The stock market rally last week showed strong, broad-based action that bypassed a surprisingly dovish Federal Reserve. This boosts confidence in the longer-term prospects of the uptrend. But as the Nasdaq expands, the likelihood of a market decline in the short term increases. Friday may have reflected the start of a downturn, but it wasn't a big one.
A decline could create new buying opportunities in leading stocks, many of which are currently far from entry. In the near term, however, investors should be cautious about new purchases, particularly in hot technology areas.
Dow Jones futures open Sunday night, as do S&P 500 futures and Nasdaq futures.
BA stock trades right around a buy point. Boeing (BA) and rival airbus (EADSY) is likely to announce a host of new orders at the Paris Air Show, which kicked off on Sunday. McKesson (MCK) broke out of a consolidation Smith & Nephew (SNN) is above a trendline entry. Marriott International (TO DAMAGE), Chipotle Mexican Grill (CMG), Boyd Gaming (BYD) and floor & decor (FND) are close to buy points. All seven stocks come from market-leading non-tech areas.
In the meantime, modern micro devices (AMD), samsara (IOT) and rambus (RMBS) are three hot stocks that are gradually declining.
But many leaders don't back down. Nvidia (NVDA) hit a new record high on Friday and is up 10% for the week. metaplatforms (META) hit a 16-month high before closing a fraction lower on Friday. Tesla (TSLA) rose to a fresh eight-month high on Friday after two tiny losses ended a record-breaking 13-day winning streak.
Tesla, META stock and Nvidia are on the IBD leaderboard. CMG stock is on the leaderboard watch list. MCK stock was added to SwingTrader on Friday, joining Boeing and FND stocks. Chipotle and IOT stocks are on the IBD 50. Chipotle and Tesla stocks are on the IBD Big Cap 20. McKesson was the IBD stock of the day on Friday.
The video embedded in the article gives an overview of the market movements over the past week and analyzes the shares of McKesson, Chipotle and AMD.
Dow Jones futures today
Dow Jones futures open at 6:00 p.m. ET, as do S&P 500 futures and Nasdaq 100 futures.
US stock markets will remain closed on Monday, June 19 for the June 19 holiday, however other stock exchanges around the world will remain open. Dow futures are traded normally.
Keep in mind that nightly action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks from the stock market rally on IBD Live
stock market rally
The stock market rally was a strong week, particularly on the Nasdaq, despite generally modest losses on Friday.
The Dow Jones Industrial Average rose 1.25% in trading last week, hitting its best level of the year. The S&P 500 index rose 2.6%, its best weekly gain since March. The Nasdaq Composite rose 3.25%, its eighth straight weekly gain. The small-cap Russell 2000 index rose 0.5%, well below weekly highs.
The 10-year government bond yield rose 2 basis points to 3.77%.
US crude oil futures rose 2.3% last week to $71.78 a barrel. Copper prices increased by 2.5%.
Among growth ETFs, innovator IBD 50 ETF (FFTY) is up 2.1% last week. The iShares Expanded Tech-Software Sector ETF (IGV) is up 5.2%. The VanEck Vectors Semiconductor ETF (SMH) is up 4.45%, with Nvidia and AMD shares leading the way.
The SPDR S&P Metals & Mining ETF (XME) is up 2.9% last week. The Global X US Infrastructure Development ETF (PAVE) gained 2.6%. US Global Jets (JETS) was up 5.65%. SPDR S&P Homebuilders ETF (XHB) is up 2.4%. The Energy Select SPDR ETF (XLE) fell 0.6%. The Health Care Select Sector SPDR Fund (XLV) rose 1.4%. MCK share is in XLV.
The Industrial Select Sector SPDR Fund (XLI) was up 3%. BA shares are a key XLI holding.
The Financial Select SPDR ETF (XLF) is up 1.3%. The SPDR S&P Regional Banking ETF (KRE) fell 0.9% after big gains since early May.
A mirror of stocks with more speculative histories, ARK Innovation ETF (ARKK) is up 4.2% last week and ARK Genomics (ARKG) is up 3.9%. Tesla stock is Ark Invest's #1 ETF.
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BA shares rose 1.2% over the past week to 219.99, just below a flat base buy point of 221.43. Many other industrial companies appear to be breaking their 50-day moving average, but not Boeing.
MCK shares climbed 3.1% to 406.20 and broke the 401.53 buy point on Friday.
SNN stock is up 6.9% to 32.16 last week, breaking a flat-base trendline that is part of a base-to-base formation.
CMG shares fell 0.4% to 2,032.92 on light volume, trading at its 21-day moving average while the 10-week moving average is catching up. Chipotle is exhibiting a four week tight pattern with an official buy point of 2139.88. This pattern could turn into a flat base in another week.
MAR stock fell 1.5% to 176.36 and found support at the 21-day and 10-week moving average. According to MarketSmith analysis, Marriott stock has a buy point of 183.37, starting from a flat base next to several bases.
BYD stock fell slightly last week, down 0.6% to 68, just above its 10-week moving average. Boyd Gaming has a buy point of 71.69 starting from a flat base next to two long cup with handle consolidations. Investors could use 70.04 as an early entry.
FND shares rose 0.3% to 96.26, just above the 50-day moving average. Floor & Decor stock has a buy point of 101.39 from a cup and handle basis, although investors could use 99.50 as an aggressive entry.
AMD stock fell 3.9% last week to 120.08, a big rebound from a 52-week high of 132.83 on Tuesday. Stocks are falling back towards their 21-day moving average and the lows of their recent mini-consolidation. AMD released new AI chips to take on Nvidia, but the market reaction wasn't great. Is AMD a potential buy if it finds support? Or, for example, are investors waiting for NVDA stock to pause?
IOT stock fell 0.3% to 28.90, falling begrudgingly towards the end of the week after nearly beating its all-time high of 31.41 at the end of 2021. Shares are trading around the 10-day moving average, with Samara stock still trading well above the 21-day moving average.
RMBS shares fell 5.2% to 60.38 in the last week, slipping just below the 21-day moving average. It's the third straight weekly decline for Rambus stock.
Analysis of the market rally
The market rally continues to show impressive strength. On Wednesday, the major indices showed resilience amid a surprisingly hawkish Fed, then rose on Thursday. The S&P 500 and Nasdaq hit new 52-week highs, while the Dow Jones made new 2023 highs.
Even on Friday, when the Nasdaq expanded significantly and the S&P 500 also lengthened, the uptrend resisted a pullback.
Market breadth was weak on Friday but has improved significantly over the past few weeks.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 2.5% to 148.83, barely falling on Friday. It's a big change from just a few weeks ago. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) is up 3.2% last week.
The Nasdaq is now 9.1% above its 50-day moving average, while the Nasdaq 100 is up 10.6%. The S&P 500 is up 5.5%. All of this points to a market pullback, and the likelihood that the pullback will be large is increasing. But the shares could be extended even further for a while yet.
Ideally, on light volume, the Nasdaq would pause or grudgingly fall, allowing the moving averages to catch up. That would allow the leading stocks to pause and possibly retreat to the 21-day or 10-week moving average or even find new bases. Of course, a decline could be more severe, and even with a mild market decline, many individual names will suffer outsized losses.
Depending on how mild or far-reaching the drop is, quality non-tech stocks could break out or at least hold up. Medical devices, industrials, restaurants, travel and various housing-related companies are doing well, including Boeing, SNN, CMG, MAR and FND.
Plan the market with IBD's ETF market strategy
With the Nasdaq and so many leading chip, software, and AI companies expanding, it's not a good time to buy tech stocks. Investors could look to increase their exposure elsewhere. Still, a Nasdaq-led decline could hit anyone. Investors may also want to save their money for buying opportunities in big tech winners after the pullback.
You can consider taking partial profits on big winners either on the way up or when they break below their 10-day moving average. It depends on the size of your individual positions and your overall exposure, your belief in different holdings and your own investment style. But do you have an exit strategy.
When a market pause or decline hits, keep a close eye on stocks finding key support or consolidating near buy points. So keep your screens rolling this long weekend to keep track of the multitude of executives and potential executives.
The market rally was impressive. Despite some near-term caution, the overall trend is bullish. Act accordingly.
Read The Big Picture daily to stay up to date on market direction and the leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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