initial entry, above recent trading highs.

NBIX stock fell 1.5% to 118.97. Shares are consolidating near multi-year highs extended from the October breakout. Despite dipping past the 50-day line last week, Neurocrine stock has a tight three-week pattern that is on track for a fourth week to go. Technically, it has a 126.09 buy point, though investors may want to wait for some quieter action.

Shockwave stock rose 4.7% to 264.06 on Wednesday, above its 21-day line but hitting resistance at the 50-day line. After a failed breakout in late October and a sharp sell-off triggered by earnings, SWAV stock has bounced back over the past week. A new base will take more time, but aggressive investors can use a strong move above the 50-day as an initial entry.

UNH stock climbed 1.3% to 529.71, rebounding above its 50-day and 21-day lines after briefly crossing its 200-day line last week. UnitedHealth stock used to be a long-time IBD leader and still shares many characteristics. Investors can use the bounce above the 50-day line as either an early entry or a long-term leader entry. UNH stock needs to make a new base after a breakout from a cup-with-handle base failed sharply last month.


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Market rally analysis

The stock market rally added to Tuesday’s gains. The S&P 500 just hit its Nov. 15 intraday high and closed within 1% of its 200-day line.

The Russell 2000 reached its 200-day line.

The Nasdaq extended Tuesday’s rebound above its 21-day moving average, though it is still below its Nov. 15 short-term high and below its 200-day low.

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The Dow Jones came within 20 points of its August 16 intraday high.

The S&P 500 decisively moving above its 200-day line — which coincides with a nearly year-long falling-tops trendline — is a big test for a market rally.

A number of economic data can change Fed rate expectations and thus the stock market. On Wednesday, November 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 preferred inflation gauge, will be released along with jobless claims and the ISM manufacturing index. The November jobs report is due Friday, November 2.

Ideally, the market will move sideways for a few days, at least holding the 21-day line, going into those economic reports.


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What to do now

The market’s rally has shown some nice gains this week, with more stocks flashing buy signals over the past few days. As a result investors could add a bit more exposure.

But they may want to be cautious about making significant new purchases with the S&P 500 hovering below its 200-day line and a lot of Fed-critical economic next week.

Also consider taking some partial profits in fast-rising stocks. Stocks are making short-term progress between a sharp rise and sector rotation.

Still, investors should work hard on their investment shopping lists, looking for setups and actionable names in different sectors.

Read the big picture every day to stay in sync with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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