Stock market rally shows character change with Tesla and Apple in focus; Here’s what you need to do now

The stock market rally has shown increasing momentum over the past week, with the major moving averages all making big moves. Dow Jones futures open Sunday night, as do S&P 500 futures and Nasdaq futures.




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Market leadership remains limited and is concentrated in the area of ‚Äč‚Äčartificial intelligence and chips and software. Many of these holdings will be renewed. However, as market breadth continues to improve, there will be a wider range of buying opportunities.

Already, Tesla (TSLA) broke out on Friday. DexCom (DXCM), lennar (LEN) and JPMorgan Chase (JPM) published early entries late in the week. Marriott International (MAR) is probably also punishable.

All reflect possible areas of leadership. Tesla stock joins the ranks of EV competitors such as BYD (BYDDF) in clearing buy points. DXCM stock is one of several medical device stocks trying to climb higher. LEN stock is among a string of homebuilders bouncing back. JPM stock stands out among financials but the sector is recovering. MAR stock is part of a largely recovering travel sector.

Given the promising upside, investors should look to increase their exposure. But be prepared to take a step back.

In the meantime, Apple (AAPL) is expected to unveil its mixed reality headset on Monday, its first new hardware product since the Apple Watch in 2015. The headset will take on rivals like the Meta Quest metaplatforms (META). Apple stock is on the verge of hitting its January 2022 highs and nearing a $3 trillion market cap.

Tesla stock entered the IBD leaderboard on Friday, joining the meta stock. LEN stock joined SwingTrader on Friday. Lennar was Friday's IBD stock of the day.

Dow Jones futures today

Dow Jones futures open at 6:00 p.m. ET on Sunday, as do S&P 500 futures and Nasdaq 100 futures.

Keep in mind that nightly action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular trading session.


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stock market rally

The stock market rally showed strong, broad gains, especially towards the end of the week.

The Dow Jones Industrial Average rose 2% in trading last week. The S&P 500 index gained 1.8%. The Nasdaq Composite gained 2%. The Russell 2000 small-cap index rose 3.3%.

The 10-year government bond yield fell 13 basis points to 3.69% during the week but rose 8 basis points on Friday.

US crude oil futures fell 1.3% last week to $71.74 a barrel despite Friday's 2.3% recovery.

ETFs

Among growth ETFs, Innovator IBD 50 ETF (FFTY) is up 3.6% last week, while Innovator IBD Breakout Opportunities ETF (BOUT) is up 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 2.1%. The VanEck Vectors Semiconductor ETF (SMH) is down 0.8%.

The ARK Innovation ETF (ARKK) is up 6.45% last week and the ARK Genomics ETF (ARKG) is up 4.9%, reflecting more speculative story stocks. Tesla stock is Ark Invest's #1 ETF. Cathie Wood's Ark also owns some BYD shares.

The SPDR S&P Metals & Mining ETF (XME) rallied 4.2% last week. The Global X US Infrastructure Development ETF (PAVE) is up just over 3%. The US Global Jets ETF (JETS) is up 3.1%. The SPDR S&P Homebuilders ETF (XHB) is up 3.5%. The Energy Select SPDR ETF (XLE) is up 1.4%. The Health Care Select Sector SPDR Fund (XLV) rose 2.2%. DXCM stock is in XLV.

The Financial Select SPDR ETF (XLF) rose 2.15% in an external bullish week. JPM shares are an important XLF component.

The SPDR S&P Regional Banking ETF (KRE) rose 4.8%.


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Apple mixed reality headset

Apple will unveil its latest hardware and software innovations in a keynote presentation Monday at 10 a.m. PT at its annual Worldwide Developers Conference. The latest iPhone, iPad, Mac, Apple TV and Apple Watch operating systems are detailed. But the buzz is mostly about a mixed reality headset, possibly called Reality Pro. It would be the first new hardware product since the Apple Watch launched in 2015. The expected price of $3,000 could put off buyers. metaplatforms (META) recently introduced its latest Meta Quest headset.

Apple shares rose 3.15% last week to 180.95. That's just below the January 2022 peak of 182.94.

Tesla stock

Tesla shares rose 10.8% this week to 213.97, including a 3.1% gain on Friday. Shares broke above their 200-day moving average on Tuesday. On Friday, TSLA stock crossed a buy point of 207.89, which is either a cup or double bottom basis. The EV giant has seen above-average volume for five consecutive sessions, after just a few such days in the previous three months.

Meanwhile, BYD shares rose 5.6% to 31.50 on the week. Friday's gain of 2.3% brought the Chinese electric and battery giant back above a buy point of 31.17 cups originally set on May 10. On Thursday, BYD reported record shipments in May, surpassing its late 2022 peak.

According to reports late Friday, Tesla is now getting its base Model 3 the full $7,500 tax credit in the US, along with all other Model 3 and Model Y vehicles. It's not clear how, but maybe Tesla is using it now 2170 cells manufactured at the Nevada site compared to the LFP batteries manufactured in China.

Other stocks near buy points

DXCM was up 6.5% last week at 122.57. DexCom recaptured its 50-day moving average on Thursday, then on Friday augmented gains with above-average volume. This offers an early start. According to MarketSmith analysis, the continuous glucose meter maker has a buy point above 126.44 in a new flat base, right next to two other consolidations. It's worth keeping an eye on several other medical device and system manufacturers, including Shockwave Medical (SWAV) and Intuitive Surgery (ISRG).

LEN shares rose 3.6% to 112 on Friday and bounced back above the 50-day moving average, marking an aggressive entry into an emerging consolidation. On Wednesday, Lennar stock fell to test a previous buy point. Several other homebuilders posted bullish gains on Friday, but LEN stock posted strong volume.

JPM stock rose 3% to 140.47 and closed right into a downtrend on a new flat base alongside a previous consolidation. It will also not be extended beyond the 50-day limit. JPMorgan looks much healthier than other banks, but bank stocks showed bullish moves on Friday.

MAR stock was up 3.55% on Friday to 177.22 after retaking its 50-day moving average on Thursday. Marriott arguably offers early entry from a burgeoning flat base. royal caribbean (RCL) is trending up, but most other travel stocks are like Marriott, trying to bounce back after bouts.

Analysis of the market rally

The stock market rally showed further strength this week, with some hopeful signs that breadth and leadership are improving.

The Nasdaq continued its upward trend and hit a 13-month high on Friday. But this past week has been about more than just AI games.

The S&P 500 is well above its 2023 range and is nearing its August 2022 highs.

The Dow Jones, which tested its 200-day moving average for most of the week, jumped above its 50-day moving average on Friday. The Russell 2000, which fell below its 50-day moving average on Wednesday, rose to its highest level since early March and also breached the 200-day moving average for the first time since.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) is up 1.4% this week to a 52-week high.

The Invesco S&P 500 Equal Weight ETF (RSP) is up 1.9% for the week. Friday's 2.2% surge pushed the RSP well above its 50-day and 200-day moving averages, breaking a downtrend that stretched back to early February.

The climbers beat the losers on Thursday and Friday. On Friday, gainers led the NYSE by more than 5-1 and the Nasdaq by almost 3-1. Still, the long-term trend was weak. And a downward A/D line is crucial.

The Nasdaq and Nasdaq 100 have widened, with the latter now 9.5% above the 50-day moving average. Ideally, big-cap tech companies, particularly AI companies, would slow down or pause while other sectors pick up. That was the broad pattern on Friday, with the Dow Jones, Russell 2000 and RSP all outperforming the Nasdaq 100's 0.75% gain.

This creates some buying opportunities, including in Tesla, Lennar, DexCom, and JPMorgan.

Of course, a few strong days are no guarantee that a broad market advance is underway. From a macro perspective, the debt ceiling is no longer an issue. The Fed, which was headed for a June 14 rate hike just a few days ago, now appears poised to take a break. With earnings season coming to an end (finally), the news cycle may be in for a relatively quiet period.


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What now

As the market rally gathers momentum and begins to widen, investors need to be on the lookout. Yes, that could be another head fake. The narrow rise could continue or, worse, the broader market rally could give way or collapse.

But for now, the market is sending bullish signals. If you wait until an undeniable strong bull market has set in, the leading stocks will all be well developed.

Investors should try to increase their exposure, especially if they have been invested primarily in cash to date. However, do this gradually to minimize the impact of sudden market reversals.

It's important to be flexible. And just as you don't want to engage in a bearish mindset, you also don't want to be a blind bull when the overall market or your positions falter.

This is an important time for creating your watch lists. Focus on a select group of stocks, but make sure you cast a wide net to keep tabs on a wide range of potential market leaders.

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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