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 and Nasdaq futures, as US markets closed for the Thanksgiving Day holiday.




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The stock market rally was positive for the second consecutive session on Wednesday. Fed officials see a slower rate hike “imminent,” according to Fed minutes from the November meeting released Wednesday afternoon.

The Nasdaq led the way, driven by a rebound Tesla (TSLA). The major indexes are up solidly so far this holiday week. But a longer holiday for the market rally could be constructive.

Investors should be cautious to add exposure to key technical resistances and notable economic reports.

However, Dexcom (DXCM), United Health (UNH), Neurocrine biosciences (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, MEDP minutes are on the Leaderboard watchlist. NBIX stock and Medpace are in the IBD 50.

Dow Jones Futures Today

Dow Jones futures were up 0.1% at fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures rose 0.3%.

Mainland China reported more than 31,000 Covid cases, including those without symptoms, surpassing mid-April levels during Shanghai’s lockdown. Covid-infections with symptoms are still below April’s peak.

US stock markets will be closed on Thursday for the Thanksgiving Day holiday. On Friday, US exchanges will close early at 1:00 PM ET. But other exchanges around the world are usually open on Thursday and Friday.

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


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Stock Market Rally

The stock market rally had some ups and downs on Wednesday, but extended gains, led by technicals.

Initial jobless claims rose to a three-month high, while ongoing claims hit an eight-month high. S&P Global’s purchasing managers’ index pointed to a contraction in US manufacturing and services indices.

The Fed minutes bolstered expectations of a 50 basis point rate hike at its Dec. 14 meeting. Markets are still accepting another half-point move in February, but there is considerable scope for a quarter-point move.

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The Dow Jones Industrial Average rose 0.3% on Wednesday. The S&P 500 rose 0.6%, led by TSLA shares. The Nasdaq composite gained 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 sank 5 basis points to 3.71%. The two-year Treasury yield, more closely tied to expectations of a Fed rate hike, fell below 4.5%.

The US dollar has fallen sharply for the second session in a row, near recent lows.


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ETFs

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

The SPDR S&P Metals & Mining ETF ( XME ) rose 0.3%. The US Global Jets ETF ( JETS ) rose 0.1%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.5%. The Energy Select SPDR ETF ( XLE ) fell 1.1%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.4%. Dow Jones stock giant UNH is a major holding in XLV.

Reflecting the speculative story stocks, the ARK Innovation ETF ( ARKK ) rose 2.9% and the ARK Genomics ETF ( ARKG ) rose 0.9%. TSLA stock is the top holding in Ark Invest’s ETF

Tesla shares rose 7.8% to 183.20 on Wednesday, rebounding from Tuesday’s bearish market lows when Citigroup upgraded the EV giant from sell to hold. Shares of TSLA are still down 19.5% this month and roughly halved in 2022.


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Stocks to watch

Dexcom shares advanced 1.7% to 112.92, finding support at its 21-day moving average. DXCM shares have been on hiatus this month after losing gains on October 28. Dexcom stock arguably has a long handle with a 123.46 buy point from 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 shares fell 1.3% to 218.81 on Wednesday. Shares have been settling near record highs since rising 38% on Oct. 25 after gains. Since then, MEDP stock has been forging a mixed grip on a deep year-long trough. Despite the stock’s large intraday swings, MEDP stock is on track to complete a tight three-week pattern at Friday’s close. Investors can use the November 15 close of 226.57 as an early entry, above most of the recent trade.

NBIX shares sank 1.5% to 118.97. Shares are consolidating near multi-year highs, extending from an 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. Technically, this has a buy point at 126.09, although investors may want to wait for some quieter action.

Shockwave shares rose 4.7% to 264.06 on Wednesday, above the 21-day line, but hit resistance at the 50-day line. After a sharp sell-off that broke out in late October and continued through profits, SWAV stock has pulled back over the past week. A new base will take longer, but aggressive investors can use a strong move above the 50-day as an early entry.

UNH shares rose 1.3% to 529.71, bouncing above the 50-day and 21-day lines after briefly undercutting the 200-day line last week. UnitedHealth stock was the long-term IBD leader and still has many qualities. Investors can use a bounce from the 50-day line as an early entry or as a Long-Term Leader entry. UNH stock needs to make a new base after a breakout of a cup-with-handle base failed last month.


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Market rally analysis

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

The Russell 2000 reached the 200-day line.

The Nasdaq added to Tuesday’s rebound from its 21-day moving average, though it is still well below its Nov. 15 short-term high and its 200-day high.

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The Dow Jones was up 20 points from its August 16 intraday high.

The S&P 500 moves decisively above its 200-day line – which roughly coincides with its year-long downtrend line – a huge test for a market rally.

A flurry 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 Chair Jerome Powell scheduled to speak later. On Thursday, the PCE price index, the Fed’s favorite 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 would move sideways for a few days, allowing at least the 21-day line to catch up, heading 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 turning on buy signals in recent days. Investors were able to add a little more exposure as a result.

But you may want to be cautious about making any significant new purchases with the S&P 500 below its 200-day line and the Fed so critical of the economy next week.

Also, consider some partial profits in fast-rising stocks. Stocks are making short-lived gains amid a mixed uptrend and sector rotation.

However, investors should work hard to invest in buy lists, looking for configurations and shareholder names in various sectors.

Read The Big Picture daily to stay in sync with market direction and key stocks and sectors.

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

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